IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/11627.html
   My bibliography  Save this paper

Market Integration as a Mechanism of Growth

Author

Listed:
  • Keller, Wolfgang
  • Shiue, Carol H

Abstract

This paper focuses on market integration as a mechanism through which institutions affect growth by examining city growth in 19th century Germany, when some cities experienced deep institutional reform as a result of French rule. Employing an instrumental-variables approach, we show evidence for a hierarchy of growth factors in which institutions affect market integration more than market integration affects institutions. It was institutional improvements that were crucial to market integration, rather than just declining transport costs, which increased city growth during this time period. The institutional reforms, however, were transmitted through the mechanism of market integration. This created a much larger impact on city growth compared to the institutional impact independent from the market integration mechanism. The approach we take can be applied to other causes of economic growth.

Suggested Citation

  • Keller, Wolfgang & Shiue, Carol H, 2016. "Market Integration as a Mechanism of Growth," CEPR Discussion Papers 11627, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11627
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=11627
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Sascha O. Becker & Ludger Woessmann, 2009. "Was Weber Wrong? A Human Capital Theory of Protestant Economic History," The Quarterly Journal of Economics, Oxford University Press, vol. 124(2), pages 531-596.
    2. Philippe Aghion & Nick Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2005. "Competition and Innovation: an Inverted-U Relationship," The Quarterly Journal of Economics, Oxford University Press, vol. 120(2), pages 701-728.
    3. Nathan Nunn & Diego Puga, 2012. "Ruggedness: The Blessing of Bad Geography in Africa," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 20-36, February.
    4. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
    5. Erik Hornung, 2015. "Railroads And Growth In Prussia," Journal of the European Economic Association, European Economic Association, vol. 13(4), pages 699-736, August.
    6. Daron Acemoglu & Davide Cantoni & Simon Johnson & James A. Robinson, 2011. "The Consequences of Radical Reform: The French Revolution," American Economic Review, American Economic Association, vol. 101(7), pages 3286-3307, December.
    7. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    8. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-1125, December.
    9. Kopsidis Michael, 2002. "The Creation of a Westphalian Rye Market 1820-1870: Leading and Following Regions, a Co-Integration Analysis," Jahrbuch für Wirtschaftsgeschichte / Economic History Yearbook, De Gruyter, vol. 43(2), pages 85-112, December.
    10. S. R. Epstein, 2008. "Craft guilds in the pre‐modern economy: a discussion," Economic History Review, Economic History Society, vol. 61(1), pages 155-174, February.
    11. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 569-600.
    12. Studer, Roman, 2008. "India and the Great Divergence: Assessing the Efficiency of Grain Markets in Eighteenth- and Nineteenth-Century India," The Journal of Economic History, Cambridge University Press, vol. 68(2), pages 393-437, June.
    13. Davide Cantoni & Noam Yuchtman, 2014. "Medieval Universities, Legal Institutions, and the Commercial Revolution," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 823-887.
    14. Williamson, Jeffrey G., 1984. "Why Was British Growth So Slow During the Industrial Revolution?," The Journal of Economic History, Cambridge University Press, vol. 44(3), pages 687-712, September.
    15. Goldberg, Pinelopi K. & Verboven, Frank, 2005. "Market integration and convergence to the Law of One Price: evidence from the European car market," Journal of International Economics, Elsevier, vol. 65(1), pages 49-73, January.
    16. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 2002. "Courts: the Lex Mundi Project," NBER Working Papers 8890, National Bureau of Economic Research, Inc.
    17. Federico, Giovanni, 2007. "Market integration and market efficiency: The case of 19th century Italy," Explorations in Economic History, Elsevier, vol. 44(2), pages 293-316, April.
