Global COE Hi-Stat Discussion Paper Series 253

Research Unit for Statisticaland Empirical Analysis in Social Sciences (Hi-Stat)

Wage Convergence and Divergence in
East Asia, 1900-39

Hi-Stat Discussion Paper

Myung Soo Cha

November 2012

Hi-Stat
Institute of Economic Research
Hitotsubashi University
2-1 Naka, Kunitatchi Tokyo, 186-8601 Japan
http://gcoe.ier.hit-u.ac.jp

Wage Convergence and Divergence in East Asia, 1900-39 *Myung Soo Cha
Faculty of Economics and Finance
Yeungnam University
Kyungsan, South Korea
mscha@ynu.ac.kr

This study calculates Robert Allen’s “welfare ratio” for eleven cities in Japan, Korea,
Manchuria, and Taiwan from 1900-39. Although considerable gap in prices andnominal wages existed, real wages remained roughly comparable in the 1910s in
different cities of East Asia outside Manchuria, where unskilled workers enjoyedsubstantially higher living standards. Interwar decades saw real wage grow at
different speeds in East Asian cities, causing both convergence, e.g. between Dairen
and Tokyo, and divergence, e.g. between Beijing and Taipei. Workers in various
cities of East Asia fared differently, primarily because productivity advanced at
distinct speeds depending upon the amount of human capital available.
Key words: price, wage, living standards, skill premium, ethnic wage gap
JEL classification: E31, N1, N3, J3*

I thankfully acknowledge financial support from the Korea Research Foundation(NRF-2010-32A-B00035). Competent research assistance by Junseok Hwang greatly
speeded up the progress of this labor-intensive project. I thank Jin Sung Chung fordiscussing this paper at the conference on Economic Disparity and Integrations within
the Japanese Empire, held in September 2011 and organized by Naksungdae Instituteof Economic Research.
1

Japan embarked on empire-building by acquiring Taiwan as a part of reparation from
China defeated in the war of 1894. In the subsequent conflict with Russia, thecountry emerged victorious again in 1905, adding Korea and southern Manchuria to
its imperial sphere. By invading Manchuria in 1931, Japan bought under its control
an area more than twice as large as Japan, Korea, and Taiwan combined. Existingstudies suggest that the four key regions of the Japanese empire differed significantly
in term of the pace of population growth and economic development in the earlytwentieth century.
This article is an attempt to shed light on comparative economic development in East
Asia by estimating real wages of unskilled laborers working in major cities of theempire in the early twentieth century. Diverse institutions upholding the Japanese
empire gathered price and wage information in a more or less systematic andcomparable manner. In particular, the observations were recorded consistently interms of the common currency, the yen, allowing one to avoid the difficulty of finding
exchange rates between various monies in use in Republican China. The availabilityof such price and wage data simplifies estimation of real wage indices revealing how
the imperial cities differed in terms of living standards, and how the disparities
evolved over time. The real wage index this study estimates refers to “welfare ratio,”a measure of living standards developed by Robert Allen and his colleagues tocompare living standards in Asia and Europe from the eighteenth to early twentiethcentury. Hence, the real incomes of workers as reported in this study can
immediately be compared with the Chinese welfare ratios presented in Allen, et al.
(2011)andon the website of the Global Price and Income History Group(http://gpih.ucdavis.edu).
This article begins by introducing key indicators of economic development in China,
Japan, Korea, Manchuria, and Taiwan in the first section. Data and procedures used
to estimate wages and prices in major cities of the empires are described in the second
section. We examine the estimated intercity price gaps in the third section, which isfollowed by inspection of nominal wage gap, skill premium, and gender wage gap in
the fourth section. Price and nominal wages as compiled in the third and fourth
section are combined to calculate unskilled real wages – welfare ratios –in East Asian
cities (section V). The sixth section ponders why intercity real wage gap evolved theway it did. The final section concludes by discussing the implication of the findings2

on origins of East Asian growth and on the high growth occurring in the region after
1945.

Comparative Economic Development in East Asia
At its zenith reached in 1942, the Japanese empire spread out so far as to control asignificant part of south eastern Asia and China, which represented a short-lived
extension of the core consisting of four regions, Japan, Korea, Taiwan, andManchuria. The mainstay resembled the European Union in important respects,
including monetary integration, free trade, and factor mobility. Each of the fourbuilding blocks of the empire had its own central bank issuing coins and notes
differently designed, which however were freely convertible into the Japanese yen on
a par. Exchange rate risk remained very low, and tariff rates applied to intra-empire
trade was close to zero. Capital was allowed freely to cross intra-imperial borders
before the outbreak of WWII, which together with low degree of exchange andpolitical risk, resulted in close integration of financial markets of different parts of theempire. 1 Although Japan did try to control migration from colonies to the metropole,
two million Koreans could be found regularly staying in Japan in 1944, indicating thatbarriers erected at checkpoints were by no means watertight. 2 The Japanese empire
represented an area even more integrated economically than the European Union in
the sense that fiscal union was in place: Japan provided unilateral transfer to be used
for construction of infrastructure in colonial Korea, while budget surplus in colonial
Taiwan contributed to fiscal balance of Japan proper.

Table 1 Land, Population, and Railway circa 1935
Japan

Korea

Manchuria

TaiwanChina ex.
Manchuria

Population

69,254,000

22,899,038

35,386,000

5,212,426

505,292,000

1

On financial integration in the Japanese empire, see Kim(2011).

2

Kwon (2004: 256, Table 10.2). Chung & Gill (1998) attribute the ineffectiveness of

immigration control to conflicting policy stances of the governments of Japan andcolonial Korea.
3

Area

383,000 km2

220,000 km2

1,303,000 km2 36,000 km2

8,293,961 km2

Cultivated60,090 km2

61,736 km2

139,140km2

13,430 km2

980,000 km2

0.15 ha0.49 ha0.39 ha

0.46 ha0.19 ha24,236 km

4,968 km

7,976km

882 km

12,870 km

Railway/km2 0.064 km

0.023 km0.006 km0.025 km0.002 kmarea
Acreage per
workerRailway

Sources: area from Yamamoto(2004: 4); cultivated area from Ando (1979: 16),
Park(2006), Eckstein, Chao, and Chang(1974: 248), Ka(1995: 69), and Perkins(1969);
Chinese acreage refer to cultivated area in 1933; population is Miwa & Hara (2007:4),
Census Reports of Colonial Korea (Chōsenkokuseichōsahōkoku), Yamanaka(2009:129), and Barclay(1954: 13), and Maddison(2006: 540); Chinese railway length wasderived by subtracting railway length in Manchuria from the length of tracks in China,
including Manchuria, as given in Rawski(1989: 209); railway length in the Japanese
empire was taken publications by railway authorities, such as Tetsudōshōtōkeishiryō,
Chōsensotokufutetsudōkyokunenpō, andMinamimanshutetsudōkabushikikaishatōkeinenpō.
Table 1 shows that key regions of East Asia differed significantly in terms of factor
endowment. Territorially, Manchuria, less than one sixth of China proper, was morethan twice as large Japan, Korea, and Taiwan added together. As of 1935, Japan had
a population, which was more than twice the sum of the population of its threecolonies, was dwarfed by the large population of China. As a result, cultivated area
per person was only about one third of that in its colonies, and even China held
advantage over Japan in terms of land availability. Railway network, an importantcomponent of capital stock, was densest and sparsest in Japan and China, respectively.
Available estimates of capital stock as standardized by population suggests that4

capital/labor ratio in Japan was ten times and twice as large as that in Korea andTaiwan, respectively. 3
In sum, prewarJapan remained a capital- and labor-abundant country vis-à-vis its
colonies, where land was richly available. The only input in abundant supply in
China was labor. This description is consistent with both the direction of factor flows
and patterns of external trade between East Asian countries. Japan exported
manufactured items to and imported agricultural goods from its imperial possessions.
Yarn and textile were the most important export items for China, which imported awide variety of manufactures from the rest of the world. 4 While easy access to landin Korea and Manchuria attracted a large number of immigrants from China andJapan, Japan exported capital to China, Korea, and Manchuria.

