Working Paper: CEPR ID: DP2809
Authors: Kevin O'Rourke; Jeffrey G. Williamson
Abstract: This Paper documents the size and timing of the world intercontinental trade boom following the great voyages in the 1490s of Columbus, da Gama and their followers. Indeed, a trade boom followed over the next three centuries. But what was its cause? The conventional wisdom in the world history literature offers globalization as the answer: it alleges that declining trade barriers, falling transport costs and overseas ?discovery? explains the boom. In contrast, this Paper reports the evidence that confirms that there was no commodity price convergence between continents, something that would have emerged had globalization been a force that mattered. Thus, the trade boom must have been caused by some combination of European import demand and foreign export supply from Asia and the Americas. The behaviour of the relative price of foreign importables in European cities should tell us which mattered most and when. We offer detailed evidence on the relative prices of such importables in European markets over the five centuries 1350-1850. We then offer a model which is used to decompose the sources of the trade boom 1500-1800.
Keywords: demand; supply; history; trade; growth
JEL Codes: F14; N70
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| European import demand (F14) | trade boom (F10) |
| foreign export supply (F10) | trade boom (F10) |
| relative prices of exotic imports (F14) | trade dynamics (F14) |
| European income growth (O52) | trade boom (F10) |
| relative price of Asian goods (P22) | trade boom (F10) |
| relative prices of American goods (P22) | trade boom (F10) |
| China's autarkic policies (F52) | European trade with other Asian economies (F19) |