    18. De Long, J Bradford & Shleifer, Andrei, 1993. "Princes and Merchants: European City Growth before the Industrial Revolution," Journal of Law and Economics, University of Chicago Press, vol. 36(2), pages 671-702, October.
    19. David H. Romer & Jeffrey A. Frankel, 1999. "Does Trade Cause Growth?," American Economic Review, American Economic Association, vol. 89(3), pages 379-399, June.
    20. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769, April.
    21. Fernihough, Alan & O'Rourke, Kevin Hjortshøj, 2014. "Coal and the European Industrial Revolution," CEPR Discussion Papers 9819, C.E.P.R. Discussion Papers.
    22. Steinwender, Claudia, 2013. "Information Frictions and the Law of One Price: “When the States and the Kingdom became United”," CEPREMAP Working Papers (Docweb) 1314, CEPREMAP.
    23. James E. Anderson & Douglas Marcouiller, 2002. "Insecurity And The Pattern Of Trade: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 342-352, May.
    24. North, Douglass C. & Weingast, Barry R., 1989. "Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England," The Journal of Economic History, Cambridge University Press, vol. 49(4), pages 803-832, December.
    25. repec:dgr:rugggd:199521 is not listed on IDEAS
    26. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
    27. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    28. 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, vol. 9(2), pages 129-162, August.
    29. Sheilagh Ogilvie, 2014. "The Economics of Guilds," Journal of Economic Perspectives, American Economic Association, vol. 28(4), pages 169-192, Fall.
    30. Nathan Nunn, 2009. "The Importance of History for Economic Development," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 65-92, May.
    31. Carol H. Shiue & Wolfgang Keller, 2007. "Markets in China and Europe on the Eve of the Industrial Revolution," American Economic Review, American Economic Association, vol. 97(4), pages 1189-1216, September.
    32. Greif, Avner, 1993. "Contract Enforceability and Economic Institutions in Early Trade: the Maghribi Traders' Coalition," American Economic Review, American Economic Association, vol. 83(3), pages 525-548, June.
    33. Kenneth A. Froot & Michael Kim & Kenneth Rogoff, 2019. "The Law of One Price Over 700 Years," Annals of Economics and Finance, Society for AEF, vol. 20(1), pages 1-35, May.
    34. Carol H. Shiue, 2002. "Transport Costs and the Geography of Arbitrage in Eighteenth-Century China," American Economic Review, American Economic Association, vol. 92(5), pages 1406-1419, December.
    35. Diego Puga & Daniel Trefler, 2014. "International Trade and Institutional Change: Medieval Venice’s Response to Globalization," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 753-821.
    36. Mokyr, Joel, 2005. "The Intellectual Origins of Modern Economic Growth," The Journal of Economic History, Cambridge University Press, vol. 65(2), pages 285-351, June.
    37. Fremdling, Rainer, 1995. "Anglo-German Rivalry on Coal Markets in France, the Netherlands and Germany, 1850-1913," GGDC Research Memorandum 199521, Groningen Growth and Development Centre, University of Groningen.
    38. Bjorklund, Anders & Jantti, Markus, 1997. "Intergenerational Income Mobility in Sweden Compared to the United States," American Economic Review, American Economic Association, vol. 87(5), pages 1009-1018, December.
    39. Keller, Wolfgang & Shiue, Carol H., 2014. "Endogenous Formation of Free Trade Agreements: Evidence from the Zollverein's Impact on Market Integration," The Journal of Economic History, Cambridge University Press, vol. 74(4), pages 1168-1204, December.
    40. Conley, T. G., 1999. "GMM estimation with cross sectional dependence," Journal of Econometrics, Elsevier, vol. 92(1), pages 1-45, September.
    41. Greif, Avner, 2000. "The fundamental problem of exchange: A research agenda in Historical Institutional Analysis," European Review of Economic History, Cambridge University Press, vol. 4(3), pages 251-284, December.
    42. Erik Lindberg, 2009. "Club goods and inefficient institutions: why Danzig and Lübeck failed in the early modern period," Economic History Review, Economic History Society, vol. 62(3), pages 604-628, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tomihiro Machikita & Tetsuji Okazaki, 2019. "Transition to a Modern Regime and Change in PlantLifecycles: A Natural Experiment from Meiji Japan," CIRJE F-Series CIRJE-F-1122, CIRJE, Faculty of Economics, University of Tokyo.
