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The Wind of Change: Maritime Technology, Trade and Economic Development

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  • Pascali, Luigi

    (Department of Economics, University of Warwick)

Abstract

The 1870-1913 period marked the birth of the first era of trade globalization. How did this tremendous increase in trade affect economic development? This work isolates a causality channel by exploiting the fact that the steamship produced an asymmetric change in trade distances among countries. Before the invention of the steamship, trade routes depended on wind patterns. The introduction of the steamship in the shipping industry reduced shipping costs and time in a disproportionate manner across countries and trade routes. Using this source of variation and a completely novel set of data on shipping times, trade, and development that spans the great majority of the world between 1850 and 1900, I find that 1) the adoption of the steamship was the major reason for the first wave of trade globalization, 2) only a small number of countries that were characterized by more inclusive institutions benefited from globalization, and 3) globalization exerted a negative effect on both urbanization rates and economic development in most other countries. JEL classification: F1 ; F15 ; F43 ; O43

Suggested Citation

  • Pascali, Luigi, 2014. "The Wind of Change: Maritime Technology, Trade and Economic Development," The Warwick Economics Research Paper Series (TWERPS) 1049, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:1049
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    References listed on IDEAS

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    Keywords

    Steamship ; Gravity ; Globalizationcreation-date: 2014;

    JEL classification:

    • F1 - International Economics - - Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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