Working Paper: CEPR ID: DP13818
Authors: Giovanni Federico; David Chilosi
Abstract: This paper measures the effects of international market integration on world trade and welfare during the first globalization (1815-1913). The analysis is carried out with a multi-market partial equilibrium model, which takes into account the interactions between route-specific changes in trade costs. We consider world trade in the two principal traded commodities, cotton and wheat. The collapse in trade costs accounted for 60% of the increase in trade in cotton and 40% of the increase in trade of wheat. Both producers and consumers gained, but welfare gains were inversely related to the size of the country and positively to the level of openness to trade. We infer that welfare gains from international market integration were equivalent to substantial shares of economic growth in the ‘long 19th century’.
Keywords: market integration; globalization; trade; welfare gains
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| collapse in trade costs (F12) | increase in trade in cotton (F10) |
| collapse in trade costs (F12) | increase in trade in wheat (F19) |
| market integration (F02) | gains for producers (L11) |
| market integration (F02) | gains for consumers (D16) |
| welfare gains (D69) | size of country (O57) |
| welfare gains (D69) | level of openness to trade (F13) |
| collapse in trade costs (F12) | substantial welfare gains (D69) |