Trade Shocks, Labor Markets and Elections in the First Globalization

Richard Bräuer, Wolf-Fabian Hungerland and Felix Kersting
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Richard Bräuer: Halle Institute for Economic Research and VU Amsterdam
Felix Kersting: HU Berlin

No 285, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: This paper studies the economic and political effects of a large trade shock in agriculture – the grain invasion from the Americas – in Prussia during the first globalization (1871-1913). We show that this shock accelerated the structural change in the Prussian economy through migration of workers to booming cities. In contrast to studies using today’s data, we do not observe declining per capita income, health outcomes or political polarization in counties aected by foreign competition. Our results suggest that the negative and persistent eects of trade shocks we see today are not a universal feature of globalization, but depend on labor mobility. For our analysis, we digitize data from Prussian industrial and agricultural censuses on the county level and combine it with national trade data at the product level. We exploit the cross-regional variation in cultivated crops within Prussia and instrument with Italian trade data to isolate exogenous variation.

Keywords: globalization; import competition; labor market; elections; agriculture; migration; trade shock (search for similar items in EconPapers)
JEL-codes: F14 F16 F66 F68 N13 R12 (search for similar items in EconPapers)
Date: 2021-10-17
New Economics Papers: this item is included in nep-his, nep-int and nep-pol
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Working Paper: Trade shocks, labour markets and elections in the first globalisation (2021)
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