FOREIGN THREATS, TECHNOLOGICAL PROGRESS AND THE RISE AND DECLINE OF IMPERIAL CHINA

Abstract This paper addresses why technological progress occurred off‐and‐on in Imperial China but came to a standstill at around the time of the European Renaissance, leading to the decline of Imperial China. We suggest that the threat of war could have induced innovative activities as well as the accumulation of public capital, which led to the development of a modern sector in Imperial China. Using numerical simulation, we find a stagnated equilibrium in an agrarian economy under low threats of war and another with a high level of technological knowledge, public capital and a vibrant modern sector under strong threats. Long periods of peace would have the opposite effect. Some supportive historical evidence from urbanization is provided.