Working Paper: NBER ID: w24252
Authors: Alan De Bromhead; Alan Fernihough; Markus Lampe; Kevin Hjortshøj O'Rourke
Abstract: A recent literature explores the nature and causes of the collapse in international trade during 2008 and 2009. The decline was particularly great for automobiles and industrial supplies; it occurred largely along the intensive margin; quantities fell by more than prices; and prices fell less for differentiated products. Do these stylised facts apply to trade collapses more generally? This paper uses detailed, commodity specific information on UK imports between 1929 and 1933, to see to what extent the trade collapses of the Great Depression and Great Recession resembled each other. It also compares the free trading trade collapse of 1929-31 with the protectionist collapse of 1931-3, to see to what extent protection, and gradual recovery from the Great Depression, mattered for UK trade patterns. Deflation was a feature of the 1930s trade collapse, and after 1931 protectionism made the UK's trade collapse geographically unbalanced. Many other features of the two trade collapses are remarkably similar, however. Both took place along the intensive rather than the extensive margin; the same types of goods were particularly badly hit in both instances; and prices of differentiated durable manufactured goods barely fell on either occasion.
Keywords: Trade Collapse; Great Depression; Great Recession; UK Trade Patterns; Protectionism
JEL Codes: F14; N74
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Deflation (E31) | Decline in the value of imports and exports (F14) |
| Liberal trade policy (F13) | Trade collapse (1929-31) (F44) |
| Shift to protectionism (F52) | Geographically imbalanced trade collapse (1931-33) (F69) |
| Economic conditions (E66) | Trade patterns (F10) |
| Trade collapse (F69) | Quantity changes (C69) |
| Price changes (P22) | Trade collapse (F69) |