Explaining Divergence in Ocean Freight Rates and Passenger Fares, 1863-1913

Tim Hatton

No 21549, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Late nineteenth-century globalisation was fostered by falling transport costs in ocean shipping as average freight rates fell by about half. The literature has emphasised the importance of progress in steamship technology in explaining this trend. Passenger fares did not share this long run decline even though passenger ships incorporated the same technological advances as those carrying goods. For passenger shipping, increasing space per passenger and improving quality of service absorbed much of the gains from technological progress. From the late 1880s cartels set minimum fares and established market sharing pools, which encouraged the shipping lines to compete on quality.

Date: 2026-05
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