Asian Globalizations: Market Integration, Trade and Economic Growth, 1800-1938

Economic History Working Papers No: 183/2013
Asian globalizations: market integration,

trade and economic growth, 1800-1938
David Chilosi
London School of Economics
Giovanni Federico
EUI and University of Pisa
Economic History Department, London School of Economics and Political Science, Houghton Street, London,
WC2A 2AE, London, UK. T: +44 (0) 20 7955 7084. F: +44 (0) 20 7955 7730
LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE
DEPARTMENT OF ECONOMIC HISTORY
WORKING PAPERS
NO. 183 - NOVEMBER 2013
Asian Globalisations: Market Integration, trade

and economic growth, 1800-1938
David Chilosi, London School of Economics ([email protected])
Giovanni Federico, EUI and University of Pisa ([email protected])
Abstract
This paper contributes to the debate on globalization and the great divergence with a
comprehensive analysis of trends, causes and effects of the integration of Asia in the world
market from 1800 to the eve of World War Two, based on a newly compiled data-set. The
analysis finds that: most price convergence occurred before 1870, with only little disintegration in
the inter-war years; market integration was determined to a large extent by the fall of Western
trading monopolies; it implied significant static welfare gains and emerges as a major cause of
substantial improvements in the terms of trade.
JEL Codes: F1, F6, N7, O4.
Keywords: globalization; market integration; international trade;economic growth; Asia; nineteenth

century
1
1) Introduction
Asia and Europe had been trading at least since the times of the Roman Empire (Findlay and
O’Rourke, 2007), but the Early Modern era featured a massive leap forward. Between the 1510s and
the 1780s, spice exports to Europe grew at 1.1 per cent yearly –, i.e. 25 times over the whole period
(De Vries, 2010). Yet, as O’Rourke and Williamson (2002) argue, price dynamics implied few benefits
to European consumers and Asian producers. Most gains accrued to the shareholders of Western
trading companies, such as the Vereenigde Oost-Indische Compagnie (VOC) for the Dutch East
Indies (nowadays Indonesia) and the East India Company (EIC) for India, which ruled the Asian
th
countries and monopolized trade. The situation changed dramatically in the early 19 century. The
monopolies were slowly dismantled and China and later Japan were opened up to Western traders.
Costs of sea transportation declined and the transfer of information was greatly accelerated by the
th th
introduction of the telegraph. Exports from Asian countries boomed throughout the 19 and early 20
centuries, and the share of European imports increased. However, the economic performance of the
main Asian countries was far from impressive. From 1850 to 1913, GDP per capita fell by 8 per cent
in China and grew only by 13 per cent in India. Admittedly, it increased by 80 per cent in the Dutch
East Indies and doubled in Japan, but this was not sufficient to catch up with the two world leaders,
the United Kingdom (increase by 111 per cent in the same period) and the United States (increase by
187 per cent). On the eve of World War One, the GDP per capita of Japan was 28.1 per cent of the
British one, that of Indonesia 17.7 per cent, that of India 13.7 per cent, and that of China 11.2 per cent
(Maddison Project, 2013). Was the growth of trade beneficial but insufficient for growth or was it
harmful?
th
This question was at the center of political discourse about colonial rule in the 19 century and early
th
20 century and it shaped the early debate in economic history of British India. In the first
comprehensive economic history of India under British rule, Romesh Dutt (1969, vol. 1: 302) wrote
that “the manufacturing power of the [Indian] people was stamped out by protection against her
industries and then free trade was forced on her so as to prevent a revival”. This “left-nationalist”
paradigm prevailed until the 1980s, but it was later questioned. Tomlinson (1993: 51-66) has singled
out exports of agricultural products as the main stimulus to growth in an otherwise stagnant economy
from the 1860s to the onset of World War One. Subsequent revisionist studies have questioned that
th
there was de-industrialization, highlighting differences within traditional industries from the early 19
2
century (Roy, 2000; Ray, 2011). The case of Dutch East Indies is less controversial. On the one hand,
there is no doubt that in the 1830s and 1840s, the Dutch government ruthlessly exploited Javanese
peasants, forcing them to produce cash crops for exports at prices well below world market. On the
th
other hand, in the second half of the 19 century the production of cash crops for export, by large
estates but also by small-holding farmers, was by far the most dynamic sector of the economy (van
der Eng, 1996; Booth, 1988: 238-247). Foreign trade played a marginal role in China, for the effect of
th
restrictions by the imperial government, political turmoil of the mid-19 century, but above all for the
sheer size of the Chinese economy (Feuerwerker, 1980, 1983). The contact with the West stimulated
modernization and brought some useful import of technology (Brandt et al., 2013), but the macro-
economic effect of export was sizeable only in the fairly limited areas of production of exportables,
such as Chekiang and Guangdong for silk (Federico, 1997) or Manchuria for soya beans. Only in
Japan exports are deemed the key source of growth. They grew faster than domestic demand and
Japan successfully changed its specialization from silk to textile manufactures (Minami, 1993).
Most of the works quoted in this very short survey date to the 1980s and 1990s. Indeed, the issues of
trade and trade policy have been sidelined in the recent debate among specialist in Asian economic
history (Ma, 2004; Roy, 2004). Ironically, this happened just when Asia was becoming arguably the
hottest topic in world economic history, following the publication of The Great Divergence by Ken
Pomeranz (2000). There, he claimed that as late as 1800 some areas in China, such as the region
around Shanghai, were as advanced as England. Some years later Parthasarathi (2011) made a
th
similar claim for India. Yet, neither India nor China underwent an industrial revolution and in the 19
century stagnated or declined. The two authors explain this divergence with different mechanisms,
which are both related to foreign trade. Pomeranz (2000) argues that China was damaged by the
lack of opportunities to trade. Unlike the United Kingdom it had no access to overseas colonies and
thus it had to allocate all its resources to feed its population. Parthasarathi (2011) resurrects the “left-
nationalist” paradigm, blaming British protectionism at home, and free trade and the lack of
investment in education in India. The most adventurous statements about the development of Asian
countries have not been confirmed: all estimates show that the GDP gap with the United Kingdom (or
th
Netherlands) was already wide at the beginning of the 19 century (Allen, 2007; van Zanden, 2003;
Broadberry and Gupta, 2006; Allen et al., 2011).

