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The Sustainability of Empire in Global Perspective: The Role of International Trade Patterns

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  • Roberto Bonfatti

Abstract

European empires had two key economic aspects: the extraction of colonial wealth by colonizers, and the relevance of trade for the colonial economies. I build a simple model of decolonization that puts these two elements at centre stage. By controlling policy in the colony, the mother country can appropriate part of her wealth; the colony, however, can stage a successful revolution at a stochastic cost. I incorporate this mechanism in a three-country, two-good trade model where countries (the mother country, the colony and a third independent country) can decide whether to trade with each other, and revolution is expected to generate trade frictions between the mother country and the rebel colony. Thus, the attractiveness of revolution and the sustainability of empire come to depend on the capacity of the rebel colony to access international markets, which, in turn, depends on the economic fundamentals that shape the pattern of trade as well as the optimal trade policy of the third country. I present detailed historical evidence showing how to use this model to put a few important cases of decolonization in global perspective. My results have important implications for the debate on the economic legacy of colonial empires.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3857.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3857

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Keywords: colonial trade; decolonization; international determinants of secession; American Revolution; independence of Spanish and Portuguese America;

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  1. Herschel I. Grossman & Murat F. Iyigun, 1995. "The Profitability Of Colonial Investment," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 7(3), pages 229-241, November.
  2. Roberto Bonfatti, 2012. "Trade and the Pattern of European Imperialism, 1492-2000," Economics Series Working Papers, University of Oxford, Department of Economics 618, University of Oxford, Department of Economics.
  3. Martin, Philippe & Mayer, Thierry & Thoenig, Mathias, 2005. "Make Trade not War?," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5218, C.E.P.R. Discussion Papers.
  4. Ronald Findlay & Kevin H. O'Rourke, 2007. "Preface to Power and Plenty: Trade, War, and the World Economy in the Second Millennium
    [Power and Plenty: Trade, War, and the World Economy in the Second Millennium]
    ," Introductory Chapters, Princeton University Press, Princeton University Press.
  5. Ronald Findlay & Kevin H. O'Rourke, 2007. "Introduction to Power and Plenty: Trade, War, and the World Economy in the Second Millennium
    [Power and Plenty: Trade, War, and the World Economy in the Second Millennium]
    ," Introductory Chapters, Princeton University Press, Princeton University Press.
  6. Ronald Findlay & Kevin H. O'Rourke, 2007. "Power and Plenty: Trade, War and the World Economy in the Second Millennium (Preface)," Trinity Economics Papers, Trinity College Dublin, Department of Economics tep0107, Trinity College Dublin, Department of Economics.
  7. Escosura, Leandro Prados de la & Casares, Gabriel Tortella, 1983. "Tendencias a Largo Plazo del Comercio Exterior Español, 1714–1913," Revista de Historia Económica, Cambridge University Press, Cambridge University Press, vol. 1(02), pages 353-367, September.
  8. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  9. N. F. R. Crafts & C. K. Harley, 1992. "Output growth and the British industrial revolution: a restatement of the Crafts-Harley view," Economic History Review, Economic History Society, Economic History Society, vol. 45(4), pages 703-730, November.
  10. Grossman, Herschel I & Iyigun, Murat F, 1997. "Population Increase and the End of Colonialism," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 64(255), pages 483-93, August.
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