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

Author / Creator

Federico, Giovanni, 1954- author

Available as

Online

Summary

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 eq...

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'.

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