Working Paper: NBER ID: w26865
Authors: Wolfgang Keller; Markus Lampe; Carol H. Shiue
Abstract: This paper describes broad regional and temporal trends in the evolution of international trade and international factor flows between 1700 and 1870, including key differences in trade costs across space and time. We find trade links in Western Europe and the European colonies of North America intensified at the same time these regions experienced the initial industrial revolution and the spread of industrialization, which led to sustained economic growth. At the same time, global differences in specialization and income emerged. To understand the contribution of global market forces, as well as colonialism to these differences, the chapter lays out theoretical reasons for links between trade and economic growth and examines related historical arguments and evidence. We conclude that trade contributed to global divergence, but the magnitude and mechanisms through which trade affected global welfare lies not so much in the direct impact of trade and specialization, but in multiplier effects emerging from the interactions of trade with other factors that affect economic development.
Keywords: International Trade; Economic Growth; Colonialism; Industrial Revolution
JEL Codes: N10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased trade (F19) | economic growth (O49) |
| trade (F19) | global divergence (F29) |
| trade (F19) | multiplier effects (F41) |
| trade + institutional quality (F14) | economic growth (O49) |
| trade + technological change (O39) | economic growth (O49) |
| trade + market integration (F15) | economic growth (O49) |
| trade (F19) | market efficiency (G14) |
| trade (F19) | institutional changes (O17) |
| trade (F19) | welfare losses for certain groups (D69) |