Table 2 Indices of Economic Development circa 1935
Japan

Korea

Manchuria Taiwan

ChinaLife expectancy 45

37

n.a.

40

24

Population

1.2%

1.3%

3.3%

1.9%

0.7%

67%

31%

22%

51%

14%

growthPrimary school
enrolment
Sources: life expectancy -Miwa &Hara(2007: 7), Kwon(1977: 303, 304), Barclay(1954: 154), and Barclay, et al. (1976); population growth - Miwa & Hara(2007:4, 5),Cha(2006), Yamanaka(2009: 118), Barclay(1954: 13), and Maddison (2006: 539,540); primary school enrolment-Lindert(2001), except for Manchuria, which wasestimated by Kurokawa(2000:6); primary school enrolment for China was derived by
dividing the number of primary school student as given Yan(2008) with the number
3

Sources of capital stock data include Ohkawa, et al (1966), Mizoguchi and

Umemura (1988), and Cha (2012).
4

For data on the external trade of East Asian countries, see Young (1971) and

Mizoguchi and Umemura (1988).
5

of population aged from 5 to 15 estimated using age structure of population in
1929/31 as available from Buck(1937).
Notes: life expectancy is male life expectancy at birth circa 1930; primary school
enrolment was calculated as the number of children in primary school as a proportionof persons aged five to fourteen.

The four pillars of the Japanese empire were awakened one after another by gunboats
from deep-rooted lethargy: Manchuria in 1858, Japan in 1867, Korea in 1876, andfinally Taiwan in 1895. Although mortality on the eve of the encounter with the Westis not precisely known, in none of the four regions is life expectancy at birth appeared
to exceed forty. 5 Introduction of modern medical technology triggered mortalitytransition driving life expectancy up to around forty in the Japanese empire by themid-1930s, while highly mortality continued to prevail in China. 6 The mortality
decline accounted almost entirely for why the Taiwanese population grew as rapidly
as 1.9% per year in the pre-WWII decades (Barclay(1954)), while high mortality
seemed to stand in the way of the Chinese population growing as rapidly. The slow
expansion of the Chinese population was also a consequence of out-migration ofChinese workers into Manchuria, which caused the Manchurian population to expand
3.3% per year. Out-migration into Manchuria also underlay the moderate pace of
demographic expansion in Japan and Korea.
The other important thing gunboats brought to East Asia was modern education. By
the mid-1930s, Japan achieved a substantial advantage in schooling relatively to the5

Kito(2000: 177) conjectures that life expectancy in nineteenth century Japanremained in the late thirties. Cha(2009: 130, Table 4)’s estimate of the Korean life
expectancy in the eighteenth and nineteenth centuries is 23. According to Barclay(1954: 154, Table 37), Taiwanese male life expectancy was 27.7 in 1906.
6

Despite the availability of Manchukuo census of 1940, little is known about

mortality level in Manchuria, except Taeuber(1945: 268)’s conjecture that infantmortality in Manchuria was probably lower than in Korea but higher than in Taiwan
and her observation that “The recorded mortality in the productive ages was
impossibly lows, partly because of the highly selective nature of the in- and outmigration of the Chinese labor that contributed an appreciable proportion of the total
population.”6

rest of East Asia, with about two thirds of the country’s school-age children receiving
primary education. In contrast, less than one seventh of school age children were put
into primary schools in China. Having been incorporated into the empire one quarterof a century earlier than Korea, Taiwan achieved a considerably higher primaryschool enrolment rate than colonial Korea around 1935. Thus, in the early twentiethcentury Japan stood out as a region, where not only physical but also human capitalabounded.

Table 3 Economic Growth and Structural Change
Japan

Korea

Manchuria

TaiwanChina

Per capita output$2,120$1,337$679$1,235$565

Per capita output

2.3%

2.3%

2%

2.2%

0.5%

Aggregate output 100

21

4

16

194

Aggregate output 3.7%

3.6%

4.6%

3.7%

1.2%

20%

42%

40%

39%

65%

26%

20%

12%

18%

10%

growth

growthShare ofagriculture
Share ofmanufacturing
Notes and sources: Per capita output is in 1990 Geary-Kharmis dollar and from thewebsite of Angus Maddison, http://www.ggdc.net/MADDISON/oriindex.htm, unlessotherwise indicated; Manchurian per capita GDP is obtained by multiplying
Maddison’s estimate of Chinese per capita GDP with the ratio of Manchurian toChinese per capita GDP from 1931-36 as calculated from Ma(2008: 367); theaggregate output is measured relatively to the Japanese aggregate output, whichequals 100; output and per capita output growth is from circa 1910-40 and was
calculated from Miwa & Hara (2007: 2, 3), Cha & Kim (2012), Eckstein, Chao, &Chang(1974: 254), and Mizoguchi (2008: 231); sectoral output as share of GDP isfrom Miwa & Hara (2007: 4,9), Cha & Kim (2012), Eckstein, Chao, & Chang(1974:

7255), Mizoguchi (2008: 229, 278, 292), and Ma(2008: 367); agriculture includes
forestry and fishery.

Maddison’s estimate of per capita output, quoted in Table 3, suggests that as of 1935
Japan was more than one and half times as well off as either Korea or Taiwan, whichwere in turn about twice as well-off as China and Manchuria. Notwithstanding thelarge income gap, per capita output growth did not differ significantly among theregions in the Japanese empire, while Chinese suffered significantly slower
improvement in their living standards. Japan accounted for roughly 70% of theoutput of the empire, which was far exceeded by the Chinese output. Output growthtended to be faster in Manchuria and Taiwan, where population expanded more
rapidly. Agricultural production as share of the aggregate output was almost two
thirds in China, but only about 40% in Japan’s colonies, a percentage, which was
twice as large as that in Japan. Manufacturing’s importance in the aggregate
economy tended to be positively correlated with the level of per capita output.
To summarize, Japan, the highest-income region in East Asia, was richly endowedwith labor and capital, both human and physical. Manchuria, the poorest regions in
the Japanese empire, enjoyed huge advantage in land availability but suffered scarcity
in other factors of production. Korea and Taiwan, roughly on a par, could be foundbetween the two opposite poles of the empire in terms of living standards, economic
structure, and factor endowment. Being abundant only in labor, China appeared asless developed than Manchuria, the worst off part of the Japanese empire.

