The steamship and global trade

The formal title of this important paper is “The Wind of Change: Maritime Technology , Trade , and Economic Development.”  One of the major findings is that if you consider 1850-1905, using conservative estimates, the introduction of the faster and more reliable steam ships was responsible for least half of the world trade boom during those years.

That was just published in the AER by Luigi Pascali.  Here is the abstract:

The 1870–1913 period marked the birth of the first era of trade globalization. How did this tremendous increase in trade affect economic development? This work isolates a causality channel by exploiting the fact that the introduction of the steamship in the shipping industry produced an asymmetric change in trade distances among countries. Before this invention, trade routes depended on wind patterns. The steamship reduced shipping costs and time in a disproportionate manner across countries and trade routes. Using this source of variation and novel data on shipping, trade, and development, I find that (i) the adoption of the steamship had a major impact on patterns of trade worldwide; (ii) only a small number of countries, characterized by more inclusive institutions, benefited from trade integration; and (iii) globalization was the major driver of the economic divergence between the rich and the poor portions of the world in the years 1850–1900.

Here are ungated copies.


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