3
Still, this fact does not necessarily impinge on the interpretation of the role of foreign trade in the
economic growth (or lack of it) in Asia. Thus, in a series of papers and a book, Williamson (2008,
th
2011, 2012) has argued that in the first half of the 19 century the periphery of the world suffered a
serious case of curse of primary products (cf. Sachs and Warner, 2001). The spectacular
improvement in the terms of trade of most peripheral countries, including Indonesia and (to a lesser
extent) India (but not China), induced them to specialize in exporting primary products, abandoning
production of manufactures. In theory, this change in the allocation of resources should have been
beneficial, but, Williamson argues, the specialization in primary products damaged the long run
prospects for growth in the periphery, for three reasons. It increased the volatility of terms of trade, a
serious hindrance to growth (Blattman et al., 2007), it reduced the economies of agglomeration from
industry, and, last but not least, it affected negatively the investments in human capital by shifting the
distribution of income towards landlords (cf. Engerman and Sokoloff, 1997; Galor and Montfourt,
2008). In a slightly different twist of this argument, Allen (2011) has argued that the former great
empires of Asia failed to develop because, unlike the United States and the European countries, they
did not pursue a coherent industrialization policy. The key role of changes in terms of trade in this
narrative raises an obvious question: why did they improve? To some extent, this movement reflects
the growth of productivity in European manufacturing during the industrial revolution. However, as
pointed out by Williamson himself (Hadass and Williamson, 2001; Williamson, 2011), terms of trade of
both trading partners may improve (worsen) even without any change in relative productivity if prices
gaps between them decrease (widen). How important was this effect? Did prices between Asia and
Europe converge and by how much? If so, what determined this convergence? Last but not least, to
what extent did it increase the welfare of Asian producers and European consumers?
The literature on the integration of Asia in the world economy is growing fast, but significant gaps
remain. Before 1800, during the mercantilist era, price gaps between Asia and Europe fluctuated
widely, while results about long-run trends depend on the choice of periods and products (O’Rourke
and Williamson, 2002; Rönnbäck, 2009; De Vries, 2010). Any gain was anyway lost during the
Napoleonic wars (O’Rourke, 2006). From 1870 and 1890 to World War One, price differentials
between India and the United Kingdom reduced somewhat and they remained stable overall also after
the war (O’Rourke and Williamson, 2002; Hynes et al., 2012). No work, as yet, has dealt with the key
period from 1815 to the late 19th century. For those years in particular, the conventional wisdom is
4
heavily shaped by our knowledge of trends in the Atlantic economy. As O’Rourke and Williamson
(1999: 1-2) put it in the introduction to their authoritative book Globalization and History: “the really big
leap to more globally integrated commodity and factor markets took place in the second half of the
th
[19 ] century”, adding that “the world economy had lost all of its globalization achievements in three
decades, between 1914 and 1945”. In fact, later research has suggested that the integration of the
th
transatlantic wheat market may have started in the 18 century, to gather momentum in the first half
th 1
of the 19 century (Jacks, 2005; Uebele, 2011; Sharp and Weisdorf, 2013). Yet, recent estimates of
world-wide trading costs confirm that there was a marked decline from 1870 to1913, while barriers
2
rose during the Great Depression (Jacks and Pendakur, 2010; Jacks et al., 2010, 2011). In short, the
th
conventional wisdom points to a division of the long 19 century in four phases, which can be
conventionally named as “twilight of mercantilism”, “early globalization”, “heyday of globalization” and
“war and interwar”. This periodization, however, may or may not hold for the integration across the
Indian and Pacific Oceans: barriers to trade are by definition product and market-specific and thus
timing and causes of convergence may differ a lot among markets even with common trends in
transportation costs. At the same time, to date, there is no quantitative estimate of the effects of
3
transoceanic price convergence on welfare and terms of trade.
This paper contributes to filling in these gaps in our historical knowledge with a comprehensive
analysis of trends, causes and effects of the integration of Asia in the world market from 1800 to the
eve of World War Two. We focus on the four main Asian countries, British India, the Dutch East
Indies, China and Japan and we add, for purpose of comparison, the integration of markets for cotton
and wheat across the Atlantic Ocean. Section two outlines the growth in exports and extends
Williamson’s (2008, 2011) analysis of trends in terms of trade up to 1938. After a short presentation
of the data (section three), section four documents patterns of convergence of prices, which we
interpret in the next two sections. We introduce the analysis with a short overview of changes in
1
An important limitation of studies positing Atlantic integration in the early nineteenth century is that they mostly rely on
European markets, with only a few cases of trans-Atlantic ones.
2
The conventional wisdom is, however, only partly supported for the inter-war: in the 1920s, barriers fell. Unfortunately, these
studies report separately series for the period before and after World War One, and thus it is impossible to assess to what
extent the decline in the 1920s was a return to normalcy after the war-time shock.
3
Federico (2008) investigates gains and losses resulting from dynamics of European integration from the second half of the
eighteenth century, Federico and Sharp (2013) deal with losses from disintegration of the American domestic market in the
interwar years, while Ejrnæs and Persson (2010) focus on gains from increasing market efficiency speed of transmission.
Haddas and Williamson (2001) rely on comparative analysis rather than statistical testing to speculate that market integration
was the main drive behind the terms of trade boom in the nineteenth-century world periphery.
5
transport costs and in barriers to Asian trade (section five) and then run a panel regression in order to
estimate the contribution of increasing efficiency, falling transport costs and changes to institutional
barriers to trade to overall convergence (section six). Section seven estimates the (static) welfare
effects of price convergence for European consumers and Asian producers and the contribution of
price convergence to improved terms of trade in India and Indonesia. The concluding section
summarizes and discusses the implications of our findings for the two bodies of literature we want to
speak to, that on market integration and that on the growth of Asian countries.
2) The growth of Asian trade: a quantitative overview
As shown by Fig. 1, there is no doubt that Asian countries did join the great growth of world trade from
th
the early 19 century. Despite a marked slow-down in India and China between the late nineteenth
and the early twentieth centuries, exports increased more or less continuously until the Great
4
Depression across the four countries. Exports from Japan rose hundredfold from the early 1860s
until the end of the 1920s, and continued to grow even during the Great Depression: the rate of
growth from 1927-1929 to 1937-1938 is 6.5 per cent per year – i.e. only marginally lower than in the
previous fifty-five years (7.1 per cent from 1862-1864 to 1927-1928). No country, not even the United
States, came close to match this stellar growth.
4
All data on foreign trade have been collected in an on-going research project on the growth of world trade from 1800 to 1938
(cf. Federico and Tena, 2013 for details on sources). Figure 1 reports series at constant (1913) prices, while the shares of
Table 1 are computed on three-year moving averages with data on current prices. Trends of shares at 1913 prices are similar,
but the decline of India is decidedly steeper: its exports accounted for almost 10 per cent of world trade in 1832, 8 per cent in
1890 and 4.5 per cent on the eve of World War Two.
6
Figure 1
The growth of exports (1913=1)
China Indonesia
400 400
300 300
200 200
100 100
0 0
1796 1821 1846 1871 1896 1921 1796 1821 1846 1871 1896 1921
India Japan
400 400
300 300
200 200
100 100
0 0
1796 1821 1846 1871 1896 1921 1796 1821 1846 1871 1896 1921
United States World

400 400
300 300
200 200
100 100
0 0
1796 1821 1846 1871 1896 1921 1796 1821 1846 1871 1896 1921
Source: Federico and Tena (2013)

7
Table 1
Shares on world exports
World
China India Indonesia Japan USA (mil $)
1831 5.0 5.6 0.6 7.0 939
1850 3.0 5.6 1.6 9.4 1871
1870 2.3 5.4 0.9 0.3 8.0 4839
1890 1.7 6.0 1.0 0.7 11.5 8704
1900 1.5 4.0 1.1 1.2 14.5 11138
1912 1.6 4.5 1.4 1.7 13.0 17476
1928 2.1 3.9 2.0 3.6 15.4 23357
1937 1.0 3.4 1.8 5.2 13.2 20680
The United States and Japan, as well as the Dutch East Indies, managed to increase their share of
5
the fast-growing world trade (cf. Table 1). In contrast, both India and above all China lost in the long
th
run the position of major exporters which they had held in the early 19 century. Yet, the pattern
differed substantially between the two countries. The Chinese share fell rather sharply in the 1830s
and it was further clobbered by the political turmoil of the 1850s and 1860s. In contrast India managed
to keep and even increase its share until the mid-1880s, while in the 1890s it was hit hard by the
collapse of exports of wheat and the stagnation of those of jute and cotton cloths (Chaudhuri 1982).
What about terms of trade? According to Williamson (2008, 2011), not all Asian countries shared the
boom of the periphery. Our new estimates yield a somewhat more optimistic view (Fig. 2). From the
start of the series (which differs across countries) to 1913, the terms of trade improved in all countries,
with yearly rates ranging from 0.4 per cent to 0.6 per cent. The increase was however far from steady,
with the notable exception of the United States, which however were changing their specialization. All
Asian countries experienced wide fluctuations, but China stands out. Prices of silk, its main export
product boomed in the 1860s and 1870s, when the European silk production was hit by a very serious
disease of silkworms, and they returned to their long-run levels when it recovered. After the war,
terms of trade fluctuated widely, and on the eve of World War Two they were lower than before World
War One in the Dutch East Indies (by a third), Japan (by a quarter), India (by a tenth), but higher in
China.
5
In the figures and tables “Indonesia” is used for brevity.
8
Figure 2
Terms of trade of Asian countries and the United States (1913=100)
China Indonesia
200 200
160 160
120 120
80 80
40 40
0 0
1800 1825 1850 1875 1900 1925 1800 1825 1850 1875 1900 1925
India Japan
200 200
160 160
120 120
80 80
40 40
0 0
1800 1825 1850 1875 1900 1925 1800 1825 1850 1875 1900 1925
United States
200
160
120
80
40
0
1800 1825 1850 1875 1900 1925
Thus, trends in terms of trade are broadly consistent with the conventional wisdom about patterns of
market integration as sketched out in the introduction. We shall return to the relationship between
market integration and terms and trade in section 7. We now present our data-base of prices.
9
3) The data-base
As Federico (2012) argues, in order to minimize the risk of spurious results, the data-base should
meet three conditions:
i) Any bilateral comparison of prices should refer to pairs of markets which were actually trading.
Otherwise, price differentials can be lower than costs and move (quasi-) randomly within the band of
commodity points. If markets trade and are efficient à la Fama (1970), in equilibrium price gaps must
be equal to transaction costs, inclusive of monopoly mark-ups.
ii) Each prices series should refer to a specific quality (e.g. the “Ngatsain” rice quoted in Rangoon)
rather than to the market average and each pair of series should refer to the same quality. Otherwise,
price gaps might reflect quality differentials, and any change in quality in a market might introduce
spurious trends.
iii) The commodities should be broadly representative of the actual trade flows. Extending inferences
from one product only (e.g. cereals), is tantamount to assume that that movements in transport costs,
barriers to trade and market efficiency are similar across all traded goods.
These conditions imply a trade-off between representativeness of the sample (number of series and
coverage of trade flows) and the quality of the data (homogeneity of prices and trade). How does our
6
data-base fare? Table 2 lists the series used in the analysis.
6
For a more detailed discussion of our sources see the Appendix B.
10
Table 2
The data-base
Period Market Homogeneous quality?
Within markets Across

