Awakening latent human capital: Economic opening up and entrepreneurship in 19th century China
Abstract
This paper examines meritocratic recruitment and incentive issues within the context of China’s initial industrialization. We analyze the impact of upper-tail human capital on entrepreneurship in China between 1840 and 1904, exploring how the Imperial Examination system influenced talent allocation between traditional sectors and modern firms. Our study leverages the treaty port system as an exogenous shock to China’s industrialization, revealing heterogeneous choices made by different echelons of the upper-tail human capital. We find that traditional human capital played a diverse role in modern entrepreneurship, with some intellectuals transitioning to new opportunities while others remained entrenched in bureaucratic roles. Our findings highlight the complex interplay between civil service examinations and economic modernization, offering insights into how bureaucratic structures can influence talent reallocation and industrial development.