A Tale of Two Oceans: Market Integration Over the High Seas, 1800-1940.

Long-range market integration is an essential component of globalization but it is still comparatively under-researched. The conventional wisdom relies heavily on the case of Atlantic trade in the period after 1870. This paper covers also the Indian Ocean and extends the period under consideration, from Waterloo to World War Two. Integration started in first half of the 19th century, and timing and extent of convergence differed substantially among products. The second part of the paper analyses the causes of the process with a panel regression and puts forwards a tentative estimate of its welfare effects. The key message of the paper is that simple generalizations about the first globalization are not good substitutes for empirical research.

Commodity Market Integration, 1500-2000

This paper provides a summary of what is known about trends in international commodity market integration during the second half of the second millennium. The range of goods which have been traded between continents since the Voyages of Discovery has steadily increased over time, and there has been substantial commodity market integration over the period, driven by technology in the 19th century and politics in the late 20th century. However, this trend towards greater market integration was not monotonic; it was periodically interrupted by shocks such as wars and world depressions, or by endogenous political responses to the distributional effects of globalization itself. In some periods politics has reinforced the effects of technology, while in other periods it has offset them. In several cases, severe shocks have had long-run effects on the international integration of commodity markets, as a result of politically induced hysteresis. Finally, we know remarkably little about international commodity market integration during the 20th century.

Why England? Demographic factors, structural change and physical capital accumulation during the Industrial Revolution

Why did England industrialize first? And why was Europe ahead of the rest of the world? Unified growth theory in the tradition of Galor-Weil (2000) and Galor-Moav (2002) captures the key features of the transition from stagnation to growth over time. Yet we know remarkably little about why industrialization occurred so much earlier in some parts of the world than in others. To answer this question, we present a probabilistic two-sector model where the initial escape from Malthusian constraints depends on capital deepening and the use of more differentiated capital inputs. Weather-induced shocks to agricultural productivity cause changes in prices and quantities, and affect wages. In a standard model with capital externalities, these fluctuations interact with the demographic regime and affect the speed of growth. Our model is calibrated to match the main characteristics of the English economy in 1700 and the observed transition until 1850. We capture one of the key features of the British Industrial Revolution emphasized by economic historians – slow growth of output and productivity. The paper explores one additional aspect of inequality in the transition to the Post-Malthusian economy – the availability of nutrition for poorer segments of society. We examine the influence of redistributive institutions such as the Old Poor Law, and find they were not decisive in fostering industrialization. Simulations using parameter values for other countries show that Britain’s early escape was only partly due to chance. France could have attained a greater workforce in manufacturing than Britain, but the probability was less than 30 percent. Contrary to recent claims in the literature, 18th century China had only a minimal chance to escape from Malthusian constraints.Industrial Revolution, Unified Growth Theory, Endogenous Growth, Transition, Calibration, British Economic Growth before 1850

Not guilty? : agriculture in the 1920s and the Great Depression

Agricultural distress in the 1920s is routinely quoted among the causes of the Great Depression. This paper challenges the conventional wisdom. World agriculture was not plagued by overproduction and falling terms of trade. The indebtedness of American farmers, a legacy of the boom years 1919-1921, did jeopardize the rural banks, but the relation between their crises, the banking panic of 1930 and the Great Depression is tenuous at bes

INCOME CONVERGENCE DURING THE DISINTEGRATION OF THE WORLD ECONOMY 1919-39

Some economists have argued that the process of disintegration of the world economy between the two World Wars led to income divergence between the countries. This is in keeping with the view that economic integration leads to income convergence. The paper shows that the view that the period 1919-39 was associated with divergence of incomes among the rich countries is wrong. On the contrary, income convergence continued and even accelerated. Since the mid-19th century, rich countries’ incomes tended to converge in peacetime regardless of whether their economies were more or less integrated. This, in turn, implies that it may not be trade and capital and labor flows that matter for income convergence but some other, less easily observable, forces like diffusion of information and technology.globalization, inequality, world, inter-war history

Why England? Demand, growth and inequality during the Industrial Revolution

Why was England first? And why Europe? We present a probabilistic model that builds on big-push models by Murphy, Shleifer and Vishny (1989), combined with hierarchical preferences. The interaction of exogenous demographic factors (in particular the English low-pressure variant of the European marriage pattern)and redistributive institutions – such as the “old Poor Law” – combined to make an Industrial Revolution more likely. Essentially, industrialization is the result of having a critical mass of consumers that is “rich enough” to afford (potentially) mass-produced goods. Our model is then calibrated to match the main characteristics of the English economy in 1750 and the observed transition until 1850. This allows us to address explicitly one of the key features of the British Industrial Revolution unearthed by economic historians over the last three decades – the slowness of productivity and output change. In our calibration, we find that the probability of Britain industrializing is 5 times larger than France’s. Contrary to the recent argument by Pomeranz, China in the 18th century had essentially no chance to industrialize at all. This difference is decomposed into a demographic and a policy component, with the former being far more important than the latter.Inequality, Industrial Revolution, growth, big push, redistribution, steam, general purpose technology