Origin Destination Origin Destination markets
Atlantic
Cotton 1801-1938 New York Liverpool Yes Yes Yes
Wheat 1800-1937 New York London No No No
Far East
Silk 1834-1877 Canton London Yes Yes Yes
Silk 1874-1913 China London Yes Yes Yes
Silk 1874-1914 China Lyon Yes Yes Yes
Silk 1894-1914 Yokohama Lyon No No No
Silk 1894-1938 Yokohama New York No No No
a
Tea 1811-1831 Canton England No No Yes
Tea 1820-1877 Canton London Yes Yes Yes
India
Cotton 1796-1845 Calcutta London Yes Yes Yes
Cotton 1867-1938 Bombay London Yes Yes Yes
Indigo 1822-1931 Calcutta London Yes Yes Yes
Jute 1844-1938 Calcutta London Yes Yes Yes
Linseed 1846-1938 Calcutta London Yes Yes Yes
Rapeseed 1871-1921 Calcutta London Yes Yes Yes
Rice 1870-1938 Rangoon London Yes Yes Yes
Saltpetre 1796-1853 Calcutta London Yes Yes Yes
Silk 1796-1856 Calcutta London Yes Yes Yes
Silk 1857-1877 Calcutta Lyon Yes Yes Yes
Sugar 1796-1856 Calcutta London Yes Yes Yes
Tea 1893-1931 Calcutta London Yes Yes Yes
Wheat 1861-1931 Calcutta London Yes No No
Indonesia
Coffee 1833-1913 Batavia Rotterdam No Yes Yes
Pepper 1828-1938 Batavia Amsterdam No No No
Rice 1848-1913 Batavia Amsterdam Yes Yes Yes
Rubber 1913-1938 Batavia London Yes Yes Yes
Sugar 1822-1938 Batavia London No No No
Tea 1893-1938 Batavia Amsterdam Yes Yes Yes
Tin 1863-1913 Batavia Amsterdam Yes No No
Notes: a since all these figures refer to tea imported and sold at auctions by the East India Company, we expect the quality mix
to be similar in the same year, but not necessarily across years
Sources: see the Appendix B
i) The first condition is surely met in the overwhelming number of pairs. All covered cities were major
trading centers in their own countries, and we collected trade statistics reporting trade between the
two countries for about 93 per cent of the observations. Missing data are mostly scattered, which
11
suggests failure to record rather than absence of trade. There is a slight suspicion that absence of
trade could be an issue in only c. 2 per cent of the cases (exports of cotton from the United States to
the United Kingdom in 1801-1805 and 1809-1814, exports of sugar from Java to the UK in 1822-
7
1824, 1826-1832, and 1864-1866, and exports of wheat from India to the UK in 1861-1867).
ii) We can rule out a significant bias in level or trends of price gaps in the majority of cases. In fact, 22
out of 29 ratios it is reasonable to assume the same quality across markets (Yes in the column
“across markets”). In two of the other cases, one series can be considered as qualitatively
homogeneous (Yes in the column “within market”), but the quality surely differs between series (No
the column “across markets”), while in the remaining ones the quality differs between markets and
changes in time in each market (No in all three columns). In short, in less than one fourth of cases,
8
the corresponding trends might be spurious, although there is no evidence to prove this suspicion.
iii) The range of primary products is undoubtedly wide, while we have been unable to find suitable
series for manufactures. As Table 3 shows, they accounted for half or more of exports from India and
th
the Dutch Indies, from China in the 19 century and from the United States before the Civil War. In
th
these two latter countries, the share declined quite fast in the 20 century, while it was always
comparatively low for Japan.
7
There is another exception to this rule: the Chinese exports of silk to Great Britain after World War One. By then the British
silk industry was in terminal decline and the London prices refers officially to “tsatlee”, a traditional native silk, which had almost
disappeared from Chinese exports (Federico, 1997). We have thus decided to drop prices of silk in London and China after
1914 from our data-base.
8
One can be more specific about American wheat on the London market. According to Ejrnæs et al. (2008), from 1850 to
1900, its quality rose steadily relative to the domestic product, as measured by the Gazette series, which is an un-weighted
average of prices in markets all over England. The ratio increased at 0.35 per cent per year, corresponding to a massive 19
per cent quality improvement over the whole period (the figure is obtained cumulating the rate of change obtained from a basic
regression of a log ratio on time trend). In the same period, the ratio of (unadjusted) prices in New York and London declined by
26 per cent (yearly rate 0.60 per cent). Thus, if prices for New York referred to export-quality wheat, the improvement could
have accounted for about three quarters of the convergence (19 per cent/26 per cent). Anyway, this paper does not use the
Gazette price, but a series of London prices.
12
Table 3
Shares of covered products on total exports (in percentage)
United
China India Indonesia Japan States
a
1810 26.4 84.0 34.8
b
1830 45.0 67.1 50.8
1850 40.5 76.3 46.5
1870 95.4 55.5 73.3 28.8 64.9
1890 58.7 57.1 59.4 24.0 33.5
1900 33.3 46.5 56.4 20.6 22.2
1913 29.0 53.3 43.4 26.3 26.7
1929 20.3 46.0 57.2 29.4 17.1
1938 9.5 42.2 43.1 9.0 10.0
Notes: a 1823, b 1828
Sources: see the Appendix B and Federico and Tena (2013)
Summing up, the data-base, though falling short of being perfect, can be considered as fit for our
purposes. We can now turn to the results.
4) The process of integration: a statistical analysis
Fig. 3 reproduces our series price differentials for a subset of commodities, which highlights some key
features of the process of convergence. On the one hand, as expected, the price ratios were fairly
th
high at the beginning of the 19 century and declined in the long run, with a spike during World War
One. On the other hand, differentials differed hugely among commodities at the same time, and they
often collapsed rather than steadily declining. Such changes are too big and sudden to be explained
only by technological progress in shipping.

13
Figure 3
Price ratios: selected commodities
Cotton New York Liverpool Tea Canton London
3.5 2.4
3.0
2.0
2.5
1.6
2.0
1.2
1.5
0.8
1.0
0.5 0.4
00 10 20 30 40 50 60 70 80 90 00 10 20 30 00 10 20 30 40 50 60 70 80 90 00 10 20 30
Saltpetre Rice Rangoon-London

10 5
8
4
6
3
4
2
2
0 1
00 10 20 30 40 50 60 70 80 90 00 10 20 30 00 10 20 30 40 50 60 70 80 90 00 10 20 30
Sugar Jakarta London Pepper

