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Economic Nationalism and Economic Integration: The Austro-Hungarian Empire in the Late Nineteenth Century

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  • Max-Stephan Schulze
  • Nikolaus Wolf

Abstract

This paper seeks to reconcile two seemingly contradictory strands in the literature on economic development in the late nineteenth century Habsburg Empire - one emphasizing the centrifugal impact of rising intra-empire of nationalism, the other stressing significant improvements in market integration across the empire. We argue that the process of market integration was systematically asymmetric, shaped by intensifying intra-empire nationality conflicts. While grain markets in Austria-Hungary became overall more integrated over time, they also became systematically biased: regions with a similar ethno-linguistic composition of their population came to display significantly smaller price gaps between each other than regions with different compositions. The emergence and persistence of this differential integration cannot be explained by changes in infrastructure and transport costs, simple geographical features or asymmetric integration with neighbouring regions abroad. Instead, differential integration along ethno-linguistic lines was driven by the formation of ethno-linguistic networks. Finally, the analysis shows that the emerging pre-war regional integration patterns – shaped by nationalist sentiment – effectively anticipated the post-war settlement: the fault lines along which the Habsburg Empire was to break up eventually are evident in the price data about a quarter of a century or so before the outbreak of the First World War.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2813.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2813

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Keywords: Habsburg Empire; market integration; nationalism; networks; pre-1914 Europe;

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References

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  1. Engel, C. & Rogers, J.H., 1995. "How Wide is the Border?," Papers, Pennsylvania State - Department of Economics 4-95-16, Pennsylvania State - Department of Economics.
  2. Combes, Pierre-Philippe & Lafourcade, Miren & Mayer, Thierry, 2005. "The trade-creating effects of business and social networks: evidence from France," Journal of International Economics, Elsevier, Elsevier, vol. 66(1), pages 1-29, May.
  3. John Komlos, 1983. "The Habsburg Monarchy as a Customs Union: Economic Development in Austria-Hungary in the Nineteenth Century," Books by John Komlos, Department of Economics, University of Munich, Department of Economics, University of Munich, number 4.
  4. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 39(4), pages 1177-1203, December.
  5. Shiue, Carol H., 2005. "From political fragmentation towards a customs union: Border effects of the German Zollverein, 1815 to 1855," European Review of Economic History, Cambridge University Press, Cambridge University Press, vol. 9(02), pages 129-162, August.
  6. Trenkler, Carsten & Wolf, Nikolaus, 2005. "Economic integration across borders: The Polish interwar economy 1921 1937," European Review of Economic History, Cambridge University Press, Cambridge University Press, vol. 9(02), pages 199-231, August.
  7. Wolf, Nikolaus, 2005. "Path dependent border effects: the case of Poland's reunification (1918-1939)," Explorations in Economic History, Elsevier, Elsevier, vol. 42(3), pages 414-438, July.
  8. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc.
  9. Fackler, Paul L. & Goodwin, Barry K., 2001. "Spatial price analysis," Handbook of Agricultural Economics, Elsevier, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 17, pages 971-1024 Elsevier.
  10. Schulze, Max-Stephan, 2007. "Origins of catch-up failure: Comparative productivity growth in the Habsburg Empire, 1870 1910," European Review of Economic History, Cambridge University Press, Cambridge University Press, vol. 11(02), pages 189-218, August.
  11. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics, Boston College Department of Economics 485, Boston College Department of Economics.
  12. Schulze, Max-Stephan, 2000. "Patterns of growth and stagnation in the late nineteenth century Habsburg economy," European Review of Economic History, Cambridge University Press, Cambridge University Press, vol. 4(03), pages 311-340, December.
  13. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, American Economic Association, vol. 83(3), pages 525-48, June.
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Cited by:
  1. Becker, Sascha O. & Boeckh, Katrin & Hainz, Christa & Woessmann, Ludger, 2011. "The Empire Is Dead, Long Live the Empire! Long-Run Persistence of Trust and Corruption in the Bureaucracy," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8288, C.E.P.R. Discussion Papers.
  2. Ferdinand Rauch & Matthias Beestermoller, 2014. "A Dissection of Trading Capital: Cultural persistence of trade in the aftermath of the fall of the Iron Curtain," Economics Series Working Papers, University of Oxford, Department of Economics 718, University of Oxford, Department of Economics.
  3. Carlo Ciccarelli & Anna Missiaia, 2014. "Business Fluctuations in Imperial Austria's Regions, 1867-1913: New Evidence," CEIS Research Paper, Tor Vergata University, CEIS 312, Tor Vergata University, CEIS, revised 11 Apr 2014.

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