How Natural Disasters Affect the Evolution of Grain Markets: Evidence from 18th Century China

Market is the foundation of modern society. However, how did market evolve? Previous research has explored the impacts of spatial distance and transportation conditions on market integration. This paper argues that natural disasters also played a crucial role in the evolution of market integration in China, particularly in the grain market. When natural disasters occur, governments relief measures and merchants arbitrage activities will gradually promote interconnectivity among local grain markets. In this paper, China's major grain monthly price dataset from 1746-1795 and the Chinese historical disaster records dataset from 1696-1795 are used to analyze the impact of natural disasters on grain market integration. The empirical results show that natural disasters have a significantly positive effect on the integration of the grain market. The findings continue to hold after controlling the traffic conditions, grain varieties and lag effect. This study proposes a new perspective for understanding the evolution of the grain market. Acknowledgement :