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Does trade liberalization converge factor prices? Evidence from the antebellum transportation revolution

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  • Matthew Slaughter

Abstract

A widespread current policy concern is whether the international integration of product markets forces together wages across countries. To help gain an insight into this issue, this paper analyses the case of the US antebellum transportation revolution. Between 1820 and 1860 an extensive intranational network of canals and railroads emerged that dramatically reduced transportation costs within the country. Motivated by the factor-price-convergence (FPC) theorem from Heckscher-Ohlin trade theory, this paper explores the impact of these cost reductions on regional product prices and wages. The main empirical finding is that prices converged quite markedly across regions, but nominal wages converged very little. The paper then discusses three possible explanations of no wage convergence.

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  • Matthew Slaughter, 2001. "Does trade liberalization converge factor prices? Evidence from the antebellum transportation revolution," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(3), pages 339-362.
    • Handle: RePEc:taf:jitecd:v:10:y:2001:i:3:p:339-362
    DOI: 10.1080/09638190110061348
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    3. Rosés, Joan Ramón & Martínez-Galarraga, Julio & Tirado, Daniel A., 2010. "The upswing of regional income inequality in Spain (1860-1930)," Explorations in Economic History, Elsevier, vol. 47(2), pages 244-257, April.
    4. Tahir Andrabi & Sheetal Bharat & Michael Kuehlwein, 2021. "Information And Price Convergence:Telegraphs In British India," BASE University Working Papers 04/2021, BASE University, Bengaluru, India.
    5. Claire H. Hollweg & Daniel Lederman & Devashish Mitra, 2016. "Structural Reforms and Labour-market Outcomes: International Panel-data Evidence," The World Economy, Wiley Blackwell, vol. 39(7), pages 925-963, July.
    6. Douglas A. Irwin, 2008. "Antebellum Tariff Politics: Regional Coalitions and Shifting Economic Interests," Journal of Law and Economics, University of Chicago Press, vol. 51(4), pages 715-741, November.
    7. Berthold Herrendorf & James A. Schmitz & Arilton Teixeira, 2009. "Transportation and development: insights from the U.S., 1840-1860," Staff Report 425, Federal Reserve Bank of Minneapolis.
    8. Harrison, James M., 2023. "Exploring 200 years of U.S. commodity market integration: A structural time series model approach," Explorations in Economic History, Elsevier, vol. 88(C).
    9. Andrabi, Tahir & Kuehlwein, Michael, 2010. "Railways and Price Convergence in British India," The Journal of Economic History, Cambridge University Press, vol. 70(2), pages 351-377, June.
    10. Keller, Wolfgang & Shiue, Carol H., 2007. "The origin of spatial interaction," Journal of Econometrics, Elsevier, vol. 140(1), pages 304-332, September.
    11. Berthold Herrendorf & James A. Schmitz, Jr. & Arilton Teixeira, 2012. "The Role Of Transportation In U.S. Economic Development: 1840–1860," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(3), pages 693-716, August.
    12. Jacks, David S., 2005. "Intra- and international commodity market integration in the Atlantic economy, 1800-1913," Explorations in Economic History, Elsevier, vol. 42(3), pages 381-413, July.

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    Trade Liberalization; Factor Prices;

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