Gateways to growth: the impact of ports on China’s early industrial development

This study examines the impact of exogenous institutional shocks on economic development by investigating the establishment of treaty ports in late Qing China (1840–1910). Forced open under unequal treaties imposed by foreign powers, these ports provide a quasi-natural experiment to identify the causal effects of openness on industrialization. We construct a novel county-level panel dataset from multiple historical archives, covering 1,752 counties with information on treaty port status, firm establishments, and firm scale measured by capital investment and industrial employment. Employing a staggered difference-in-differences (DiD) approach, we find that treaty port establishment significantly promoted firm agglomeration, as well as capital and labour accumulation. Mechanism analysis suggests that treaty ports spurred industrialization by expanding international trade, strengthening institutional control through foreign concessions, and building human capital through new-style schools. Heterogeneity analysis reveals stronger effects in light industries, for firms with foreign and private capital, and in coastal ports. Our findings suggest that treaty ports created the institutional and commercial gateways through which modern industry entered China.