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Does trade liberalization converge factor prices? Evidence from the antebellum transportation revolution

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Matthew J. Slaughter
Abstract

A widespread current policy concern is whether the international integration of product markets forces together wages across countries. To help gain an insight into this issue, this paper analyses the case of the US antebellum transportation revolution. Between 1820 and 1860 an extensive intranational network of canals and railroads emerged that dramatically reduced transportation costs within the country. Motivated by the factor-price-convergence (FPC) theorem from Heckscher–Ohlin trade theory, this paper explores the impact of these cost reductions on regional product prices and wages. The main empirical finding is that prices converged quite markedly across regions, but nominal wages converged very little. The paper then discusses three possible explanations of no wage convergence.

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Article provided by Taylor and Francis Journals in its journal Journal of International Trade & Economic Development.

Volume (Year): 10 (2001)
Issue (Month): 3 (September)
Pages: 339-362
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Handle: RePEc:taf:jitecd:v:10:y:2001:i:3:p:339-362

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Keywords: Trade Liberalization Factor Prices;

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  2. Robert A. Margo, 1990. "Wages and Prices During the Antebellum Period: A Survey and New Evidence," NBER Historical Working Papers 0019, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Collins, William J., 1999. "Labor Mobility, Market Integration, and Wage Convergence in Late 19th Century India," Explorations in Economic History, Elsevier, vol. 36(3), pages 246-277, July. [Downloadable!] (restricted)
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  13. O'Rourke, Kevin & Williamson, Jeffrey G., 1994. "Late Nineteenth-Century Anglo-American Factor-Price Convergence: Were Heckscher and Ohlin Right?," The Journal of Economic History, Cambridge University Press, vol. 54(04), pages 892-916, December. [Downloadable!]
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  16. O'Rourke, Kevin H & Taylor, Alan M & Williamson, Jeffrey G, 1996. "Factor Price Convergence in the Late Nineteenth Century," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 499-530, August.
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  1. Keller, Wolfgang & Shiue, Carol Hua, 2003. "The Origins of Spatial Interaction," CEPR Discussion Papers 4138, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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