Data Sources and Estimation Procedure
Price and wage data used in this study were taken in large part from publications
issued by the Japanese and colonial governments, which include
Oroshiuribukkatōkeihyō (Statistical Tables of Wholesale Prices), Kouribukkatōkeihyō(Statistical Tables of Retail Prices), Nihonteikokutōkeinenkan (Statistical Yearbook of
the Japanese Empire) andChingintōkeihyō (Tables of Wage Statistics) for Japan,
Chōsensotokufutōkeinempō (Statistical Yearbook of the Colonial Government of
Korea)for Korea, Kantōtotokufutōkeisho (Statistical Yearbook of the Governing
Authorities of Kwantung Area) and Hōtenkeizaitōkeinenpō (Statistical Yearbook ofFengtian) for Manchuria, and, finally,Taiwansotokufutōkeisho(Statistical Yearbook of
the Colonial Government of Taiwan) for Taiwan. The official materials were8

supplemented by a variety of data sources as published by private or quasigovernmental institutions, such as the Seoul and Dairen Chamber of Commerce,
Southern Manchurian Railway Company, and the central banks of Korea(Chōsenginkō) and Manchukuo (Manshūchūōginkō). 7 Also used were Dairen, Keijō,
andShinkyōshōkōkaigishokeizaigeppō (Monthly Bulletin of Statistics of Chamber ofCommerce of Dairen, Seoul, and Changchun), Chōsenginkōchōsageppō (Monthly
Research Bulletin of the Bank of Colonial Korea), Kinyūkeizainenpō (Financial
Yearbook of the Bank of Manchuria), and Mantesuchōsageppō(Monthly Survey
Bulletin of the Southern Manchurian Railway Company.

Figure 1 Cities of East Asia
Changchun
Shenyang
Beijing
DairenPyongyang
˘
Seoul
Pusan

Tokyo
Osaka

FukuokaShanghaiTaipeiCantonTainanNote: imperial cities are indicated bycircles.

7

Functioning as the central bank not only for colonial Korea, but also for Manchuria

before the establishment of Manchukuo, the Bank of Colonial Korea publishedmonthly bulletin, which reported price information for both regions. See O(1998) for
description of activities of the Bank of Colonial Korea in Manchuria.
9These data sources provide prices and nominal wage observations as made in morethan one hundred cities located in the Japanese empire. Of these cities, eleven cities
were selected and are indicated by circles in Figure 1. Tokyo and Osaka are politicaland economic capital of Japan, respectively, while Fukuoka was included due to its
geographical proximity to Korea. In addition to Seoul, the capital city of colonial
Korea, Pusan and Pyongyang were chosen, because they were Korea’s gateways toJapan and China, respectively. It was mainly through Dairen, China’s northernmost
warm water port, that Manchuria carried out trade and other dealings with the rest of
China and foreign countries. Shenyang, designated by the Manchu people as theircapital city in the seventeenth century, was and remains the commercial andtransportation hub of Manchuria. Japanese rulers elected in 1932 Changchun as thecapital city of Manchukuo, the puppet state they controlled. The colonial governmentof Taiwan was located in Taipei, while Tainan, chosen for its remoteness from Taipei,
remained the trading and ruling post of the Dutch VOC and prefectural capital underQ’ing dynasty,.
Wage and price data for Japanese cities are available from 1880 and 1900,
respectively. Both price and wage figures began to be recorded from 1907/8 in Korea,
1917in Manchuria, and 1902in Taiwan. 8 Although observations continued to bemade well into the Second World War depending on location, commodity, andoccupation, the end point was set down in 1939, when wartime controls began toaffect prices and wage.
Wage tables found in the official and quasi-official publications used in this study
provide (mostly) daily wage rates observed in different cities for several scores ofoccupations requiring different amounts and kinds of skill. Some traditional trades(like rickshaw pullers and rice polishers) exit the wage tables well before 1939, while
modern activities (such as car drivers and steamship sailors) make their first
appearance as late as in the 1920s or 1930s. Moreover, there are years when wage
observations are missing briefly. Nevertheless, it was relatively straightforward tocompile consistent nominal wage series for key occupations in the eleven cities of theJapanese empires by joining wage data from different sources and drawing on
8Pre-1900 data for Japanese cities as found in Nihonteikokutōkeinenkan and isolated

observations made in 1907 and 1908 in Manchurian cities are not used in this study.
10interpolation. The key occupations include common laborers, carpenters, andtypesetters. 9
Although price observations were recorded with regularity (or irregularity)similar tothat found in wage data, compilation of price series for key consumption items ismore complicated for at least four reasons. First, while retail price data are needed to
calculate consumer price indices, it was not until 1920 that authorities began to collectretail price information. 10 Second, gathering price information, surveyors did notalways held quality of goods fixed. Similarly, manufactured products are normallycreated in several distinct types commanding considerably different prices, but
recorded prices refer to different types of manufactures in different years. Finally,
recorded prices are not infrequently in terms of different measures, but required
conversion ratios are not always known. 11
To obtain consistent price series from price database with such defects, I resorted tohedonic price regression, which may be best explained with the example of estimating
cotton textile prices in Tokyo from 1900-39.
log(Pti) = α + Σtβt∙YEARt + Σjγj∙TYPEj+ δ∙RETAIL + εti(1).

The sources of Japanese price data provide seventy-seven observations on cotton
textile prices from 1900-39, pre-1930 figures referring to wholesale prices only andboth retail and wholesale price information being available in the 1930s. In equation(1) the price observations are expressed by Pti, subscripts i and t representing
observation identifier (running from 1 to 77) and year of observation (running from

9

Common outdoor workers appear as hiyatoininpu (日傭人夫) and hiraninsoku(平人足) in Japanese and Korean data sources. They correspond to ninpu (人夫),zatsueki(雜役), coolie(苦力)in Manchurian and Taiwanese sources.
10

The case in point is colonial Korea. Retail price data began to be made available

from 1922 on for Taiwan and from 1930 on for Japan and Manchuria.
11

A case in point is koku (石), unit traditionally used to measure the volume ofdifferent types of grain. Different estimates of conversion ratio between koku andkilogram for rice exist, and to my knowledge, conversion ratios for grains other thanrice are unknown.
111900 to 1939), respectively. On the right-hand side of equation (1) are included
dummy variables, controlling for year of observation (YEARt), three different typesof cotton textiles (TYPEj), and whether the price refers to retail or wholesaletransactions. Ordinary least squares estimation of equation (1), taking the year 1900,
bleached cotton textile (sarashimomen, 晒し 木綿), and wholesale price as thereference, indicated that bleached cotton textile was significantly cheaper item than
non-reference types, and that retail price was about 10 per cent higher than wholesale
prices. 12
While different versions of equation (1) – mostly incorporating a smaller number ofdummy variables -- were applied to estimate prices of commodities other than cotton
textile in cities other than Tokyo, it would be neither possible nor useful to report all
the details of estimation here. Only three issues seem worth elaborating. First, retailmark-up ratios cannot be estimated in the absence of years when both retail andwholesale prices were observed, in which case estimated mark-up ratios estimated forother cities in the same or a comparable country were applied. For some products,
such as soybean, retail mark-up could be estimated in none of the eleven cities, whichleft me no choice but to substitute the mark-up ratio as directly observed (notestimated) in Korea in 1940. 13 Even such information being unavailable for sorghum,
wholesale prices of the product had to be used.
Second, in estimating prices of some commodities, dummy variables were introduced
to control for the effect of place of production, which revealed transportation andtransactions costs did matter. 14 In calculating consumer prices indices for different
cities, prices of locally produced goods of comparable quality and type were used,because it is reasonable to assume that, quality and type being equal, a typicalconsumer would have preferred locally produced to imported goods, which were