3.0 4.0
3.5
2.5
3.0
2.0
2.5
1.5
2.0
1.0
1.5
0.5 1.0
00 10 20 30 40 50 60 70 80 90 00 10 20 30 00 10 20 30 40 50 60 70 80 90 00 10 20 30
We test formally the extent and speed of convergence by running the following regression (Razzaque
et al., 2007):
Δ Ln RP =α + β TIME+ ψ ln RP t-1+ φ ln Δ Ln RP
i i i
t-1 +u 1)
i
Where RP is the relative price of the i-th good between two markets and TIME is a linear trend. The
long-run rate of change can be computed as t=- (β/ψ). Prices converge if the coefficient t is negative
14
and significant. The error correction model coefficient ψ (ranging between -1 and 0) tests whether and
estimates how rapidly price ratios return to this trend after a shock, while the lagged change in relative
prices is added to address possible serial correlation. We first run Equation 1) in a fixed effects panel
version, for the whole sample and separately by country, considering jointly the (comparatively few)
observations for China and Japan.
Table 4
Long-run convergence: panel estimation
Cumulated
Initial Half-life Rate (in (in
N. obs ratio (months) percentage) percentage)
All 1725 1.940 24 -0.443*** -46.72
Atlantic 257 1.618 20 -0.401*** -42.46
Far East 191 2.024 18 -0.520*** -52.22
India 805 2.085 26 -0.501*** -50.89
Indonesia 472 1.746 18 -0.402*** -37.25
Significant at * 10 per cent; ** 5 per cent; *** 10 per cent
Sources: see the text and the Appendix B
The statistical analysis confirms the conventional wisdom about price convergence: at the beginning
of the series (which differed by product and route), on average European prices doubled the Asian
ones and by the end this difference had been cut by a half, so that export and import prices had
become almost identical. All rates are statistically significant and very similar across routes. The half-
lives of shocks, the standard measure of speed of reaction to shocks, are quite high (Federico, 2012).
One might sum up that the market was becoming increasingly integrated, but overall it had still a long
way before becoming really efficient.
However, clearly, such a conclusion would be a tad hasty, for three reasons. First, it overlooks the
differences among products in the extent and rate of convergence, which depend on the initial level of
9
differentials and on the product and market-specific barriers. Second, any long run analysis by
definition assumes convergence to have been linear, in clear contrast with the conventional wisdom.
Finally, the half-lives, being computed over the whole period, by definition average out any increase in
market efficiency. A simple way to address the two latter issues is to re-run the panel regressions
according to the traditional periodization, as stated in the introduction (Table 5).
9
To demonstrate the point, we have run regressions according to equation 1 consider the five series with at least two thirds of
the observations – i.e. 93 out of 138 (cotton and wheat from the United States, cotton, indigo and jute from India and pepper
and sugar from the Dutch East indies). Their rates of convergence (Statistical Appendix Tab A1) varied widely, ranging from a
maximum of -1.08 for jute to a minimum of -0.26 for cotton from the United States (in percentage, both significant at 1 per cent).
The rate is not significant for indigo.
15
Table 5
Trends by period: panel regression
Cumulated
Initial Half-life Rate (in (in
N. obs ratio (months) percentage) percentage)
Twilight of mercantilism (1796-1815)
All 102 2.274 10 0.968 20.20
Atlantic 27 1.215 9 3.249 62.81
India 72 3.099 9 0.285 17.00
Early globalization (1815-1870)
All 565 1.973 16 -0.896*** -38.92
Atlantic 109 1.632 10 -0.678*** -31.12
Far East 48 2.245 12 -1.501** -55.55
India 263 2.125 17 -1.243*** -49.51
Indonesia 145 1.892 12 -0.504** -21.48
Heyday of globalization (1870-1913)
All 765 1.291 8 -0.418*** -16.44
Atlantic 88 1.129 12 -0.288*** -11.65
Far East 114 1.266 12 -0.334** -13.37
India 330 1.326 7 -0.517*** -19.95
Indonesia 233 1.311 8 -0.347*** -13.85
War and interwar (1914-1938)
All 313 1.441 10 -1.128*** -23.71
Atlantic 37 1.084 7 -0.160 -3.78
Far East 27 1.157 0 -0.250* -5.82
India 150 1.559 10 -1.478** -28.86
Indonesia 99 1.483 9 -1.181** -24.69
As posited by the conventional wisdom, the results show no integration before 1815, although the
number of observations is comparatively small and thus the results are potentially not representative.
The data for the two subsequent periods are undoubtedly representative and they yield a clear
conclusion: convergence was twice faster in the “early globalization” than in its (alleged) “heyday”.
The difference between the two periods is particularly wide for the Far East, while convergence
between the Dutch East Indies and Europe was only 45 per cent faster in 1815-1870 than in 1870-
1913. That prices converged after 1914 reflects a return to normal levels, after the sharp increase in
price differentials during the war: indeed, dropping the first five years, the rates become positive
10
(except for the Far East). Yet these diverging trends are not significant; the inter-war disintegration
10
The overall rate of change (in percentage) is 0.50 (not significant), while rates by area are: -0.39 for the Far East (significant
at 10 per cent), 0.63 for India, 0.53 for Dutch East Indies and 0.51 for the United States (none significant).
16
of the world trading network seems to have affected only inconsistently exports from Asia, at least for
primary commodities; for the trade of these products, it certainly did not entail a return to the barriers
of the pre-globalization era.
There is also evidence of improvement in market efficiency between the second and the third periods,
but the fall in half-lives is not shared by all routes. Furthermore, the speed of reaction remained quite
high. One may surmise that in modern markets, most shocks were arbitraged away within the year
and that, consequently, our yearly series capture only very large shocks, which needed more time to
be absorbed. This conjecture should be tested with higher frequency data. Indeed, Brunt and Cannon
(2013) show that half-lives of shocks tend to be higher if estimated with yearly data than if estimated
with monthly or weekly data.
One might point to two additional shortcomings of our analysis: the choice ex-ante of the periodization
and the assumption of linear trends within each period. In theory, breaks in series can be in any year,
not just in or around 1815 or 1870. Thus, we have looked systematically at breaks in the series of
price ratios with Bai-Perron tests (Bai and Perron, 1998, 2003). Most series, twenty-three out of
twenty-nine, do show at least one such break and six of them more than one break – for a total of 31.
About a third of these breaks can be classified as major ones, as they entailed a change exceeding
30 per cent of the differential before the break. We report full results of the test in Table A1 of the
Appendix A and we sum them up in Table 6. Column 1 reminds the number of series by period and
country (from Table 1). Columns 2 to 4 reports the number of trends, distinguishing between
converging (negative and significant coefficient of the time variable), divergence (positive and
significant trend) and trendless (not significant). The number of trends (sum of columns 2 to 4) would
exceed the number of pair of markets (col 1) whenever there is more than one trend within a given
period. Then we count the number of breaks which entail also an upward (column 5) or downward
(column 6) jump exceeding 10 per cent of the last year of the previous trend. We estimate the total
change in each period/country (Column 7) and the contribution by shocks (Column 8), both as
averages of product specific figures. Last but not least, we average the product-specific yearly rates
of change (column 9), so that results are comparable to estimates of linear trends from Table 5.
17
Table 6
The four phases of globalization
Total change in the Contribution of Implicit rate of

Number of trends Number of breaks
period shocks change
Pairs of Upward Downward
Convergence Divergence Trendless (in percentage) (in percentage) (in percentage)
markets shock shock
Twilight of mercantilism (1796-1815)
Atlantic 2 2 -1.10 0.00 -0.10
India 4 4 -3.50 0.00 -0.31
All 6 6 -2.70 0.00 -0.24
Early globalization (1815-1870)
Atlantic 2 1 2 2 -27.60 45.50 -0.45
Far East 3 1 1 2 1 -28.50 25.80 -0.79
India 8 4 5 1 5 -46.10 41.80 -1.90
Indonesia 5 3 1 3 2 -10.60 16.20 -0.47
All 18 9 2 12 1 10 -32.50 33.39 -1.20
Heyday globalization (1870-1913)
Atlantic 2 2 -8.40 21.40 -0.21
Far East 4 3 1 1 1 -2.80 5.70 -0.06
India 8 6 1 2 1 2 -19.30 22.70 -0.54
Indonesia 6 3 3 2 -14.30 41.30 -0.40
All 20 12 2 8 1 5 -13.40 24.76 -0.37
War and interwar (1914-1938)
Atlantic 2 2 -1.80 0.00 -0.08
Far East 1 1 -2.90 0.00 -0.12
India 8 4 2 2 3 1.80 17.50 0.28
Indonesia 4 1 1 2 2 1 4.90 43.50 0.16
All 15 6 3 6 5 1 1.84 20.91 0.17
18
As a whole, this approach corroborates the two main insights from the panel regression results:
convergence was consistently and significantly faster during the “early globalization” than during the
“heyday of globalization”, although the difference for the Dutch East Indies is very small; and, in no
case do we find a break after the end of World War One, confirming little or no inter-war disintegration
for our series. The analysis adds two important results. First, related to the last point, the timing of the
breaks only weakly supports the traditional periodization: slightly less than half of the detected breaks
(14 out of 31) fall within an interval of six years around the pre-selected end-dates of the periods
(1815, 1870 and 1913) and almost as many (10) are farther than ten years. Second, shocks mattered
a lot, particularly in the “early globalization” phase. In that period, on average, they accounted for one
third of changes, as compared to a quarter during the “heyday” and a fifth during the last period. It is
also noteworthy that almost all the major shifts, 10 out of 12, clustered around 1815 or 1913 –, i.e. the
end of Napoleonic Wars in Europe and of the EIC monopoly in Indian trade (1813) or the outbreak of
World War One. The two other major shifts are likewise related to political and institutional events.
Prices of Benares sugar in London boomed in 1840 as a consequence of the boycott of Caribbean
sugar, as part of the anti-slavery campaign. The price differential for Congou tea between Canton and
London suddenly fell in 1835 (Figure 4), two years after the demise of the EIC’s monopoly in Canton.
5) The causes of convergence: transport costs and barriers to trade
The perceived wisdom attributes the integration of world market before World War One to the
combined effects of a fall in transport costs and the liberalization of trade, and the disintegration after
the war to the protectionist backlash. Figure 4 illustrates these trends for some representative
commodities: the upper part measures transport costs with freights, and the lower part proxies
barriers to trade with total duties (sum of import duties in consuming countries and export taxes from
11
India and the Dutch Indies) . In both cases, we normalize costs with prices in the export country.
11
We assume other transport costs (e.g. insurance) to have been proportional to freights. In this section, we use data collected
for the statistical analysis and thus we focus on the Atlantic, India and the Dutch East Indies only.
19
Figure 4
Barriers to trade for selected commodities
a) Transport costs (freight factors)