    2. Tomohiro Machikita & Tetsuji Okazaki, 2019. "Transition to a Modern Regime and Change in Plant Lifecycles: A Natural Experiment from Meiji Japan," CIGS Working Paper Series 19-006E, The Canon Institute for Global Studies.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wolfgang Keller & Carol H. Shiue, 2013. "The Link Between Fundamentals and Proximate Factors in Development," NBER Working Papers 18808, National Bureau of Economic Research, Inc.
    2. Wolfgang Keller & Carol H. Shiue, 2020. "Market integration and institutional change," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(2), pages 251-285, May.
    3. Nunn, Nathan, 2014. "Historical Development," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 7, pages 347-402, Elsevier.
    4. Lecce, Giampaolo & Ogliari, Laura, 2019. "Institutional Transplant and Cultural Proximity: Evidence from Nineteenth-Century Prussia," The Journal of Economic History, Cambridge University Press, vol. 79(4), pages 1060-1093, December.
    5. Williamson, Claudia R., 2012. "Dignity and development," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(6), pages 763-771.
    6. Jinfeng Luo & Yi Wen, 2015. "Institutions Do Not Rule: Reassessing the Driving Forces of Economic Development," Working Papers 2015-1, Federal Reserve Bank of St. Louis.
    7. Fenske, James, 2010. "Institutions in African history and development: A review essay," MPRA Paper 23120, University Library of Munich, Germany.
    8. Wahl, Fabian, 2016. "Does medieval trade still matter? Historical trade centers, agglomeration and contemporary economic development," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 50-60.
    9. James Fenske, 2013. "Does Land Abundance Explain African Institutions?," Economic Journal, Royal Economic Society, vol. 123(12), pages 1363-1390, December.
    10. Nunn, Nathan & Trefler, Daniel, 2014. "Domestic Institutions as a Source of Comparative Advantage," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 263-315, Elsevier.
    11. Carol H. Shiue & Wolfgang Keller, 2007. "Markets in China and Europe on the Eve of the Industrial Revolution," American Economic Review, American Economic Association, vol. 97(4), pages 1189-1216, September.
    12. Johnson, Noel D. & Koyama, Mark, 2017. "States and economic growth: Capacity and constraints," Explorations in Economic History, Elsevier, vol. 64(C), pages 1-20.
    13. Douglas A. Irwin, 2020. "Adam Smith's “tolerable administration of justice” and the Wealth of Nations," Scottish Journal of Political Economy, Scottish Economic Society, vol. 67(3), pages 231-247, July.
    14. Ogilvie, Sheilagh & Carus, A.W., 2014. "Institutions and Economic Growth in Historical Perspective," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 8, pages 403-513, Elsevier.
    15. Charles Angelucci & Simone Meraglia & Nico Voigtländer, 2017. "How Merchant Towns Shaped Parliaments: From the Norman Conquest of England to the Great Reform Act," NBER Working Papers 23606, National Bureau of Economic Research, Inc.
    16. Buggle, Johannes C., 2016. "Law and social capital: Evidence from the Code Napoleon in Germany," European Economic Review, Elsevier, vol. 87(C), pages 148-175.
    17. Long, Cheryl & Murrell, Peter & Yang, Li, 2019. "Memories of colonial law: The inheritance of human capital and the location of joint ventures in early-reform China," China Economic Review, Elsevier, vol. 58(C).
    18. Knack, Steve & Xu, Lixin Colin, 2017. "Unbundling institutions for external finance: Worldwide firm-level evidence," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 215-232.
    19. van Bavel, Bas, 2016. "The Invisible Hand?: How Market Economies have Emerged and Declined Since AD 500," OUP Catalogue, Oxford University Press, number 9780199608133.
    20. Di Liberto, Adriana & Sideri, Marco, 2015. "Past dominations, current institutions and the Italian regional economic performance," European Journal of Political Economy, Elsevier, vol. 38(C), pages 12-41.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:11627. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://www.cepr.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.