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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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    File URL: http://www.tandfonline.com/doi/abs/10.1080/09638190110061348
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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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    Related research

    Keywords: Trade Liberalization; Factor Prices;

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    1. Maurice Obstfeld & Alan M. Taylor, 1997. "Nonlinear Aspects of Goods-Market Arbitrage and Adjustment: Heckscher's Commodity Points Revisited," NBER Working Papers 6053, National Bureau of Economic Research, Inc.
    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.
    3. Kevin H. O'Rourke & Jeffrey G. Williamson, 2001. "Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650592.
    4. 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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    11. Margo, Robert A. & Villaflor, Georgia C., 1987. "The Growth of Wages in Antebellum America: New Evidence," The Journal of Economic History, Cambridge University Press, vol. 47(04), pages 873-895, December.
    12. Adams, Donald R., 1992. "Prices and Wages in Antebellum America: The West Virginia Experience," The Journal of Economic History, Cambridge University Press, vol. 52(01), pages 206-216, March.
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    16. 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.
    17. 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.
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    Cited by:
    1. Wolfgang Keller & Carol H. Shiue, 2003. "The Origins of Spatial Interaction," NBER Working Papers 10069, National Bureau of Economic Research, Inc.
    2. 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.
    3. Julio Martinez-Galarraga & Joan R. Roses & Daniel A. Tirado Fabregat, 2009. "The Upswing of Regional Income Inequality in Spain (1860-1930)," Working Papers in Economic History wp09-05, Universidad Carlos III, Departamento de Historia Económica e Instituciones.

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