DP13818 The effects of market integration during the first globalization: a multi-market approach

Author(s): David Chilosi, Giovanni Federico
Publication Date: June 2019
Keyword(s): Globalization, market integration, Trade, welfare gains
JEL(s):
Programme Areas: Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13818

This paper measures the effects of international market integration on world trade and welfare during the first globalization (1815-1913). The analysis is carried out with a multi-market partial equilibrium model, which takes into account the interactions between route-specific changes in trade costs. We consider world trade in the two principal traded commodities, cotton and wheat. The collapse in trade costs accounted for 60% of the increase in trade in cotton and 40% of the increase in trade of wheat. Both producers and consumers gained, but welfare gains were inversely related to the size of the country and positively to the level of openness to trade. We infer that welfare gains from international market integration were equivalent to substantial shares of economic growth in the 'long 19th century'.