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The Empire Effect: Country Risk in the First Age of Globalization, 1880-1913

  • Niall Ferguson

    (Harvard University)

  • Moritz Schularick

    (Free University of Berlin)

Would the movement of capital from to poor countries greatly increase, if the commitment to protecting property and allowing capital to move freely were more credible? This paper asks whether the British Empire provided global public goods that supported large-scale development finance before 1914. We reassess the importance of colonial status to investors by means of multivariable regression analysis. We show that British colonies were able to borrow in London at significantly lower rates of interest than non-colonies precisely because of their colonial status, which overruled economic factors. We conclude that these findings have important implications for the current globalization debate: lacking jurisdictional integration is a major impediment to capital flows from rich to poor.

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File URL: http://econwpa.repec.org/eps/eh/papers/0509/0509002.pdf
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Paper provided by EconWPA in its series Economic History with number 0509002.

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Length: 40 pages
Date of creation: 06 Sep 2005
Date of revision:
Handle: RePEc:wpa:wuwpeh:0509002
Note: Type of Document - pdf; pages: 40
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Kris James Mitchener & Marc D. Weidenmier, 2004. "Empire, Public Goods, and the Roosevelt Corollary," NBER Working Papers 10729, National Bureau of Economic Research, Inc.
  2. Maurice Obstfeld & Alan M. Taylor, 2003. "Sovereign risk, credibility and the gold standard: 1870-1913 versus 1925-31," Economic Journal, Royal Economic Society, vol. 113(487), pages 241-275, 04.
  3. Mody, Ashoka & Taylor, Mark P, 2003. "International Capital Crunches: The Time-Varying Role of Informational Asymmetries," CEPR Discussion Papers 3757, C.E.P.R. Discussion Papers.
  4. Moritz Schularick, 2005. "A Tale Of Two “Globalizations”: Capital Flows From Rich To Poor In Two Eras Of Global Finance," Economic History 0509001, EconWPA.
  5. Bordo, Michael D. & Schwartz, Anna J., 1999. "Monetary policy regimes and economic performance: The historical record," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 3, pages 149-234 Elsevier.
  6. Kris James Mitchener & Marc Weidenmier, 2008. "Trade and Empire," NBER Working Papers 13765, National Bureau of Economic Research, Inc.
  7. Oaxaca, Ronald L. & Geisler, Iris, 2003. "Fixed effects models with time invariant variables: a theoretical note," Economics Letters, Elsevier, vol. 80(3), pages 373-377, September.
  8. Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters, in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435 National Bureau of Economic Research, Inc.
  9. Peter H. Lindert & Peter J. Morton, 1989. "How Sovereign Debt Has Worked," NBER Chapters, in: Developing Country Debt and Economic Performance, Volume 1: The International Financial System, pages 39-106 National Bureau of Economic Research, Inc.
  10. Barry Eichengreen and Marc Flandreau., 1994. "The Geography of the Gold Standard," Center for International and Development Economics Research (CIDER) Working Papers C94-042, University of California at Berkeley.
  11. Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc.
  12. Christopher M. Meissner, 2002. "A New World Order: Explaining the Emergence of the Classical Gold Standard," NBER Working Papers 9233, National Bureau of Economic Research, Inc.
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