12

The two other types are white and striped cotton textile (shiromomen 白木綿 andshimamomen, 鎬木綿, respectively), which were about 22% and 67% more expensive,
respectively, than bleached cotton textile. Estimated retail markup ratio was similar
for Fukuoka, but roughly three times as high in Osaka.
13

The information is available from Park (2006).

14

For instance, imported rice was about 40% more expensive in Taipei than locallygrown rice.
12

usually more expensive due to transport and transactions costs. Finally, hedonic
regression allowed estimation of conversion ratios between different measures, which
would have remained otherwise unknowable in a precise way. For instance, Seoul
rice price data revealed that one koku (石), a traditional volume measure, equals 136
kilogram, a ratio, which was applied to estimate rice prices in Taipei, where
estimation of the conversion ratio was not feasible. 15 Estimation of price of soybeans,grains of which being larger than rice grain, indicated that one koku of soybean
weighed about 100 kilograms.

Consumer Price IndicesThis section calculates for different cities in the Japanese empire the amount silver
required to pay for the Chinese subsistence life style as defined by Allen, Bassino, Ma,
Moll-Murata, and van Zanden (2011). The bare subsistence consists of sorghum (179kg) or rice (171 kg), depending on whether a person works in northern or southern
China, beans (20 kg), meat (3 kg), oil (3 kg), soap (1.3 kg), cotton textile (3 m),
candles (1.3 kg), lamp oil (1.3 kg), and fuel (3 million BTU). In this study, I assume
workers in Manchurian cities to be sorghum eaters, while rice-based consumption
pattern prevailed in the rest of the Japanese empire. Meat is represented by beef,
because price data were not forthcoming on a regular basis for pork or chicken. I
assumed workers used only coal as fuel. Finally, for lack of data, I followed Allen, etal. (2011: 36) in setting candle price per kilogram equal to lamp oil price per liter andsetting price of soap equal to half the price of lamp oil.

Table 4 Price of Subsistence in 1923 in gram of Pure Silver

Items

Quantity

Tokyo

rice

171 kg

1221

1041

934

533

710

na

na

sorghum

179 kg

na

na

214

na

242

na

na

beans

20 kg

323

93

56

92

57

na

na

meat

3 kg

180

118

67

85

23

na

na

15

Seoul

Dairen Taipei

Beijing Shanghai

CantonCompare this with existing conjecture on the weight of one koku of rice, including

142.4 kg by Park(2006: 103) and 144 kg by Chung(2008: 317).
13

oil

3 kg

33

40

18

34

33

na

na

soap

1.3 kg

4

6

2

3

5

na

na

cotton

3m

10

10

10

14

33

na

na

candles

1. 3kg

9

13

5

7

10

na

na

lamp oil

1.3 kg

8

11

5

7

10

na

na

fuel

3 m BTU

109

70

46

49

35

na

na

1899

1402

423

823

450

835

928

textileTotal(1144)(918)

Sources: price data for Beijing, Shanghai, and Canton arefrom http://gpih.ucdavis.edu/; for data sources for other cities, see text.
Notes: one yen was set equal to 24.88g of pure silver, a ratio based on silver price inLondon and the pound/yen exchange rate as available from Kinyūjikōsankōsho(Handbook of Financial Matters),various issues; total amounts in brackets are costs ofliving, which include rice, rather than sorghum, in Beijing and Dairen; figures for
Beijing, Shanghai, and Canton are based on wholesale prices, while those for other
cities reflect retail prices, except sorghum in Dairen; meat refers to port and chicken
in Chinese cities and to beer in the cities of the Japanese empire.

Table 4 presents the amount of silver required to buy the subsistence life style in thefour major cities of the Japanese empire in 1923. In the table are also compared thecosts of living in imperial cities with those in Beijing, Shanghai, and Canton, whichwere calculated by Allen, et al. (2011). Total amounts include expense on sorghum in
Beijing and Dairen, while in other cities the totals were calculated assuming rice,
rather than sorghum, to be staple diet. Costs of subsistence based on rice in the twosorghum-eating cities are shown in brackets.
Table 4 reveals distinct patterns in intercity price gap. First, agricultural goods tended
to be more expensive in Japan than in its colonies and China, where agricultural
output as a share of GDP was significantly larger. In particular, retail price of refinedrice was about twice as expensive in Japanese cities than in Taiwanese cities, where
rice could be bought most cheaply. While lower than those observed in Tokyo, rice
prices in Seoul exceeded that in Dairen or Beijing. Price of bean also remained far
higher in Tokyo than in other cities, and beans could be bought with the smallest
14amount of silver in Dairen and Beijing. In contrast, cotton textiles were cheaper inTokyo than either in Taipei or Beijing. Workers in Beijing enjoyed lowest fuel, i.e.
coal, prices. Overall, such a pattern of regional price difference suggests
transportation costs accounted for much of intercity price differences.
Prices of the two staple diet – rice and sorghum – so differed that buying of 171 kg of
rice cost about three times as much as 179 kg of sorghum in Beijing and Dairen.
Consumption of the two grains accounting for the lion’s share of the subsistence
budget, the cost gap went far to lower the cost of subsistence in the two cities. Totals
in brackets for the two sorghum-eating cities in Table 4 indicate the workers in thetwo cities would have had to pay about twice as much, had they chosen to eat rice,
rather than sorghum. It should however be recalled that the cost gap is somewhat
overstated, given that sorghum prices – unlike rice prices -- used in this study arewholesale prices. Finally, note that costs of living for Chinese cities were calculatedby Allen, et al. (2011) using wholesale prices, which would imply price gap between,
say, Tokyo and Beijing, isactually smaller than is suggested by totals in Table 4.

Figure 2 Costs of Subsistence in East Asian Cities (grams of pure silver)
2500

2000
1500
1000

500

0
Tokyo
TaipeiCantonSeoul

Beijing

DairenShanghai/Suzhou

Source: see text for cities in the Japanese empire; http://gpih.ucdavis.edu/ for Chinese
cities.

15

Note: costs of living in imperial cities were first calculated in terms of the yen which
was converted into amounts in pure silver, usingsilver price in London and thepound/yen exchange rate as given in Kinyūjikōsankōsho (Handbook of Financial
Matters).