Cotton New York Liverpool Indigo
.20 .025
.16 .020
.12 .015
.08 .010
.04 .005
.00 .000
1800 1825 1850 1875 1900 1925 1800 1825 1850 1875 1900 1925
Saltpetre Sugar Jakarta London

3.5 .25
3.0
.20
2.5
2.0 .15
1.5 .10
1.0
.05
0.5
0.0 .00
1800 1825 1850 1875 1900 1925 1800 1825 1850 1875 1900 1925
20
b) Import and export duties

Cotton USA Indigo
.16 .10
.08
.12
.06
.08
.04
.04
.02
.00 .00
1800 1825 1850 1875 1900 1925 1800 1825 1850 1875 1900 1925
Saltpetre Sugar East Indies

1.0 5
0.8 4
0.6 3
0.4 2
0.2 1
0.0 0
1800 1825 1850 1875 1900 1925 1800 1825 1850 1875 1900 1925
Sources: see the Appendix B
Levels in are not directly comparable because the scales on the vertical axis differ, but trends are by
12
and large similar across countries and products. They confirm the conventional wisdom only
th
partially. Both duties and freights did fall in the first part of the 19 century,. but the rise in protection
in the interwar years is very limited. During the Great Depression (1930-1938) total duties were on
average equivalent to 26.8 per cent of the price in the exporting country, exceeding 50 per cent in 22
observations out of 95 (most of them on sugar). Thus, over the whole period 1796-1938, the impact of
protection was fairly small: total duties exceeded 5 per cent of prices in slightly more than a quarter of
cases and 50 per cent only in about a eight. On the same line, one should note that most of the fall in
freights was over by 1875 and that the change was often quite sudden. The 75 per cent collapse in
the freight factor for saltpetre in 1816-1817 is an extreme case, but there are several other instances
of major jumps, including a 70 per cent fall in freights for tea from China to England in 1835, just after
of the end of the EIC monopoly. Such sudden changes cannot be accounted for by innovations in
12
We are not using the same scale because levels for saltpetre are so much higher than for the other goods that changes in
time would have disappeared. For the same reason, we omit war years from Fig. 4 a).
21
shipping organization or technology, the two competing explanations for the fall in costs of sea
transport (North, 1968; Harley, 1988; Shah and Williamson, 2004). Jointly with the evidence about
duties, they suggest that the traditional narrative is not sufficient to explain integration over the whole
period. It must be supplemented by an analysis of the process of dismantling of institutional barriers,

