 State formation and market integration: Germany, 1780–1830Hakon Albers and Ulrich Pfister Journal of Comparative Economics, 2023, vol. 51, issue 2, 403-421 Abstract: The rise of modern states is an important factor for economic development. We test the effects of territorial consolidation and the increase in legal capacity on market integration. The political transformation of Germany in the wake of the Napoleonic Wars, which reduced territorial fragmentation and transformed former semi-autonomous estates to sovereign polities, serves as a natural experiment. We apply a difference-in-differences framework to a new dataset of grain prices and show that territorial consolidation reduced trade costs conditional on trade reforms that replaced heterogenous internal duties by a unified system of external tariffs. The effect was equivalent to a reduction of price gaps by 31 percent. Cities that were part of Prussia both before and after the Wars and experienced trade reform saw a reduction in price gaps of similar magnitude. By contrast, there was no market integration in late-reformer states such as Hanover and Saxony. Trade reforms were the main channel through which territorial consolidation fostered market integration. Keywords: State formation; Market integration; Tariffs; Border; War (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:51:y:2023:i:2:p:403-421 DOI: 10.1016/j.jce.2023.01.007 Access Statistics for this article Journal of Comparative Economics is currently edited by D. Berkowitz and G. Roland More articles in Journal of Comparative Economics from Elsevier |
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