Working Paper: CEPR ID: DP1661
Authors: William J. Collins; Kevin H. O'Rourke; Jeffrey G. Williamson
Abstract: Trade theorists have come to understand that their theory is ambiguous on the question: are trade and factor flows substitutes? While this sounds like an open invitation for empirical research, hardly any serious econometric work has appeared in the literature. This paper uses history to fill the gap. It treats the experience of the Atlantic economy between 1870 and 1940 as panel data with almost 700 observations. When shorter run business cycles and ?long swings? are extracted from the panel data, substitutability is soundly rejected. When secular relationships are extracted over longer time periods and across trading partners, once again substitutability is soundly rejected. Finally, the paper explores immigration policy and finds that policy-makers never behaved as if they viewed trade and immigration as substitutes.
Keywords: trade; factor mobility
JEL Codes: F1; F2; N7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| historical context of the Atlantic economy (N11) | trade and factor mobility (F16) |
| trade (F19) | factor mobility (J62) |
| immigration policy (K37) | trade restrictions (F14) |