In view of much debated European integration, Research Fellow Kevin O'Rourke, in Discussion Paper No. 1319, surveys the recent literature on links between international commodity and factor market integration, convergence, and migration in Europe of the late nineteenth century. This period was - as the current one - marked by globalization, mass migration, large-scale international capital flows, booming commodity trade, and plummeting transport costs. Moreover, within the current OECD club, it was a period of distinct convergence, with poorer countries catching up with the rich. The paper begins by surveying the `traditional', `economic geography' and `new growth' theory literature on the links between economic integration and convergence, and finds conflicting predictions. It continues by looking at empirical studies of the impact of international trade, migration, and capital flows, on real wage convergence and European as well as North American land rents, which behaved as traditional trade theory would have predicted.

Two econometric approaches are discussed and examples of applications are given. The main finding is that migration had a more pervasive impact on real wages than trade and capital flows. To further assess the impact of mass migration, two approaches, as well as practical examples, are presented. O'Rourke concludes that open economy forces, in particular migration, were crucial in driving observed international convergence of living standards in the late nineteenth century. He suggests that more attention should be paid to those forces when discussing present convergence.

Trade, Migration and Convergence: An Historical Perspective
Kevin H O'Rourke