Klasing, Mariko and Milionis, Petros (2012): Reassessing the Evolution of World Trade, 1870-1949.
Download (301Kb) | Preview
The typical narrative regarding the evolution of world trade prior to World War II refers to a secular rise that started around 1870 and a subsequent collapse that began in 1914. This narrative, though, is based on measures of trade openness that do not fully take into account purchasing power differences across countries, as in the literature non-PPP-adjusted trade data are typically denominated by PPP-adjusted GDP data. The present paper seeks to resolve this inconsistency by constructing new trade share estimates for 51 countries spanning the period from 1870 to 1949 by combining historical import and export data with non-PPP-adjusted GDP values that we estimate via the "short-cut" method. Our estimates indicate a much more pronounced rise and fall of world trade over this period with trade shares being on average 32% higher than previously documented and the world's level of openness to trade in 1913 being comparable to that in 1974. In addition, performing a similar correction for purchasing power differences in the context of standard gravity regressions for the 1870-1939 period we find that the existing literature has overestimated the importance of income movements during this period relative to tariffs changes and the evolution of the gold standard.
|Item Type:||MPRA Paper|
|Original Title:||Reassessing the Evolution of World Trade, 1870-1949|
|Keywords:||International Trade, Purchasing Power Differences|
|Subjects:||F - International Economics > F1 - Trade > F15 - Economic Integration
N - Economic History > N1 - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations > N10 - General, International, or Comparative
N - Economic History > N7 - Transport, Trade, Energy, Technology, and Other Services > N70 - General, International, or Comparative
F - International Economics > F0 - General > F01 - Global Outlook
F - International Economics > F1 - Trade
N - Economic History > N7 - Transport, Trade, Energy, Technology, and Other Services
|Depositing User:||Petros Milionis|
|Date Deposited:||19. Jun 2012 19:30|
|Last Modified:||22. Feb 2013 00:16|
Anderson, J. E., and E. van Wincoop (2003): �Gravity with Gravitas: A Solution to the Border Puzzle,� The American Economic Review, 93(1), 170�-192.
Baier, S. L., and J. H. Bergstrand (2001): �The Growth of World Trade: Tariffs, Transport Costs, and Income Similarity,� Journal of International Economics, 53(1), 1�27.
Balassa, B. (1964): �The Purchasing Power Parity Doctrine: A Reappraisal,� Journal of Political Economy, 72(6), 584�-596.
Barbieri, K., and O. Keshk (2012): �Correlates of War Project Trade Data Set Codebook, Version 3.0, �Online: http://correlatesofwar.org.
Barbieri, K., O. Keshk, and B. Pollins (2009): �TRADING DATA: Evaluating our Assumptions and Coding Rules, �Confl�ict Management and Peace Science, 26(5), 471-�491.
Beenstock, M., and P. Warburton (1983): �Long-Term Trends in Economic Openness in the United Kingdom and the United States,� Oxford Economic Papers, 35(1), 130-�135.
Clemens, M. A., and J. G. Williamson (2004): �Why Did the Tariff-Growth Correlation Change after 1950?,� Journal of Economic Growth, 9(1), 5�46.
David, P. A. (1972): �Just How Misleading Are Official Exchange Rate Conversions?,� The Economic Journal, 82(327), 979�-990
Eichengreen, B., and D. A. Irwin (1995): �Trade Blocs, Currency Blocs and the Reorientation of World Trade in the 1930s,� Journal of International Economics, 38(1-2), 1�-24.
Estevadeordal, A., B. Frantz, and A. M. Taylor (2003): �The Rise and Fall of World Trade, 1870-1939, �The Quarterly Journal of Economics, 118(2), 359�-407.
Frankel, J. A., and D. Romer (1999): �Does Trade Cause Growth?,�The American Economic Review, 89(3), 379�-399.
Heston, A., R. Summers, and B. Aten (2011): �Penn World Table Version 7.0,�Center for International Comparisons of Production, Income and Prices at the University of Pennsylvania.
Irwin, D. A., and M. Terviö (2002): �Does Trade Raise Income?: Evidence from the Twentieth Century, �Journal of International Economics, 58(1), 1�-18.
Jacks, D. S. (2005): �Intra- and International Commodity Market Integration in the Atlantic Economy, 1800-1913, �Explorations in Economic History, 42(3), 381-�413.
Jacks, D. S., C. M. Meissner, and D. Novy (2010): �Trade Costs in the First Wave of Globalization,� Explorations in Economic History, 47(2), 127-�141.
Jacks, D. S., C. M. Meissner, and D. Novy (2011): �Trade Booms, Trade Busts, and Trade Costs, �Journal of International Economics, 83(2), 185�-201.
Jacks, D. S., and K. Pendakur (2010): �Global Trade and the Maritime Transport Revolution,� The Review of Economics and Statistics, 92(4), 745�-755.
Kravis, I. B. (1984): �Comparative Studies of National Incomes and Prices,�Journal of Economic Literature, 22(1), 1�-39.
Kravis, I. B., A. W. Heston, and R. Summers (1978): �Real GDP Per Capita for More Than One Hundred Countries,�The Economic Journal, 88(350), 215-�242.
Krugman, P. (1995): �Growing World Trade: Causes and Consequences,�Brookings Papers on Economic Activity, 1, 327-�377.
Lopez-Cordova, J. E., and C. M. Meissner (2003): �Exchange-Rate Regimes and International Trade: Evidence from the Classical Gold Standard Era,� The American Economic Review, 93(1), 344�-353.
Maddison, A. (2001): The World Economy: Volume 1 - A Millennial Perspective. Development Studies Center, OECD, Paris.
Meissner, C. M. (2005): �A New World Order: Explaining the International Diffusion of the Gold Standard, 1870-1913, �Journal of International Economics, 66(2), 385�-406.
Mitchell, B. R. (2008): International Historical Statistics: 3 Volume Set, 1750-2005. Palgrave Macmillan, New York.
Obstfeld, M., and A. M. Taylor (2004): Global Capital Markets: Integration, Crisis, and Growth. Cambridge University Press, Cambridge.
Officer, L. H. (2008): �Gold Standard,� EH.Net Encyclopedia, edited by Robert Whaples.
Officer, L. H., and S. H. Williamson (2012): �The Annual Consumer Price Index for the United States, 1774-2011,� MeasuringWorth.
O'�Rourke, K. H., and J. G. Williamson (1999): Globalization and History: The Evolution of a Nineteenth Century Atlantic Economy. The MIT Press, Cambridge, MA.
O'�Rourke, K. H., and J. G. Williamson (2002): �When Did Globalisation Begin?,�European Review of Economic History, 6(1), 23-�50.
Prados de la Escosura, L. (2000): �International Comparisons of Real Product, 1820-1990: An Alternative Data Set,�Explorations in Economic History, 37(1), 1-�41.
Samuelson, P. A. (1964): �Theoretical Notes on Trade Problems,�The Review of Economics and Statistics, 46(2), 145�-154.
Schularick, M., and S. Solomou (2011): �Tariffs and Economic Growth in the First Era of Globalization,�Journal of Economic Growth, 16(1), 33�-70.
Smits, J., P. Woltjer, and D. Ma (2009): �A Dataset on Comparative Historical National Accounts, ca. 1870-1950: A Time-Series Perspective, �Groningen Growth and Development Centre Research Memorandum GD-107, Groningen: University of Groningen.