DP2809 After Columbus: Explaining the Global Trade Boom 1500-1800

Author(s): Kevin Hjortshøj O'Rourke, Jeffrey G Williamson
Publication Date: May 2001
Keyword(s): Demand and Supply, History, Trade Growth
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=2809

This Paper documents the size and timing of the world intercontinental trade boom following the great voyages in the 1490s of Columbus, da Gama and their followers. Indeed, a trade boom followed over the next three centuries. But what was its cause? The conventional wisdom in the world history literature offers globalization as the answer: it alleges that declining trade barriers, falling transport costs and overseas ‘discovery’ explains the boom. In contrast, this Paper reports the evidence that confirms that there was no commodity price convergence between continents, something that would have emerged had globalization been a force that mattered. Thus, the trade boom must have been caused by some combination of European import demand and foreign export supply from Asia and the Americas. The behaviour of the relative price of foreign importables in European cities should tell us which mattered most and when. We offer detailed evidence on the relative prices of such importables in European markets over the five centuries 1350-1850. We then offer a model which is used to decompose the sources of the trade boom 1500-1800.