Economic Openness, Industrial Development and Income Distribution in China, 1860-1936 Evidence from China Maritime Custom Archives

China experienced drastic economic openness and industrialization from 1860s to 1936. However, little quantitative evidence has been collected to study the extents and impacts of these changes. This project estimates nominal wage series in nearly fifty Chinese cities from 1858 to 1936 using newly constructed Maritime Custom employees’ wage data. It also constructs cost of living indices on the basis of raw prices and expenditure weights developed from custom trade statistics and surveys. The resulting nominal wage series and cost of living indices make it possible to estimate real income trends for different groups of people. This paper finds that skill premia rose rapidly during the first two decades of industrialization. After the 1910s, the wage gap between skilled and unskilled labor began to decline, while the gap between highly skilled and unskilled labor leveled off. These changes in the skill premia were driven by movements in the wages of skilled and highly skilled labor. China’s enormous reservoir of unskilled labor kept unskilled wages stagnant until a rapid growth in the last ten years of the period. After the mid 1920s real wages of all groups began to grow rapidly. This paper explores the possible reasons driving the patterns of skill premia, including the changes in the supply and demand of skilled and unskilled labor brought by technological and educational progresses, as well as external shocks such as the WWI.