th
which hampered the long-range trade with Asia at the beginning of the 19 century.
th
In Japan and China, exports were limited by national governments. Since the mid-17 century,
Japanese were not allowed to trade with Western merchants, but for a small Dutch post in Nagasaki.
The self-isolation ended in 1853 and the next years Japan was forced to sign trade treaties with the
main Western powers, which enshrined the principle of free trade, forbidding it to raise protective
duties until 1905. The case of China was broadly similar although the initial restrictions were less
extreme (Dermigny, 1964; Wakeman, 1978; Fairbank, 1978). Western merchants were allowed to
trade only in Canton, and only through Chinese intermediaries (hongs). Most restrictions to the
activity of Western traders were lifted after the first opium war (1842), and all the remaining ones were
effectively ended after the second opium war (1858).
th
The Indian subcontinent had been throughout the 18 century a battleground among European
trading companies, but eventually the British EIC succeeded to gain control of most of it. The
company enjoyed a monopoly of the trade between its Indian possessions and the United Kingdom,
although it never entirely succeeded in repressing smuggling. It used specialized, very large and
heavily manned and armed ships, the so-called Indiamen, which it rented from owners. These latter
were often also shareholders of the Company and this relationship is often invoked to explain the
“excessive” freight the Company charged, even after they had been capped in the renewal of its
charter in 1793 (Webster, 2009: 32-40; Mui and Mui, 1984; Wakeman, 1978; Bowen, 2006: 252-
13
256). In a very recent paper, Solar (2012) argues that Indiamen were much more expensive to build
and to run than smaller ships, but they were needed to fight the military threat of other Western
trading companies. In the 1810s, the combined effect of technical progress (mostly copper sheathing)
and of the reduced need for protection at sea, thanks to the successes of the Royal Navy, made it
possible to use smaller ships, cutting drastically the cost of transportation. The monopoly on trade
13
This arrangement reflects the official constraints in its charter. It stipulated that the price of company wares in London “should
not exceed the prime cost, the freight and charges of importation, the lawful interest of capital from the time of arrival of such
tea in Britain, and the common premium in insurance" (Mui and Mui, 1984: ix). Indeed, the official profits of the Company were
quite low (Wakeman, 1978: 167).
22
with India was abolished with the renewal of the charter in 1813, and competition from private
shipping caused freight rates with India to collapse (Webster, 2009: 72). However, the company
continued to play a key role in the trade with China, as it still enjoyed a monopoly on the production of
Indian opium and on the export of Chinese tea to Britain. All its mercantile activities were
discontinued after the renewal of the charter in 1833: since then, Indian trade was entirely in private
hands and in all likelihood the market was competitive.
Unlike the British EIC, the Dutch VOC had enjoyed a monopoly of trade with the Dutch East Indies
since the early 17th century. It collapsed in the 1790s, and from then to 1824, the islands enjoyed a
short period of freedom, during the British occupation (1811 to 1816) and the early years of the
restored Dutch rule. In 1825, the monopoly of trade between the Netherlands and its Asian colony
was granted to a new trading company, the Nederlandsche Handel-Maatschappij, or NHM (Furnivall,
1976; Horlings, 1995: 142). Similarly to the EIC, the company rented ships from Dutch owners, at
“exceptionally high” rates (Horlings, 1995: 145; Korthals Altes, 1994: 161). In the first years of activity,
exports were reduced by a rebellion of natives, the so called Java War. At its end, the Dutch
government, desperate for revenues, established a system of compulsory delivery of coffee, sugar
and indigo for exports, known as Cultivation System (de Klerck, 1938; Dobbin, 1983; Fasseur, 1992;
14
Houben, 2002; van Zanden and Marks, 2012). Peasants were paid much less than the world
15
market price –, about a half of the Batavia price for coffee (Fasseur, 1992: 37). The goods were
transported by the NHM to Amsterdam, and there sold at auction: the profits, net of a fee for the NHM,
accrued to the Dutch government. The amount was very substantial: at its peak, in the 1850s, it
accounted for over half the state revenues and for about 3.8 per cent of Dutch GDP (van Zanden and
van Riel, 2004; Smits et al., 2000). Including the hidden subsidies to the Dutch economy from
shipping and production of manufactures for the colonial market, the total rises to 4.3 per cent of
GDP. In spite of its benefits for the Dutch economy, the Cultivation System was increasingly
unpopular and was slowly phased out. From the point of view of this paper, the key provision was the
monopoly on shipping. It was relaxed in 1850, by widening the access to bidding contracts for renting
ships and was abolished altogether in 1868 (NHM, 1924: 23; Furnivall, 1976: 168; Korthals Altes,
14
Forced production and deliveries of products under the Cultivation System involved coffee, sugar and indigo, but monopoly
trade affected also other goods, including pepper and tin (which was produced by state-owned mines).
15
Interestingly, a monopsonist (as the Dutch government was in Java) would pay half the market price even without coercion if
supply elasticity were unitary. In fact, the ratio between prices under monopsony (PM) and perfect competition (PPC) is
PM/PPC=(ε/1+ε), where ε is the elasticity of supply.
23
1994). From then to 1918, the Dutch trade with the colonies remained free. In that year, the sugar
producers set up a private association (VJSP) to allocate the scarce available shipping. The
organization continued to manage sugar exports after the end of the war and in 1932, it was
substituted by a governmental organization (NIVAS) to manage sugar production quotas under the
international agreement (van der Eng, 1996: 224-226). The Great Depression featured also the first
intervention in American agriculture: the Agricultural Adjustment Act (AAA), part of the New Deal
policies, established a loan facility for cotton farmers, which in practice set a minimum price of cotton
16
since 1934 (Federico and Sharp, 2013).
Summing up, this very brief sketch confirms the conventional wisdom about the liberalization of trade
th
in the first half of the 19 century. The process was however much more far-reaching in Asia than in
the Atlantic economy as it involved also the dismantling of institutional constraints. In contrast, the
backlash against globalization affected only marginally the Asian trade. Even during the Great
Depression, duties on primary products remained low and the institutional regulation of trade much
less invasive than one century earlier. In the next section, we try to measure more precisely the
contribution of these causes to overall convergence
6) The causes of integration: an econometric analysis
We can sum up the implicit causation model in a regression
Log RPit=F(B, Em, Tc) 2)
Where the ratio of prices for the i-th good between two markets is explained by sets of variables
measuring the policy-induced barriers to trade (B), the efficiency of markets (Em) and the transaction
costs (Tc).
The set B includes the total duties (LOG_DUTY) and dummies for monopolies - a dummy for the EIC
(1796 to 1816) and separate dummies for the NHM under the full monopoly regime (NHM1), from
17
1824 to 1850, and for the partially liberalized one (NHM2) from 1851 to 1868. All these variables
16
In subsequent years, this facility was extended also to other commodities, including wheat (since 1939).
17
The variable LOG_DUTY is computed as log(1+t), where t is the ratio of (usually specific) duties to the price in the producing
country. It is thus zero if t=0. The dummy EIC is equal to 1 until 1816, instead of 1813 since it evidently took a few years for the
demise of the monopoly to become effective: recorded freight rates between India and the UK detect a sudden downward level
shift from 1817. Neglecting the effect of the end of the Napoleonic Wars is mainly methodologically dictated (the dummy would
be collinear with the EIC dummy), and may potentially introduce a positive bias in the size of the estimated coefficient of EIC. It
24
are expected to be positive, as they increase transaction costs. We also add specific dummies for the
AAA support to American cotton prices (since 1933) and for the two marketing boards for Javanese
sugar, the private VJSP (1918 to 1931) and the public NIVAS (after 1932). The sign of these variables
is not defined a priori, as the effect of the intervention of these agencies on the commodity market
varied according to the specific procedure they adopted.
We use two separate sets of variables to capture market efficiency. The first deals with long-run
changes, and features a dummy for the existence of a telegraph connection (TELEGRAPH) and
country-specific linear trends (TREND). The telegraph connections were opened in 1866 between the
United Kingdom and the United States and around 1875 between Europe and Asia (Headrick, 1988:
101; Lew and Cater, 2006: 148). They greatly increased the efficiency of the market by cutting the
time to transmit information from weeks to minutes and thus the dummy is expected to be negative.
The linear trends capture all other organization changes. The second set consists of dummies for
major political events - the Java War in 1825-1827 (JAVA WAR), the Indian Mutiny in 1857-1859
(MUTINY), the American Civil War (CIVIL WAR), the anti-slavery campaign, which boycotted
Caribbean sugar, in 1840-1845 (SLAVE) and World War I (WWI). We expect these events to have
disrupted the orderly working of markets and thus to widen price gaps, ceteris paribus.
As said, we measure transport costs with the freight factor (LOG_FREIGHT). The series for the East
Indies and India include the rents paid to privileged Dutch or British ship-owners under the NHM and
EIC monopoly system. We estimate these rents as a time-invariant proportion of actual freights, with
coefficients from a fixed-effect panel regression, which explains freights with dummies for the NHM
18
and the EIC. We use the coefficients of dummies to scale down the series of freights and thus we
obtain a series (LOG_ADJFREIGHT) net of the estimated extra-costs of monopolies (Fig. 5).
is nevertheless relatively safe to neglect such bias. After Trafalgar (1805) the French were no longer a serious threat for British
long-distance trade. As shown by O’Rourke (2006), price gaps with Asia in Britain were much less affected than in continental
Europe by the Napoleonic Wars. That the key factor behind sudden falls in freight rates and price gaps between Calcutta and
London in around 1815 was the demise of the EIC is confirmed by our own data. Thus for the Canton-London trade of Congou
tea, as mentioned earlier, we detects an analogous level shifts in freight factors and price gaps shortly after the EIC monopoly
there was dismantled in 1833. Conversely, on the transatlantic trade, we fail to identify breaks at the end of the Napoleonic
Wars.
18
Specifically, the regression is LOG_FREIGHTit=c +αi+β1EICit+β2NHM1it+β3NHM2it+εit and we compute the adjusted freights
as follows: LOG_ADJFREIGHTit=LOG_FREIGHTit-(β1EICit+β2NHM1it+β3NHM2it). Using alternative specifications, like including
a time trend, yielded qualitatively identical results and only small quantitative differences.
25
Figure 5
Freight factors and adjusted freight factors: selected commodities
i) Saltpetre India
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1796 1801 1806 1811 1816 1821 1826 1831 1836 1841
Freight factor
Adjusted freight factor
ii) Sugar Dutch East Indies
.24
.20
.16
.12
.08
.04
.00
1823 1833 1843 1853 1863 1873 1883
Freight factor
Adjusted freight factor
The yearly changes of the two series are equal by construction, except in the final year of the EIC and
NHM dummies. Therefore, the substitution of LOG_ ADJFREIGHT for LOG_FREIGHT does not
26
affect their coefficients under the least squares specification and only marginally under the
instrumental variables ones. At the same time, it changes the size and the interpretation of the EIC
and NHM coefficients. In the baseline specification LOG_FREIGHT includes the costs of monopoly of
shipping and thus the dummies measure only the additional effect of the trading monopoly on
commerce. In the alternative specification, the variables EIC and NHM capture the entire effect of
monopolies, including the additional mark-ups on transport costs. Lastly, we add the lagged value of
the dependent variable to reduce auto-correlation and to take into account the possible delay in
adjustment to shocks, but its omission does not affect qualitatively the results. The coefficients are
thus short term elasticities; long run elasticities can be computed as βk/(1-γ) where βk is the coefficient
of the k-th variable and γ is the coefficient of the lagged dependent variable.
We report the descriptive statistics for all variables and the pairwise coefficient of correlation between
them in the Appendix A (Table A3 and Table A4). As a whole, they do not add much new information.
However, it is worth noting that the average freight factors and the average duties are almost identical
– respectively 18.1 per cent and 18.2 per cent (17 per cent on imports and 1.2 per cent on exports)
of prices in exporting countries- and that the coefficient of correlation between the two variables is
only 0.18. The correlation between explicative variables is in general very low and thus there is not a
risk of multi-collinearity. Yet, most variables are clearly non-stationary (cf. the Appendix A, Table A2
for a formal testing) and thus results might be spurious. We thus test ex-post the stationarity of the
residuals with a Levin et al. (2002) test for panel regressions.
We omit from the regression the Far Eastern markets, as the series are very short and their quality is
particularly poor (three series out of seven are not qualitatively homogenous even in the same
market). This leaves a total of twenty-two cross-sections and 1534 observation. We have also run
separate regressions for the United States, India and Dutch East Indies (cf. the results in the
Appendix A, table A6), which yield qualitatively identical results. All regressions use fixed-effects
specification with panel corrected standard errors to address cross-section heteroskedasticity
(reflecting different levels of transaction costs) and contemporaneous correlation (which may arise as
a result of common shocks). In the short run, Jacks and Pendakur (2010) stress, the supply of
transport is inelastic; in consequence, freights are co-determined by the demand, which depends on
price gaps. As the flows covered here account for an only small proportion of world transportation by
27
Table 7
The causes of integration: econometric analysis
(1) (2) (3) (4) (5) (6)

PCSE PCSE/IV PCSE/IV PCSE/IV PCSE/IV PCSE/IV
C 0.524 0.404 0.402 -0.079 0.371 0.416
(17.27)*** (12.19)*** (12.10)*** (-0.12) (11.59)*** (11.69)***
LOG_DUTY 0.073 0.076 0.076 0.079 0.066
(3.34)*** (3.45)*** (3.45)*** (3.51)*** (2.96)***
LOG_DUTY*ATLANTIC 0.094
(2.51)**
LOG_DUTY*INDIA 0.028
(0.45)
LOG_DUTY*INDONESIA 0.072
(2.27)**
EIC 0.164 0.210 0.360 0.200 0.258 0.166
(4.79)*** (5.99)*** (10.60)*** (5.57)*** (7.23)*** (4.09)***
NHM1 -0.097 -0.058 0.081 0.007 0.009 0.017
(-4.10)*** (-2.41)** (3.44)*** (0.20) (0.38) (0.56)
NHM2 -0.060 -0.043 0.051 -0.005 -0.015 0.010
(-2.90)*** (-2.13)** (2.39)** (-0.19) (-0.76) (0.42)
AAA 0.030 0.027 0.027 0.006 0.013 0.022
(0.64) (0.58) (0.58) (0.13) (0.30) (0.49)
VJSP -0.087 -0.057 -0.057 -0.097 -0.035 -0.030
(-2.29)** (-1.49) (-1.48) (-2.34)** (-0.92) (-0.78)
NIVAS -0.210 -0.165 -0.164 -0.220 -0.145 -0.135
(-4.06)*** (-3.18)*** (-3.17)*** (-3.92)*** (-2.76)*** (-2.54)**
LOG_FREIGHT 0.130 0.087 0.088
(13.89)*** (8.28)*** (8.04)***
LOG_ ADJFREIGHT 0.086
(8.19)***
LOG_FREIGHT*LIGHT 0.054
(5.10)***
LOG_FREIGHT*BULKY 0.135
(9.82)***
LOG_FREIGHT*ATLANTIC 0.085
(5.71)***
LOG_FREIGHT*INDIA 0.122
(6.85)***
LOG_FREIGHT*INDONESIA 0.053
(4.77)***
TELEGRAPH -0.023 -0.052 -0.053 -0.056 -0.047 -0.041
(-1.34) (-3.01)*** (-3.04)*** (-2.51)** (-2.76)*** (-2.28)**
YEAR*ATLANTIC 0.000
(0.96)
28
Table 7-continued
(1) (2) (3) (4) (5) (6)