Subsistence costs may be similarly calculated for years other than 1923, which arepresented as Figure 2. Cost of living remained highest in Tokyo and lowest in Beijing
and Dairen, where sorghum was eaten, throughout the first four decades of thetwentieth century. Seoul was the second most expensive city to live, while prices inrice-eating cities in southern China -- Taipei, Canton, and Suzhou – were lower thanin Seoul but higher than in the two northern cities.

Figure 3 Coefficient of Variation of Consumer Price Indices in Different Cities
0.65

0.6

0.55

0.5

0.45

0.4

0.35

0.3

0.25

0.2
all cities

Sources: same as Figure 2.

empireempire+suzhou

Figure 3 shows consumer price gap for three different sets of cities in East Asia. The
coefficient of variation including all the fourteen cities of East Asia spans only
fourteen years, from 1910-23, which conveys an impression of price differential
neither widening nor narrowing. The longest series from 1907-39, comprising theeleven cities of the Japanese empire, indicates that price gap among these urban
16

centers was being closed in the interwar decades. Finally, coefficient of variation for
the imperial cities plus Shanghai/Suzhou runs from 1910-30, tracking closely thecoefficient of variation for the eleven imperial cities.

Nominal Wages, Skill Premium, and Gender Wage Gap

Figure 4 Nominal Wages of Common Laborers in East Asia
25000
20000
15000
10000
5000
0
Tokyo

Seoul

Sources: see Data Appendix.

DairenTaipei

BeijingShanghai

CantonFigure 4shows that wages of common laborers differed substantially in terms of silveramong East Asian cities. Nominal wages continued to remain highest in Tokyo andlowest in Chinese cities in the early decades of the twentieth century. Nominal wages
in Dairen were higher than in Chinese cities, but lower than in either Seoul or Taipei.
Overall, nominal wages tended to be higher, where higher prices prevailed, and viceversa. Until the end of WWI, nominal wage gap between Dairen, Seoul, and Taipei
was not substantial, but in the 1920s and 1930s, nominal wages rose in Seoul andTaipei as they did in Tokyo, while workers in Dairen suffered nominal wage
stagnation as in China. Nominal wages in Shenyang and Changchun, the two
Manchurian cities further to the north of Dairen, not included in Figure 4 for the sake17

of readability, rose in the interwar decades. Nominal wages in different cities either
in Japan or in Korea or in Taiwan (not shown in Figure 4 either) remained fairly close
to each other in the early twentieth century.

Figure 5 Skill Premium

A. Carpenter/Common Laborer Wage Ratios

B. Typesetter/Common Laborer Wage Ratios

18

Sources: see Data Appendix.

A large majority of available wage data concern a variety of skilled workers, who infact was in the minority of working population even in Japan. Skilled occupations
listed in my wage data sources are mostly of traditional type in the sense that skills
required were acquired on the job, rather than through formal schooling or training.
Carpentry represents one example of such jobs, and in Panel A of Figure 5 is shownwages of carpenters relatively to wages earned by common laborers. Until theoutbreak of WWI, carpenters tended to be rewarded roughly twice as highly as
common laborers in the four cities. Thereafter, the skill premium diverged, rising in
Dairen and Seoul on the one hand and stagnating in Taipei and falling in Tokyo on
the other.
In Panel B are compared the wages of common labourers with the wages oftypesetters, which may be described as a modern type of skilled worker, given thattypesetting requires a certain level of literary that is achieved normally through formal
schooling. Until the end of WWI, wages did not differ significantly between thetypesetters and common laborers. Skill premium emerged in the 1920s to increasesteadily to reach two by the early 1930s in Tokyo, Seoul, and Taipei. Rising more
rapidly, the skill premium became as high as four in Manchuria on the eve of WWII.

19

Figure 6 Gender Wage Gap

Sources: see Data Appendix

Referring predominantly to male workers, the wage data used in this study provides
wage information for both male and female workers in three occupations: servants,
agricultural workers, and common laborers. Female/male wage ratios in theseoccupations are presented as Figure 6. For Tokyo, gender wage gap is represented byfemale/male wage ratio for servants (solid line ending in 1919) and that for common
laborers (dashed line starting from 1920), which neither narrowed nor widened as amatter of trend. The Japanese gender wage gap fluctuated around 0.6, tending torisein wartimes – such as the Sino-Japanese War (1894), Russo-Japanese War(1904/5), and WWII. While gender wage gap as revealed by agricultural wages was
devoid of trend in Seoul and Taipei, wage superiority of male over female servants inSeoul declined rapidly virtually to disappear by the late 1920s. The only evidence
available on gender wage gap in Manchuria is female/male weavers’ wage ratios in1938 and 1939, 0.82 and 0.73, respectively.

Comparative Living Standards of Unskilled Workers
20Unlike either China or Korea, Japan avoided the fate of being invaded and colonized
by imperialist powers and modernized itself to emerge as a leading industrial
economy after the Second World War. Does the contrast have roots in the Japan’s
economic superiority over the rest of East Asia at the time of their encounter with theWest? Emulating European powers, Japan set upon building an empire comprising an
area more than four times as large as the Japanese archipelago. How did workers in
its colonial territories fare under Japanese rule, particularly in comparison withworkers’ living standards in the metropole? Did trade and factor mobility occurring
within the empire cause income levels in Japan and its different colonial territories tobecome increasingly similar? Construction and comparison real wage indices, whichtell not only inter-regional income gap at a particular point in time, but also how the
disparity evolved over time, seems like a good starting point in the search for answers
to these questions. And one of such real wage indices is welfare ratio, which can beobtained by standardizing nominal wages (shown in Figure 4)with the costs ofsubsistence in different cities (presented as Figure 2).

Figure 7 Welfare Ratios in East Asia, 1900-39
A. Four Large Cities of the Japanese Empire
6
5
4
3
2
1
0
Tokyo

Seoul

DairenB. Chinese and Manchurian Cities

21

Taipei

6
5
4
3
2
1
0
DairenSources: see text.

BeijingShanghai/Suzhou

CantonFigure 7 presents welfare ratios in East Asia in two panels for the sake of readability.
At the beginning of the twentieth century Beijing, Taipei and Tokyo appeared not todiffer significantly in terms of unskilled workers’ living standards, with welfare ratios
in the three cities well above the poverty line, which is unity. In the 1910s, althoughreal wages in Beijing fell to a level somewhat below that in Taipei and Tokyoand
similar to that observed in Seoul, difference in the workers’ welfare in these threecities was still not large. Compared with the three cities, workers in Dairen enjoyedliving standards about twice as high in the 1910s, while workers in Shanghai fared
worst.
In the two decades following the end of WWI, real wages in Tokyo and Dairen
followed opposite trends, rising in Tokyo and declining in Dairen. As a consequence,
fortunes of workers in the two cities were reversed on the eve of WWII, with common
laborers in Tokyo being twice as well off as their counterparts in Dairen. Workers’
welfare improved slowly in Taipei, while in Canton, Seoul, and Shanghai unskilled
real wages stagnated.

