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

  • Roberto Bonfatti

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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  1. 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.
  2. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade Not War?," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 865-900.
  3. Ronald Findlay & Kevin H. O'Rourke, 2007. "Power and Plenty: Trade, War and the World Economy in the Second Millennium (Preface)," Trinity Economics Papers tep0107, Trinity College Dublin, Department of Economics.
  4. 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.
  5. Grossman, Herschel I & Iyigun, Murat F, 1997. "Population Increase and the End of Colonialism," Economica, London School of Economics and Political Science, vol. 64(255), pages 483-93, August.
  6. 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, vol. 45(4), pages 703-730, November.
  7. Herschel I. Grossman & Murat F. Iyigun, 1995. "The Profitability Of Colonial Investment," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 229-241, November.
  8. Roberto Bonfatti, 2013. "Trade and the Pattern of European Imperialism, 1492-2000," Discussion Papers 2013-01, University of Nottingham, GEP.
  9. repec:cup:cbooks:9780521855266 is not listed on IDEAS
  10. 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, vol. 1(02), pages 353-367, September.
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