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IMPERIAL LEGACY The Persistence of Colonial Trade Patterns

  • Aditya Bhattacharjea

    (Delhi School of Economics)

Several decades after formally attaining independence, many developing countries continue to trade disproportionately with the European countries that once ruled them. Earlier attempts to examine this phenomenon have relied on inappropriate statistical techniques. After reviewing the existing literature, this paper draws on insights from economic history as well as the theory of industrial organization in order to motivate a different approach. History shows that there were crucial differences between the major colonial powers in respect of the nature and duration of the trade-diverting policies they imposed on their colonies; their treatment of different colonies; and of colonial exports as against imports. Theory suggests that when early entrants have sunk costs of marketing and distribution, market size is an important determinant of the entry of new suppliers. These insights are combined in an econometric specification that seeks to explain the market shares of Britain and France in different countries by their size, distance and (where relevant) time since independence. Exploratory tests, using panel data on imports by 119 developing countries for the period 1994-1999, give qualified support to the hypothesis that high market shares for the former colonial powers persist, especially in smaller, nearer, and more recently independent countries.

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Paper provided by Centre for Development Economics, Delhi School of Economics in its series Working papers with number 126.

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Length: 23 pages
Date of creation: Aug 2004
Date of revision:
Handle: RePEc:cde:cdewps:126
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  1. Rauch, J E & Casella, Alessandra, 2001. "Overcoming Informational Barriers to International Resource Allocation: Prices and Ties," University of California at San Diego, Economics Working Paper Series qt2k8626fr, Department of Economics, UC San Diego.
  2. James E. Rauch & Vitor Trindade, 1999. "Ethnic Chinese Networks in International Trade," NBER Working Papers 7189, National Bureau of Economic Research, Inc.
  3. Henri L.F. De Groot & Gert-Jan Linders & Piet Rietveld & Uma Subramanian, 2003. "The Institutional Determinants of Bilateral Trade Patterns," ERSA conference papers ersa03p421, European Regional Science Association.
  4. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  5. Kleiman, Ephraim, 1976. "Trade and the Decline of Colonialism," Economic Journal, Royal Economic Society, vol. 86(343), pages 459-80, September.
  6. Wolf, Nikolaus & Ritschl, Albrecht, 2003. "Endogeneity of Currency Areas and Trade Blocs: Evidence from the Inter-War Period," Papers 2004,10, Humboldt-Universität Berlin, Center for Applied Statistics and Economics (CASE).
  7. James Cassing & Steven Husted, 2004. "Trade Pattern Persistence," Chapters, in: Empirical Methods in International Trade, chapter 6 Edward Elgar.
  8. Yeats, Alexander J., 1978. "Monopoly power, barriers to competition and the pattern of price differentials in international trade," Journal of Development Economics, Elsevier, vol. 5(2), pages 167-180, June.
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