PCSE PCSE/IV PCSE/IV PCSE/IV PCSE/IV PCSE/IV
YEAR*INDIA 0.000
(-0.75)
YEAR*INDONESIA 0.001
(2.62)***
JAVA_WAR 0.073 0.053 0.053 0.067 0.058 0.050
(0.95) (0.69) (0.69) (0.85) (0.74) (0.62)
MUTINY -0.060 -0.054 -0.053 -0.068 -0.071 -0.069
(-0.68) (-0.60) (-0.60) (-0.77) (-0.82) (-0.79)
SLAVE 0.246 0.204 0.204 0.204 0.199 0.208
(5.78)*** (4.73)*** (4.71)*** (4.72)*** (4.53)*** (4.72)***
CIVIL_WAR 0.005 -0.027 -0.028 -0.025 -0.054 -0.019
(0.14) (-0.76) (-0.78) (-0.70) (-1.49) (-0.52)
WWI*ATLANTIC -0.084 -0.023 -0.022 -0.038 0.010 -0.025
(-1.55) (-0.43) (-0.41) (-0.72) (0.20) (-0.47)
WWI*INDIA 0.071 0.124 0.125 0.132 0.110 0.081
(1.67)* (2.86)*** (2.88)*** (2.91)*** (2.56)** (1.72)*
WWI*INDONESIA 0.163 0.197 0.197 0.189 0.226 0.227
(5.38)*** (6.47)*** (6.48)*** (6.20)*** (7.24)*** (7.26)***
LOG_RATIO1 0.444 0.482 0.482 0.476 0.443 0.468
(17.76)*** (18.58)*** (18.60)*** (18.40)*** (16.65)*** (18.04)***
N 1534 1534 1534 1534 1534 1534

Adjusted R-squared 0.79 0.79 0.79 0.79 0.80 0.79
F 155.62*** 135.52*** 135.32*** 126.25*** 136.58*** 123.99***
LLC t-stat -33.38*** -38.53*** -38.57*** -38.37*** -38.49*** -39.31***
Wooldridge exogeneity test chi-squared stat 58.92*** 61.61*** 52.65*** 59.29*** 52.52***
Wooldridge exogeneity test F stat 58.84*** 61.48*** 55.07*** 29.72*** 17.86***
Adjusted R-squared first stage 0.98 0.97 0.98
Partial R-squared first stage 0.77 0.77 0.73
Shea's partial R-squared first stage first inst 0.81 0.86
Shea's partial R-squared first stage second inst 0.80 0.74
Shea's partial R-squared first stage third inst 0.85
Adjusted partial R-squared first stage first inst 0.80 0.85
Adjusted partial R-squared first stage second inst 0.79 0.73
Adjusted partial R-squared first stage third inst 0.85
F first stage first inst 3769.16*** 3749.19*** 2422.04*** 1957.87*** 738.55***
F first stage second inst 2624.01*** 1121.71***
F first stage third inst 562.546***
Sources: see the text and Appendix B

29
sea, it is still reasonable to assume exogeneity of freights. Nonetheless, we prefer to minimize this
risk and thus we run also an instrumental variable (IV) version of the baseline regression, using as
instrument the values of the trend component of LOG_FREIGHT, obtained with a Hodrick-Prescott
filter. The series captures the (surely exogenous) effects of the decline of institutional barriers and
technical progress, by discounting short term fluctuations, which can be driven by oscillations in the
demand. The Wooldrige’s (1995) statistics test the null hypothesis of endogenity, with a
heteroskedasticity-robust covariance matrix (like all the IV’s diagnostic tests). The first stage statistics
test the quality of the instruments with measures of the strength of their association with the
instrumented variables. Table 7 reports both versions of our baseline specification and the IV version
of the additional specifications (the least squares versions are in table A6 of the Appendix B).
The overall performance of the model is good. The residuals are stationary, the combined variables
are highly significant (F-test) and explain about four fifths of the total variance. Almost all the signs
agree with expectations. The Wooldridge’s (1995) tests find strong evidence of endogeneity in all
cases: not so surprisingly, the change in the estimated coefficients across the least squares and IV
specifications is sufficiently large to recommend the use of the latter. Predictably, all first stage tests
find that the instruments are very highly correlated with the variables, so that the expected small-
sample bias is low. Turning to the results:
i) Transport costs mattered as expected. The coefficients for freights are positive and highly
significant, and remarkably stable across specifications. In the IV versions, a 10 per cent increase in
freights augmented price gaps by about 0.8 per cent in the short run and by about 1.7 per cent in the
long run. As column 4 shows, the coefficients differed according to the physical characteristics of
each good: the impact of changes in transportation was average 2.5 times greater for bulky than for
19
light products (column 5). To some extent, this is purely a numerical effect: ceteris paribus, a given
absolute change in transportation costs is bound to reduce less the price differential for high-value
goods, as these costs account for a lower share of the price at origin. But the unit value of
19
We distinguish “light” from “bulky” goods with the coefficient of product dummies in an OLS regression with LOG_FREIGHT
as dependent variable, explained by a linear trend and by route and product dummies. The coefficients yield a ranking of
commodities the lightest to the heaviest (silk, indigo, tin, cotton, tea, coffee, pepper, rubber, sugar, wheat, jute, saltpetre,
linseed, rapeseed, and rice). Our distinction between the first nine products (“light”) and the others (“bulky”) closely mirrors the
conventional one between “grain and seeds” and “lighter goods”.
30
commodities affected also the choice of shipping technology, and thus ultimately the rate of change in
costs: sailing ships have been employed for the long-distance transport of high value goods, such as
th
tea, until the end of the 19 century. This product-specific effect can partly explain differences
between countries (column 6). In fact, bulky goods accounted for half the observations for India (427
out of 839) and only a sixth for the East Indies (66 out of 427). However, the coefficient for the United
States is a third lower than the Indian one, in spite of a similar share of bulky goods. Naturally, the
numerical impact of freight factors on price gaps tends to decline with distance, too, but the result may
also reflect differences in the demand for shipping services - most notably for return cargoes- and
possibly differences in levels of transportation costs other than freights (e.g. port handling and fees).
ii) The variable LOG_DUTY is positive and significant, and coefficients in the IV versions are similar to
those for freight factors – as one would expect given the similar percentage on the price of goods.
The difference among country-specific coefficients (Column 6) is greater than for freights because
duties differed by product much more than freight factors. The high coefficient for Atlantic trade
reflects the impact of British Corn Laws, which were repealed in 1846; conversely, for products from
India, a low coefficient is associated with particularly low duties, on average. The effects of
monopolies are quite complex and somewhat unexpected. According to the baseline specification,
with LOG_FREIGHT (column 1 and 2), the EIC widened the price differentials with India by at least 15
per cent, while apparently the NHM reduced them, without much difference before and after 1850.
An official history of the Company claims that it sold at a loss to help Dutch middlemen to be
competitive on the European market (NHM, 1924). It is also possible that the NHM increased the
efficiency of the market, by improving the transmission of information and by reducing the risks. On
the other hand, the result is not robust to small changes in specification (columns 4-6). Substituting
our monopoly-adjusted series of freights (column 3) causes the coefficients for monopoly dummies to
change as expected. The EIC increased price gaps, ceteris paribus by more than a third in the short
run and by almost 70 per cent in the long run. The NHM dummies become positive as expected, but
its coefficient(s) are about a quarter of the EIC one. This difference, however, does not imply that the
Dutch monopoly system was less harmful than the EIC. In fact, the estimate deals exclusively with the
effects on trade, neglecting the effects of Cultivation System. A comparison between columns 3 and
the others suggests that the NHM affected negatively integration only because it charged high
31
freights, while the EIC also for its trading practices. The American AAA did not affect integration, while
the NIVAS (in all specifications) and the VJSP (in some specifications) reduced price differentials.
20
iii) The market efficiency variables yield mixed results. The variable TELEGRAPH is negative as
expected and significant in all specifications but the panel baseline (Column 1). We have tried to
interact it with a time trend, to capture the effect of technical progress and increases in transmission
(or changes in policy to set rates), but the results are poor. Our results confirm the earlier work by
Lew and Cater (2006), who stress the positive effect of telegraph on world trade. The high coefficient
of the SLAVE variable highlights the market disrupting effect of the start of the campaign against
slave-produced sugar in the United Kingdom, which caused an upward jump in the series (Table A1,
Appendix A). In contrast, political shocks in producing countries seem not to have affected price
differentials, although of course they may have had important consequences in producing areas. The
dummies for WWI are positive and significant, as expected, for India and Dutch East Indies but not for
the Atlantic. We interpret them as the effect of disruption in the market on top of war-related increase
in transport costs, which should already be captured by the variable LOG_FREIGHT. For instance,
the VJSP was set-up in 1917-1918 specifically to manage a shortage of transport (van der Eng, 1996:
215-216; Knight, 2010). The trends are significant only in the Dutch East Indies, where the variable is
unexpectedly positive – i.e. ceteris paribus markets have been disintegrating. A decrease in
efficiency is conceivable, but not so plausible. As an alternative, we speculate that this increase might
reflect the increasing exposure to price shocks originating in other markets.
So far we have discussed the effect of each variable in isolation, but the key question is about their
contribution to long-run convergence. We compute this latter as the percentage change in the n-th
variable times the corresponding long-run elasticity and we compute its share on percentage change
in price differentials over the covered period. In table 8, we report results for the long-run convergence
from Waterloo to World War One as well as for its two phases, the “early globalization” (1815-1870)
20
We have tested two additional measures of efficiency, total traded quantity and a dummy for fixed exchange rates between
countries. Both are expected to be negative: more trade should increase the flow of information and fixed exchange rates
should reduce the risks of trading. The dummy for fixed exchange rates is wrongly signed and not significant. The quantity
variable is negative, but it worsens the overall results of the regression (available upon request). The former result suggests
that more refined measures of exchange rate volatility than afforded by the available data are needed to adequately capture the
effect of exchange rate regimes; the latter result can be expected given that quantities are endogenous to price gaps.
32
21
and the “heyday of globalization” (1870-1913), with coefficients from Table 7. We also analyse the
long-run change separately for the three routes (coefficients from Table A6, Appendix A).
Table 8
The causes of integration: decomposition analysis (in percentage)
(1) (2) (3) (4) (5) (6) (7)

