Working Paper: CEPR ID: DP5418
Authors: Kevin H. O'Rourke; Jeffrey G. Williamson
Abstract: In his seminal publications between the 1930s and 1960s, Frederick Lane offered three hypotheses regarding the impact of the Voyages of Discovery that have guided debate ever since. First, pepper and other spice prices did not rise in European markets in the century before the 1490s, and thus could not have ?pulled in? the oceanic explorations by their rising scarcity. Second, Portuguese circumnavigation of Africa did not lower European spice prices across the 16th century, implying that the discovery of the Cape route had no permanent effect on Euro-Asian market integration. Third, 15th century Venetian spice markets were already well integrated with those in Iberia and northern Europe, implying that Portugal could not have had an intra-European market integrating influence in the 16th century. Lane developed these influential hypotheses by relying heavily on nominal spice prices from Venice and the Levant. This paper revisits Lane?s hypotheses by using instead relative spice prices, that is, accounting for inflation. It also draws on evidence from Iberia and northern Europe. In addition, it explores European market integration before and after 1503, the year when da Gama returned from his financially successful second voyage. Lane?s three hypotheses are rejected: the impact of the Portuguese was profound on all fronts. We conclude by using a simple model of monopoly and oligopoly to decompose the sources of the Cape route?s impact on European markets.
Keywords: market integration; spice trade; voyages of discovery
JEL Codes: F14; N7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Vasco da Gama's voyages (N76) | increased integration of European spice markets (F15) |
| Cape route (Y91) | decrease in relative prices of spices in Europe (N93) |
| Cape route (Y91) | increased market integration (F15) |
| Portuguese discoveries (Y91) | significant decrease in spice prices in the 16th century (N93) |
| Rise of Lisbon as a trading hub (N93) | enhanced market integration across Europe (F15) |