The Persistent Effect of Famine on Present-Day China: Evidence from the Billionaires

TL;DR

This study investigates the long-term impact of the 1959-1961 Chinese Famine on current wealth distribution, revealing persistent negative effects on individuals born during the famine, even among billionaires today.

Contribution

It provides causal evidence linking famine exposure to reduced contemporary wealth, accounting for selection bias and endogeneity in historical data.

Findings

Famine exposure negatively affects current individual wealth.

The adverse effect persists among China's billionaires.

Long-term economic consequences of famine are significant.

Abstract

More than half a century has passed since the Great Chinese Famine (1959-1961), and China has transformed from a poor, underdeveloped country to the world's leading emerging economy. Does the effect of the famine persist today? To explore this question, we combine historical data on province-level famine exposure with contemporary data on individual wealth. To better understand if the relationship is causal, we simultaneously account for the well-known historical evidence on the selection effect arising for those who survive the famine and those born during this period, as well as the issue of endogeneity on the exposure of a province to the famine. We find robust evidence showing that famine exposure has had a considerable negative effect on the contemporary wealth of individuals born during this period. Together, the evidence suggests that the famine had an adverse effect on wealth, and it is even present among the wealthiest cohort of individuals in present-day China.