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The Heckscher-Ohlin Model Between 1400 and 2000: When It Explained Factor Price Convergence, When It Did Not, and Why

  • O'Rourke, Kevin Hjortshøj
  • Williamson, Jeffrey G

There are two contrasting views of pre-19th century trade and globalization. First there are the world history scholars like Andre Gunder Frank who attach globalization ‘big bang' significance to the dates 1492 (Christopher Columbus stumbles on America in search of spices) and 1498 (Vasco da Gama makes an end run around Africa snatching monopoly rents away from Arab and Venetian spice traders). Such scholars are on the side of Adam Smith who believed that these were the two most important events in recorded history. Second, there is the view that the world economy was still fragmented before the 19th century. This paper offers a novel way to discriminate between these competing views and we use it to show that there is no evidence that the Ages of Discovery and Commerce had the economic impact on the global economy the world historians assign to them, while there is plenty of evidence of a very big bang in the 19th century. The test involves a close look at the connections between factor prices, commodity prices and endowments world-wide.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2372.

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Date of creation: Feb 2000
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Handle: RePEc:cpr:ceprdp:2372
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  1. O'Rourke, Kevin & Williamson, Jeffrey G., 1994. "Late Nineteenth-Century Anglo-American Factor-Price Convergence: Were Heckscher and Ohlin Right?," The Journal of Economic History, Cambridge University Press, vol. 54(04), pages 892-916, December.
  2. Mankiw, N Gregory & Romer, David & Weil, David N, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 407-37, May.
  3. Alan M. Taylor & Jeffrey G. Williamson, 1994. "Convergence in the Age of Mass Migration," NBER Working Papers 4711, National Bureau of Economic Research, Inc.
  4. Alan M. Taylor, 1996. "Sources of Convergence in the Late Nineteenth Century," NBER Working Papers 5806, National Bureau of Economic Research, Inc.
  5. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
  6. Irwin, Douglas A, 1991. "Mercantilism as Strategic Trade Policy: The Anglo-Dutch Rivalry for the East India Trade," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1296-314, December.
  7. Matthew J. Slaughter, 1995. "The Antebellum Transportation Revolution and Factor-Price Convergence," NBER Working Papers 5303, National Bureau of Economic Research, Inc.
  8. Maurice Obstfeld & Alan M. Taylor, 1997. "The Great Depression as a Watershed: International Capital Mobility over the Long Run," NBER Working Papers 5960, National Bureau of Economic Research, Inc.
  9. Temin, Peter, 1966. "Labor Scarcity and the Problem of American Industrial Efficiency in the 1850's," The Journal of Economic History, Cambridge University Press, vol. 26(03), pages 277-298, September.
  10. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, March.
  11. Williamson, Jeffrey G., 1990. "The impact of the Corn Laws just prior to repeal," Explorations in Economic History, Elsevier, vol. 27(2), pages 123-156, April.
  12. Wood, Adrian, 1995. "North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World," OUP Catalogue, Oxford University Press, number 9780198290155, March.
  13. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  14. Huber, J Richard, 1971. "Effect on Prices of Japan's Entry into World Commerce after 1858," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 614-28, May-June.
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  16. Maurice Obstfeld., 1994. "International Capital Mobility in the 1990s," Center for International and Development Economics Research (CIDER) Working Papers C94-037, University of California at Berkeley.
  17. O'Rourke Kevin, 1994. "The Repeal of the Corn Laws and Irish Emigration," Explorations in Economic History, Elsevier, vol. 31(1), pages 120-138, January.
  18. O'Rourke, Kevin H & Taylor, Alan M & Williamson, Jeffrey G, 1996. "Factor Price Convergence in the Late Nineteenth Century," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 499-530, August.
  19. Fogel, Robert William, 1967. "The Specification Problem in Economic History," The Journal of Economic History, Cambridge University Press, vol. 27(03), pages 283-308, September.
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