Interesting paper in the most recent Review of Development Economics. Historically, guns and growth have been close companions.
Abstract
This
paper offers an explanation of why, in Imperial China, the merchant
class expanded and the economy modernized up to the 13th century, and
why it entered into decline from the 14th century onward. The
modernization of China required the accumulation of public capital and
the building of good institutions, upon which a vibrant class of
merchants and entrepreneurs could gradually emerge. This class
contributed to the enrichment of the society and the emperor, but its
activities also weakened the dominance of the emperor and the élite,
who would then prefer to block the modernization of China and to
restrict the size of the merchant class, putting the economy into
long-run stagnation. However, when the emperor faced severe foreign
military threats and when he realized that a modern sector improved the
defense capabilities of China, he made the opposite choice.
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