Working Paper: NBER ID: w7411
Authors: Kevin H. O'Rourke; Jeffrey G. Williamson
Abstract: There are two contrasting views of pre-19th century trade and globalization. First, there are the world history scholars like Andre Gunder Frank who attach globalization 'big bang' significance to the dates 1492 (Christopher Colombus stumbles on the Americas in search of spices) and 1498 (Vasco da Gama makes an end run around Africa and snatches monopoly rents away from the Arab and Venetian spice traders). Such scholars are on the side of Adam Smith who believed that these were the two most important events in recorded history. Second, there is the view that the world economy was fragmented and completely de- globalized before the 19th century. This paper offers a novel way to discriminate between these two competing views and we use it to show that there is no evidence that the Ages of Discovery and Commerce had the economic impact on the global economy that world historians assign to them, while there is plenty of evidence of a very big bang in the 19th century. The test involves a close look at the connections between factor prices, commodity prices and endowments world wide.
Keywords: No keywords provided
JEL Codes: F14; N7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| long-distance intercontinental trade (F10) | differences in factor proportions between continents (F16) |
| differences in factor proportions between continents (F16) | gains from trade (F11) |
| gains from trade (F11) | potential for factor price convergence between trading partners (F16) |
| commodity price convergence in the late 19th century (N91) | factor price convergence (F16) |
| absence of significant commodity price convergence before the 19th century (N93) | trade's impact on consumption, production, and factor income distribution was minimal (F61) |
| conditions necessary for trade to influence factor prices were not satisfied prior to the 19th century (F16) | limited relevance of the Heckscher-Ohlin model (F11) |
| economic impact of the ages of discovery and commerce (1492-1800) (N13) | substantial economic changes observed in the 19th century (N13) |
| trade (F19) | changes in domestic commodity prices (P22) |
| changes in domestic commodity prices (P22) | reshuffling of resources between sectors (P23) |