Commercial Revolution in Medieval China : Origin and Consequences

With a per capita GDP estimated to be 20% higher than that of Great Britain, Song dynasty China (c. 960-1268) experienced a remarkable Commercial Revolution. We trace its origin to a tax reform forced upon the emperor by an exogenous war shock (the An-shi Rebellion of 755-763) during the (preceding) Tang dynasty, and find that counties where the reform was implemented more effectively exhibited distinctly stronger signs of a commercial revolution 200 years later, as demonstrated by: 1) a higher per capita commercial tax, 2) a larger number of market towns, and 3) a stronger pro-commerce ideology. The change from a poll tax levied in kind (including corvée labour) to a land tax effectively moved both capital and labour away from land, thereby serving as primary channels of the nexus between the tax reform and the commercial revolution. Moreover, the commercial revolution led to significantly greater human capital investment and the emergence of the world’s first meritocracy – the civil service exam or keju – as merchants in the more commercialized counties invested more in private academies and printed books, producing a greater number of jinshi-scholars, and an increasing share of scholars and high-ranking officials from a non-aristocratic background