22

Figure 8 Welfare Ratios in Manchurian Cities
8
7
6
5
4
3
2
1
0
DairenShenyang

Changchun

Figure 8 shows that in contrast to Dairen, Shenyang, and Changchun saw workers
living standards improve rapidly in the 1920s and 1930s. Thus, on the eve of WWII,
unskilled real wages in the two northern Manchurian cities reached a level roughly
equal (Shenyang) or even higher (Changchun) to that in Tokyo and at least twice ashigh as that in Dairen, Seoul, and Taipei.
According to Figures 9, real wages in different cities in Japan did not differ
significantly in terms of either trend or level, with the exception of real wages inFukuoka surging in the early 1920s. As seen in Figure 10, in Korea, real wages rose
slowly in Pyongyang, while Seoul or Pusan suffered real wage stagnation, confirming
per capita output growing more rapidly in northern than in southern provinces of
Korea (Cha and Kim(2012)). In Taiwan, workers in Tainan benefited from faster
improvement in living standards than those in Taipei (Figure 11).

Figure 9 Welfare Ratios in Japanese Cities

23

4.5

4

3.5

3

2.5

2

1.5

1

0.5

0
Tokyo

Osaka

Fukuoka

Figure 10 Welfare Ratios in Korean Cities
2.5
2
1.5
1
0.5
0

Source: see text.

Seoul

Pusan

Figure 11 Welfare Ratios in Taiwanese Cities

24

Pyongyang

3.5

3

2.5

2

1.5

1

0.5

Source: see text.

TaipeiTainanThe evolution of real wage gap among East Asian cities as shown by Figures 7 and 8
is consistent with existing studies, which suggest the affluence of Manchuria
relatively to China and prosperity of Taiwan vis-à-vis Korea. A survey conducted in1941 by the Southern Manchurian Railway Company found that workers’ real
incomes in Manchuria were between 48 and 118 per cent higher than in northern
China depending upon occupations (Toiku(1941: 178, Table 1)). In addition,
Ma(2008: 367, Table 3)’s estimation indicated that per capita GDP was 20% higher inManchuria than in China from 1931-36.
Angus Maddison’s estimate of per capita output in 1990 Geary-Khamis dollars(reproduced in Table 3) indicated that Korea was somewhat better off than Taiwan in
the mid-1930s. The purchasing power parity(PPP, hereafter) converters Maddisonused to derive the per capita output figures were obtained by backward projection andindicated that prices tended to be significantly higher in Taiwan than in Korea.
Claiming that the PPP converters suffer from index number bias, Fukao, Ma, andYuan (2006) estimated PPP converters using direct observation, i.e. prices of morethan seventy different goods and service from 1934-36 in Japan, Korea, and Taiwan.
The PPP converters included consumer price indices, which remained somewhat
lower in Taiwan (4.53) than in Korea (4.75) in 1934/6, a gap, which is in line withthat found in Figure 2 above. Applying the set of PPP converters they estimated to25

Mizoguchi and Umemura(1988)’s estimates of per capita output in Japan’s colonial
territories in the current yen, Fukao, Ma, and Yuan (2006) concluded that in
1934/6PPP-adjusted per capita output of Taiwan exceeded that in Korea, which isagain consistent with welfare ratio being lower in Seoul than in Taipei as seen in
Panel A of Figure 7. 16

Figure 12 Coefficient of Variation of Welfare Ratios
0.8

0.7
0.6
0.5
0.4
0.3
0.2
0.1

0

Source: see text.

5 cities

3 cities

EmpireNote: “5 cities” refer to Tokyo, Seoul, Dairen, Taipei, and Beijing; “3 cities” areTokyo, Taipei, and Beijing; “empire” refers to eleven imperial cities shown in Figure1.

Coefficients of variation of welfare ratios relating to three different subsets of the
fourteen cities are shown in Figure 1, which suggest living standards neither
converged nor diverged in pre-WWII decades. One of the three groups includes

16

Applying the PPP converter estimated for 1934/6 over the three decades from 1910,

Fukao, Ma, and Yuan (2006) showed that per capita output in Taiwan remained about
twice as high as that in Korea throughout the period. Note however that according toPanel A of Figure 7 workers’ living standards in the two colonies did not differ
significantly in the 1910s and tended to widen slowly in the following two decades.
26

eleven cities in the Japanese empire (“Empire”), where real wage gap appeared tostagnate as a matter of trend in the 1920s and 1930s.Such was also the case between
Beijing and the four large imperial cities (“5 cities”) in the 1910s and early 1920s andbetween Tokyo, Taipei, and Beijing (“3 cities”) in the two decades following 1904.

Discussion and Interpretation
The real wage estimates of this study raise at least three issues worth discussing. First,
is the roughly equality in living standards among East Asian cities (except Dairen) at
the beginning of the twentieth century consistent with existing studies suggesting that,
unlike Q’ing China and dynastic Korea, Tokugawa Japan achieved nontrivial
economic development? Second, why did workers’ living standards indifferent cities
of East Asia did not become increasingly similar although different parts of East Asia
were being economically integrated in the decades preceding WWII? Finally, why
did workers migrate from Japan to Korea and Manchuria, which remained as low
wage regions relatively to Japan in the 1920s and 1930s?
Limited amount of quantitative evidence exists to suggest that real wages and land
rents was on the decline in eighteenth and nineteenth century China and Korea, while
Japanese wages at least held their own, and land rents rose slowly in Tokugawa
period. Japanese visitors to Korea at the end of the nineteenth century found land
productivity in Korea as being about half as high as that in Japan. Finally, theeighteenth century is known as a period of industrious revolution and protoindustrialization in the Japanese economic history. 17
One of few indices of comparative living standards available for East Asia is stature,
which confirms the finding that Japanese did not enjoy advantage over either China or
Korea in terms of living standards around 1900. In fact, existing records suggest
Japanese were shorter than Chinese and Koreans at the end of the nineteenth century.
In 1883-92, average height of conscripted Japanese males was about157 centimeters,
and in 1900 the education ministry of Japan conducted a survey to find adult maleheight to be 160.9 centimeters (Yasuba(1986); Kito (1996: 439)). In 1897, Alfred
Burt Stripling, an Englishman working for the dynastic government of Korea, put
17

