DP2372 The Heckscher-Ohlin Model Between 1400 and 2000: When It Explained Factor Price Convergence, When It Did Not, and Why

Author(s): Kevin Hjortshøj O'Rourke, Jeffrey G Williamson
Publication Date: February 2000
Keyword(s): Factor Prices, Globalization, History
JEL(s): F14, N70
Programme Areas: International Trade and Regional Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2372

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 Columbus stumbles on America in search of spices) and 1498 (Vasco da Gama makes an end run around Africa snatching monopoly rents away from 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 still fragmented before the 19th century. This paper offers a novel way to discriminate between these 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 the 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.