A new historical narrative for “Needham Puzzle” and the modern Chinese growth miracle: The perspective of keju

Abstract

Why was China not the origin of the Industrial Revolution, but instead rose from imperial dynasties and experienced a growth miracle in the past four decades? We find that China’s imperial examination system (keju) plays a critical role in explaining the fall and rise of historical and modern/contemporary China. We find that keju significantly facilitates contemporary innovation and business creation by raising the contemporaneous level of human capital, shaping an innovative and productive culture, and fostering efficient institutions. In historical periods, keju misallocated top talents away from the scientific/technological sectors, leading to sluggish development during the Ming and Qing dynasties.