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

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  • Matthew Slaughter
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    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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    Bibliographic Info

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

    Volume (Year): 10 (2001)
    Issue (Month): 3 ()
    Pages: 339-362

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    Handle: RePEc:taf:jitecd:v:10:y:2001:i:3:p:339-362

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    Web page: http://www.tandfonline.com/RJTE20

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    Keywords: Trade Liberalization; Factor Prices;

    References

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    1. Kevin O'Rourke & Jeffrey G. Williamson, 1995. "Open Economy Forces and Late 19th Century Scandinavian Catch-Up," NBER Working Papers 5112, National Bureau of Economic Research, Inc.
    2. Howard Bodenhorn & Hugh Rockoff, 1992. "Regional Interest Rates in Antebellum America," NBER Chapters, in: Strategic Factors in Nineteenth Century American Economic History: A Volume to Honor Robert W. Fogel, pages 159-187 National Bureau of Economic Research, Inc.
    3. Leamer, Edward E. & Levinsohn, James, 1995. "International trade theory: The evidence," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 26, pages 1339-1394 Elsevier.
    4. Coelho, Philip R. P. & Shepherd, James F., 1976. "Regional differences in real wages: The United States, 1851-1880," Explorations in Economic History, Elsevier, vol. 13(2), pages 203-230, April.
    5. Robert A. Margo, 1992. "Wages and Prices during the Antebellum Period: A Survey and New Evidence," NBER Chapters, in: American Economic Growth and Standards of Living before the Civil War, pages 173-216 National Bureau of Economic Research, Inc.
    6. 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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    13. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May.
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    15. Deardorff, Alan V., 1986. "Firless firwoes: How preferences can interfere with the theorems of international trade," Journal of International Economics, Elsevier, vol. 20(1-2), pages 131-142, February.
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    Cited by:
    1. Keller, Wolfgang & Shiue, Carol Hua, 2003. "The Origins of Spatial Interaction," CEPR Discussion Papers 4138, C.E.P.R. Discussion Papers.
    2. Rosés, Joan Ramón & Martínez-Galarraga, Julio & Tirado, Daniel A., 2010. "The upswing of regional income inequality in Spain (1860-1930)," Explorations in Economic History, Elsevier, vol. 47(2), pages 244-257, April.
    3. Jacks, David S., 2005. "Intra- and international commodity market integration in the Atlantic economy, 1800-1913," Explorations in Economic History, Elsevier, vol. 42(3), pages 381-413, July.

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