On the trends in wages and rents (or agricultural land prices) in China, Japan, andKorea, see Allen, et al. (2011), Cha(2009), Chao (1986), Kusano(1996), and Yasuba(1986).
27

forward 163.8 centimeters as the average after measuring the height of 1,060 males in
Seoul (Bishop (1898)), which is not too different from estimates of Chinese malestature at the end of the nineteenth century (Baten, Ma, Morgan and Wang (2010: 351,
352, Figures 2 and 3)).
The rough parity of living standards between Japan on the one hand and China andKorea on the other need not be seen as conflicting with evidence of only Japan
achieving progress before the encounter with the West. For Malthusian model
predicts that productivity advance results in the long run in population growth, rather
than improvement in per capita output. And this conclusion was found to beconsistent with patterns of population growth in different places in the past
(Kremer(1993); Ashraf and Galor(2011)).
Put differently, population growth is an index of productivity advance realized byMalthusian economies (Clark(2009)). As seen in Table 1, as of 1935 population
density was significantly higher in Japan than in the rest of East Asia, a gap which
was even more pronounced in circa 1900, particularly vis-à-vis China. 18 Thissuggests that faster population expansion occurred in Japan, confirming that thecountry achieve faster productivity growth than the rest of East Asia in the centuries
leading up to 1935.
In the interwar decades, East Asian countries saw the volume of intra-Asian trade as ashare of total expand consistently (Sugihara (1996: chapter 4)). Capital flows fromJapan to the rest of East Asia --particularly to its colonies-- also boomed(Yamamoto(1992; chapter 6)). Finally, masses of migrant workers crisscrossed theEast Asia in an effort to improve living standards. A large number of Koreans left
home attracted by higher wages in Japan, registering migration rates reaching levels
comparable to those attained by countries taking part in the pre-1914 trans-Atlantic
passage (Gill & Chung (2002: 134)) and resulting in nearly two million Koreanssettled in Japan at the end of the colonial rule (Kwon(2004: 256: Table 10.2)).
Manchurian wage advantage attracted masses of Chinese workers, which generated
waves of internal migration sometimes compared to the American westward
movement in the nineteenth century. Finally, the 1935 census carried out in colonial

18

Arable land per capita was 0.12 ha in Japan, 0.39 ha in Korea, and 0.22 ha in China

circa 1900. Data sources are the same as with Table 1.
28

Korea revealed the presence of more than seventy thousand Chinese earning higher
wages in Korea.
Despite the migration and burgeoning trade and capital flows, gap in workers’ living
standards in different cities of East Asia neither narrowed nor widened as a matter oftrend in early twentieth century (Figure 12). Behind this façade of constancy
occurred convergence and divergence in different parts of East Asia. For instance, as
shown by Figures 7 and 8, real wage gap between Tokyo and Seoul widened, while
real incomes of unskilled workers in Dairen and Tokyo converged. Real wage gap
between Japanese cities on the one hand and Shenyang and Changchun on the otherwas also being closed, but living standards in Chinese cities probably became
increasingly deteriorated vis-à-vis Tokyo, Osaka, and Fukuoka.
Explaining the convergences and divergences requires information on input growth
and technological progress in different East Asian regions.

Table 5 Growth Accounting, 1910-40
Japan

Korea

TaiwanManchuria

gY

3.66%

3.60%

3.69%

4.21%

gN

1.20%

1.16%

1.71%

3.12%

gK

4.27%

6.60%

4.63%

n.a.

gT

0.31%

0.75%

1.82%

2.23%

gA

1.72%

0.96%

1.08%

n.a.

Notes: Total factor productivity growth (gA) was obtained applying the identicalfactor shares for labor, capital, and land, set equal to 0.5, 0.3, and 0.2, respectively todifferent regions; labor input growth refers to growth of population aged from 15-64,
except for Manchuria, where population growth was substituted.
Sources: Ohkawa, et al. (1974), Mizoguchi (1988 & 2008), Cha & Kim (2012),
Cha(2012)

Table 5 shows that the four key regions of the Japanese empire differed considerably
in terms of input growth and productivity advance. Faster labor input growth in29

Manchuria and Taiwan reflected faster demographic expansion as seen in Table 2,
which was due to inflow of migrants from China into Manchuria and faster decline ofmortality in Taiwan. The more rapid growth in labor probably caused cultivatedacreage to expand more rapidly in the two regions. Capital input growth wassignificantly faster in Korea than either in Japan or in Taiwan largely as a result of theindustrialization drive in the 1930s, which was to a great extent motivated by Japan’s
imperialist ambition about China. Although the rate of capital accumulation in
Manchuria remains unknown, it was likely to be closer to that observed in Korea thanin Japan, given the narrative evidence of Japan attempting to develop both Manchuria
and northern Korea as footholdfor the invasion of China. Rawski(1989: 245)’s
estimate of “modern-oriented” gross fixed capita formation in Manchuria alsosuggests rapid accumulation of the Manchurian capital: capital stock as derived byapplying perpetual inventory method to Rawski’s flow figures grew 16% per year
from 1903-36. 19Finally, estimated rate of productivity progress was fastest in Japanand slowest in Korea. While ignorance of the rate of capital accumulation makes it
impossible to estimate TFP growth for Manchuria precisely, substitution of the capital
input growth in Korea (6.37%) yielded 0.22% as the growth of Manchurian TFP.
Plugging in the slower rate capital accumulation in Japan (4.27%) raises TFP growthin Manchuria rises to 0.92%, which is still lower than that in Korea.
Comparison of Tables 5 and 2 reveals that higher productivity growth was associatedwith higher primary school enrolment, and vice versa. This correlation is unlikely to
be a consequence of failure to take changes in labor qualityinto account in the growthaccounting of Table 5, where labor input indices derived from population figures wereused: given that primary schooling spread faster in Korea and Taiwan than in Japan,
controlling for faster improvement in labor quality in the two colonies would widen
the gap in the estimated productivity growth.The correlation appears as indicating
causation running from human capital to productivity advance, rather than in the
opposite direction, for even larger human capital gap probably was already in place
before 1900. In 1910, about three fifths of school age children attended primaryschools in Japan, but only 4% and 9% in Korea and Taiwan, respectively. Europeans
arriving in Tokyo and Osaka in the mid-nineteenth century found a surprisingly large
19

Depreciation rate was set equal to 8%, which is an estimate for colonial Korea. See

Cha and Kim (2012).
30

portion of dwellers in the cities – some 80% of males and 60-70% of females – to beliterate, which stands in stark contrast with male literacy ratio as low as 22% in Korea
as late as in 1947.
Using Table 5, one may draw several conclusions on the reasons why income gaps
narrowed or widened in different subsets of the eleven cities of East Asia. First, real
wage convergence between Dairen and non-Manchurian cities is attributable to theerosion of wage advantage due to labor inflow from northern China into Dairen.
Second, the widening real wage gap between Taiwan and Japan appears primarily as aconsequence of faster population growth in Taiwan. Finally, given that population
grew at similar speeds in Japan and Korea, and that capital was being accumulated
more rapidly in Korea, the divergence between Japan and Korea should be seen as aconsequence of faster productivity growth in Japan.
The final question raised at the beginning of this section is about why workers moved
not only from richer to poorer regions, but also in the opposite direction. In particular,a significant number of Japanese workers migrated to Korea, Taiwan, and Manchuria.
As a consequence, censuses undertaken in 1935 indicated that nearly seven hundredand more than two hundred and seventy thousand Japanese could be identified asstaying regularly in Korea and Taiwan, respectively, and that Manchuria embraced
more than 1.3 million Japanese in 1942. 20 Workers of different ethnic origins could
be found in major urban centers of the empire, and my data sources allow comparisonof wages paid to Japanese and indigenous labourers earning incomes in Seoul, Dairen,
and Taipei.

