Institutions, Technology, and Trade / Wolfgang Keller, Carol H. Shiue.

Format:

Book

Author/Creator:

Keller, Wolfgang.

Contributor:

National Bureau of Economic Research.

Shiue, Carol H.

Series:

Working Paper Series (National Bureau of Economic Research) no. w13913.

NBER working paper series no. w13913

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2008.

Summary:

We study the importance of technology and institutions in determining the size of markets in five different countries and fifteen different German states. The setting of 19th century Europe presents a unique opportunity to address this issue, since it witnessed fundamental change in both dimensions. At the beginning of the century, numerous customs borders, separate currencies with different monetary systems, and poor transportation facilities were major obstacles that held back trade. Important institutional change, through the Zollverein customs treaties and currency unification, and major technological innovations in the steam train all had a role in increasing market size as measured in terms of the spatial dispersion of grain prices across 68 markets. However, we find that the impact of steam trains is substantially larger than the effects from customs liberalizations and currency agreements in increasing market size, where correcting for the potential endogeneity in institutional and technological changes are crucial for this result. We also find that a state's institutions influence the rate of adoption of steam trains, thereby identifying an important indirect effect from institutions on economic performance. The institutional and technological changes account for almost all of the decline in price gaps over this period.

Notes:

Print version record

April 2008.