The Social Cost of State Monopoly : China’s Salt Monopoly System and the Rise of Secret Societies, 1640—1910

This research explores how salt monopoly, a widespread but costly institution in the pre-modern world, induced mafia-type secret societies in Qing China. Constructing a panel dataset comprising 1638 counties and using salt price regulation as a policy shock, I find that the enforcement of salt price regulation increases the number of secret societies, who specialized in salt smuggling. This positive effect is not driven by a potential reporting bias related to the official’s heterogeneity or local state capacity. Moreover, the regulation effect is stronger in counties a moderate distance from the salt-producing counties, where the government’s price-setting strategies generate a higher incentive for salt smuggling