Figure 13 Ethnic Wage Gap: Ratio of Wages of Japanese to Indigenous Common
Laborers

20

See the Report of 1935 Census in Colonial Korea, Barclay (1954: 16), andYamanaka(2009: 134, Table 8). Little appeared to occur in the way of migration
between Korea and Taiwan, the two countries in terms of living standards. According
to Barclay(1955: 16), 1,479 Koreans were counted in the 1935 census conducted in
Taiwan, while the Korean census of the same year failed to identify any Taiwanese in
Korea at all.
31

Sources: see Data Appendix.

Figure 13 shows that in both Seoul and Taipei, Japanese labourers were paid twice as
highly as indigenous workers in the 1910s and 1920s, an ethnic wage gap which
tended to narrow in the following decade. In Dairen, the wage advantage of workers
from Japan was even greater, with Japanese workers enjoying living standards about
three times as high relatively toManchurian workers. Given that Japanese and Korean
laborers, say, in Seoul, were combined with the same amount of land and capital stock
available in the city using identical technology, the ethnic wage gap should reflectethnic difference in human capital. This inference is consistent with the evidence ofJapanese superiority vis-à-vis the three colonies in terms of life expectancy andprimary school primary schooling (Table 2).Also, in the 1930s, Korea and Taiwan
achieved faster accumulation of human capital than Japan, hence the narrowing of
ethnic wage gap in Seoul and Taipei. 21
21

From 1930-35, primary school enrolment rate increased by 13% and 9% points in

Korea and Taiwan, respectively, which compares with 7% point increasing occurringin Japan. In Manchuria, primary school enrolment increased by 11% points from 19%
32

Figure 14Real Wage Ratio:Expatriate/Non-migratory Japanese Workers

Sources: same as Figure 13.
Notes: wages refer to common laborers; solid, dashed, and dotted lines compare real
wages of Japanese workers in Seoul, Taipei, and Dairen, respectively with thoseearned by Japanese workers in Tokyo.

Figure 14 shows that in the 1910s expatriate Japanese workers in Seoul or Taipei
were about twice as well-off as non-migratory Japanese workers in Tokyo. The
greater wage advantage enjoyed by Japanese workers in colonies vis-à-vis thoseremaining home suggests the presence of factors boosting the productivity of
expatriate vis-à-vis sedentary Japanese workers, which would include, productivity,
capital, and land. First, while estimates of relative productivity in the three countries
are unavailable as yet, it appears unreasonable to assume that the metropole suffered
TFP disadvantage relatively to the two colonies. Second, while migratory Japanese
to 30%. Korean and Taiwanese males gained 2.5 and 2.3 years in life expectancy
from 1925/30 to 1935/40, respectably, while male life expectancy increased by 2.1
year in Japan from 1930-40. The sources of information are the same as in Table 2.
33

may have been better educated and healthier than those remaining at home, it is atleast equally conceivable that less privileged tended to be forced out of Japan intopoorer colonies. 22 Third, capital, which was more abundantly available in Japan thanin the rest of the empire (Table 1), cannot explain the wage advantage of expatriate
Japanese. This process of elimination leaves greater land abundance in colonies(Table 2) as the cause to explain the wage advantage of migratory vis-à-vis sedentary
Japanese. Land availability mattered, because in both the metropole and in thecolonies manufacturing was outweighed by agriculture before the 1930s, when Japanfirst emerged as an industrialized economy.
Figure 14 shows that the wage advantage enjoyed by migratory vis-à-vis Japanese
was being eroded in the decades during the interwar period. Why? One obvious
reason would be that out-migration weakened population pressure in Japan, at thesame time intensifying that in colonies. Perhaps at least equally important was fasteradvance in productivity in Japan (Table 5), which raised productivity of non-migrant
Japanese.

Conclusions
This article estimated real wages of unskilled workers in the key cities of East Asia tofind that until the end of WWI unskilled workers’ living standards did not differ
significantly outside Manchuria, where significantly higher real wages prevailed. In
the interwar decades, real wages grew at different speeds in different cities, which
resulted in the convergence of living standards between Dairen and non-Manchurian
cities on the one hand and increasing superiority of Japanese cities over cities in
China, Korea, and Taiwan on the other. The convergence was most probably driven
by mass migration of workers into Manchuria, while faster productivity growth inJapan played an important role in creating the Japanese lead. Productivity growth
was positively correlated with educational achievement, which suggests causation
running from the latter to the former. For the reverse causation is likely to results inthe speed of technological progress being correlated with growth, rather than level, of
educational attainment, which did not take place.

22

In the trans-Atlantic migration in pre-WWI decades, literacy tended to encourage

workers to move. See Hatton and Williamson (1998).
34

This study also attributed the real wage advantage enjoyed by Japanese expatriate
workers’ in colonial cities around 1900 to their superiority in human capital, which
was a legacy of Japan’s superior growth performance in the eighteenth and nineteenth
centuries, as well as a consequence of efficient response to the challenge of theWest. 23 At the opposite pole stood China with a limited and slowly growing amountof human capital, which probably allowed productivity to improve only verysluggishly. As a consequence, notwithstanding mass migration to Manchuria,
Chinese workers’ living standards appeared at best to stagnate in the early twentiethcentury.
Trends in Korean and Taiwanese living standardswere neither so optimistic as inJapan nor so pessimistic as in China. In the two colonies, unskilled real wages
improved slowly. Progress was probably somewhat faster in Taiwan than in Korea,
which is attributable to faster TFP growth in Taiwan enjoying advantage over Korea
in terms of educational attainment. Wage gap between Japanese and indigenous
workers in Japan’s colonial cities was being closed consistently, as both Korea andTaiwan caught up with Japan in terms of health and schooling.
In all this, human capital figures prominently as a factor driving the evolution of real
wage gap in East Asia in the first four decades of the twentieth century. Therefore, itappears warranted to a call for a greater attention to be paid to human capital as afactor to explain the emergence of East Asia as a growth engine in the post-WWII
world economy. [to be completed]

23

Europeans arriving in Tokyo and Osaka in the mid-nineteenth century found asurprisingly large portion of dwellers in the cities – some 80% of males and 60-70%
of females – to be literate, which is to be contrasted with only 30% of males being
literate in China in the 1930s and male literacy ratio as low as 22% in Korea in 1947.
Chinese literacy rate is from Rawski(1989: 58), which is John Lossing Buck’s
estimate as cited in Dwight H. Perkins, “Introduction,” in China’s Modern Economy
in Historical Perspective, ed. Dwight H. Perkins.
35

Appendix: Conversion Ratios
One koku (石) = 10 to (斗) = 100 shō (升) = 1.8 liters
One shō (升) = 1kg for soybean and 1.36 kg for rice.
One kin (斤) of meat = 600g
One kin (斤) of fruit and vegetable = 375 g = 0.1 kan (貫) = 100 monme.
One monme (匁) = 3.75 g
Onechōbo (町步) of land = 3000 tsubo (坪) = 9917.4m2
One tan (反) of cotton cloth = 24 shaku (尺) long and 9.5 sun (寸) wide
One shaku (尺) = 10 sun (寸) = 30.3 cm
One kan (罐 , 缶) of oil or kerosene = 18 liters
One ton of coal = 25 million BTU
One kg of firewood = 14071 BTU

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