Weak central government, strong legal rights: the origins of divergent legal institutions in 18th-century Chinese and Japanese rice markets

This paper examines the formation of legal institutions in Qing China and Tokugawa Japan with a focus on the rice market. In both countries in the 18th century, rice was the most important commodity. By the end of the 18th century, Japan offered strong legal rights to rice market participants, while China managed the rice market with weak legal institutions. The authors develop a subversive regime game model to explain social and political reasons behind this divergence. Supported by historical evidence from Qing China and Tokugawa Japan, they find that with lower suppression capacity and higher risks of domestic threats to power, Edo Japan's central government (Bakufu) was more likely to enforce legal rights than Qing China's central government (Imperial Court). Japan's institutional configuration facilitated the growth of rice markets such as the Dōjima market in Osaka, because participants did not need to invest as much in informal protections. The analysis suggests that a state's relative strength matters most in determining its attitude toward legal rights, which further influences state stability and longevity.

Rui Wang, Qianmao Zhu, Matthew Noellert