Working Paper: NBER ID: w30295
Authors: Roberto Bonfatti; Kerem Coar
Abstract: The last two centuries witnessed the rise and fall of empires. We construct a model which rationalises this in terms of the changing trade gains from empires. In the model, empires are arrangements that reduce trade cost between an industrial metropole and the agricultural periphery. During early industrialisation, the value of such bilateral trade increases, and so does the value of empires. As industrialisation diffuses, and as manufactures become more differentiated, trade becomes more multilateral and intra-industry, reducing the value of empires. Our results are consistent with long-term changes in income distribution and trade patterns, and with previous historical arguments.
Keywords: Empires; Trade Dynamics; Industrialization; Comparative Advantage
JEL Codes: F10; F50; N70
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade costs (F19) | emergence of empires (F54) |
| industrial diffusion (L69) | shifting comparative advantages (F12) |
| shifting comparative advantages (F12) | optimal size and number of empires (L25) |
| optimal size and number of empires (L25) | fragmentation of empires (F12) |
| early industrialization (O14) | bilateral trade value (F10) |
| reduction in trade costs (F12) | bilateral trade value (F10) |
| industrialization (O14) | significance of empires (F54) |
| industrialization (O14) | decolonization (F54) |
| rise in trade efficiency (F19) | consolidation of empires (F54) |
| increased importance of intra-industry trade (F12) | decolonization (F54) |