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

Luigi Pascali

American Economic Review, 2017, vol. 107, issue 9, 2821-54

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 introduction of the steamship in the shipping industry produced an asymmetric change in trade distances among countries. Before this invention, trade routes depended on wind patterns. The steamship reduced shipping costs and time in a disproportionate manner across countries and trade routes. Using this source of variation and novel data on shipping, trade, and development, I find that (i) the adoption of the steamship had a major impact on patterns of trade worldwide; (ii) only a small number of countries, characterized by more inclusive institutions, benefited from trade integration; and (iii) globalization was the major driver of the economic divergence between the rich and the poor portions of the world in the years 1850-1900.

JEL-codes: F14 F43 F63 L92 N70 O33 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/aer.20140832
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Related works:
Working Paper: The Wind of Change: Maritime Technology, Trade and Economic Development (2014) Downloads
Working Paper: The Wind of Change: Maritime Technology, Trade and Economic Development (2014) Downloads
Working Paper: The wind of change: Maritime technology, trade and economic development (2014) Downloads
Working Paper: The Wind of Change: Maritime Technology, Trade and Economic Development (2014) Downloads
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