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Trade costs in the first wave of globalization

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  • Jacks, David S.
  • Meissner, Christopher M.
  • Novy, Dennis

Abstract

What factors drove globalization in the late 19th century? We employ a new micro-founded measure of bilateral trade costs based on a standard model of trade in differentiated goods to address this question. These trade costs gauge the difference between observed bilateral trade and frictionless trade. They comprise tariffs, transportation costs, and all other factors that impede international trade but which are inherently difficult to observe. Trade costs fell on average by 10-16 percent between 1870 and 1913. We also use this measure to decompose the growth of trade over that period and find that roughly 44 percent of the rise in trade within our sample can be explained by reductions in trade costs; the remaining 56 percent is attributable to economic expansion.

Suggested Citation

  • Jacks, David S. & Meissner, Christopher M. & Novy, Dennis, 2010. "Trade costs in the first wave of globalization," Explorations in Economic History, Elsevier, vol. 47(2), pages 127-141, April.
  • Handle: RePEc:eee:exehis:v:47:y:2010:i:2:p:127-141
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    More about this item

    Keywords

    Trade costs Globalization Gravity model;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative

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