Sample All All All All Atlantic India Indonesia
Years 1816-1913 1816-1870 1871-1913 1816-1913 1816-1913 1815-1913 1849-1913
EIC 33.58 43.60 57.73 70.06

NHM1 42.33
LOG_DUTY 7.66 9.48 1.64 7.67 15.07 2.61 5.48
LOG_FREIGHT 43.53 54.34 66.32 52.75
LOG_ ADJFREIGHTS 19.22 9.48 21.23
TELEGRAPH 12.54 2.51 44.64 12.69 11.01 9.26 15.05
Total 97.31 109.93 112.60 97.32 78.84 91.41 84.10

The last row of Table 8 sums up the contributions of all variables: the model performs very well in the
long run (columns 1 and 4) and fairly well in all other cases. In the long run, the contribution of trade
liberalization (LOG_DUTY) and TELEGRAPH is rather modest. Most of the change is explained by
changes in transportation costs and by the abolition of the EIC, which looms large in the long run
analysis as the majority of observations in 1815 refer to India. According to the baseline specification
(column 1), the fall in freights mattered more, but this conclusion is decidedly reversed if we use the
coefficient from LOG_ADJFREIGHTS (column 4). The NHM does not appear among the variables in
the aggregate analysis, because the series for the Dutch East Indies start later, but column (7) shows
it played a similarly important role in the convergence of prices between the colony and Europe. By
definition, institutional change did not contribute to convergence in the second period (column 3).
This latter reflected mostly the fall in freights, with a very substantial contribution of the telegraph.
Summing up, our results strongly highlight the difference between the two periods. The “early
globalization” was mostly determined by political decisions, while further convergence during the
“heyday of globalization” was achieved thanks to the lay-out of the telegraph lines and to technical
21
The exact starting date differs somewhat across products, in order to maximise the number of covered goods. We omit
explicative variables which did not affect the dependent variables at the beginning and/or at the end of the period (such as the
World War dummies). The cumulated change in the dependent variable is obtained as the average of the differences between
the values fitted by the panel at time 0 and that of time T divided by the former.
33
progress in sea transportation. On the whole, political decisions mattered more in the long run
because, as shown in section four, most of total convergence pre-dated 1870.
7) Who gained from market integration?
We estimate the welfare gains from price convergence with a modified version of the standard static
partial equilibrium analysis of gains from trade liberalization – the Haberger triangles (Vousden,
1990). Following Hufbauer et al. (2002), we assume that price gaps remain non-zero (Federico,
2008). We obtain total gains from convergence (or losses from divergence) by summing up the
estimates by product
Δ DWL/GNPi = ΔPi| α – β | + 0.5* ΔPi *[ η*αj + ε*βj] 3)

2
Where the subscript i refers to the product, η is the (absolute value of the) price elasticity of demand, ε
is the price elasticity of supply, α and β are its shares of production and consumption, and ΔPi is the
percentage change in price. Our estimate, however, refer to changes in price differentials (Table 6).
Their movement may reflect a fall in prices in consuming countries or an increase in producing
countries, or both. The allocation of total change determined the distribution of gains from integration
to Western consumers or Asian producers, but unfortunately we do not have information to apportion
the change. Therefore, in Table 9 we adopt the simplest solution – i.e. to present the upper and lower
bound of gains to producers as well as the compromise estimate of an equitable distribution. We
assume η=1.5 and ε=1, but results are not very sensitive to changes in elasticity for a reasonable
range of parameters. The shares α and β must be obtained from national accounts, which are
detailed enough only since 1900 in India and, with some approximation, since 1880 in Dutch East
Indies. We thus can compute only the cumulative gains from convergence on the eve of World War
One. We consider separately the gains since 1816 – i.e. in the whole process of globalization-, or
since 1870 (only during the “heyday”). We report full results by product in the Appendix A (Table A7)
and we sum them up by country in Table 9.

34
Table 9
The welfare effect of price convergence (in percentage)
(1) ( 2) (3)
Equitable 100 per cent 100 per cent
division producers consumers
1870-1913
India 1.77 5.75
Indonesia 0.43 0.89
United States 0.03 0.08
United Kindgom 0.51 1.10
1816-1913
India 2.86 8.36
Indonesia 0.60 1.28
United States 0.25 0.68
United Kindgom 1.35 3.05
The estimated gains are far from negligible, for a partial-equilibrium estimate. Note that gains are
significantly greater in the long-run than during the “heyday of globalization” and that, in the equitable
division, India gained substantially more than the United Kingdom. This was mainly thanks to wheat
and especially rice; it therefore looks as if agricultural exports did contribute substantially to the
growth of the Indian economy. It is worth stressing that we implicitly assume no changes in price
differentials in periods not covered by our series – e.g. from 1816 or 1870 to 1891 for the series of tea
from the East Indies, which starts in 1892. As these commodities were subject to the same forces
which caused prices of other products to converge this assumption implies a negative bias. Moreover,
our estimate refers only to a subset of exported goods, omitting other exports and all imports. In 1913,
they accounted for about 50 per cent of total exports in India and for about 40 per cent in the Dutch
East Indies (Table 3). Assuming that all flows benefitted from the same cut in prices from integration
and all other parameters (elasticities and shares on consumption and production) were the same is
clearly unrealistic: for instance, shares of consumption of imported goods were surely quite low.
Anyway, this computation shows that aggregate gains from integration may have been quite
substantial: a very crude estimate would place the static contribution of the first globalization to GDP
22
to c. 3 per cent in the Dutch East Indies and to c. 11 per cent in British India.
This raises an obvious question: who gained? Were gains evenly distributed among regions within
each country and among agents? The consumption of wheat, tropical goods and textile manufactures
22
By way of comparison, Hersh and Voth (2009) estimate that English consumers would have given up 15 per cent of their
GDP in 1850 to maintain access to tea and sugar. From this perspective, the size of gains from the growth in world trade for
European countries in the early modern era was of a similar order to that of the first globalization for Asian ones.
35
was widespread in the European population and the markets for their distribution were fairly
competitive. Thus, the gains from convergence were in all likelihood evenly distributed in the
consuming countries. This was not the case for producing ones. The production of most exports was
geographically concentrated. In the United States, in 1913 seven states, all in the South, produced
23
each more than 5 per cent of the whole cotton output, jointly accounting for 90 per cent of it. In the
Dutch East Indies, two provinces accounted for 74 per cent of exports of tin, 60 per cent of sugar and
45 per cent of pepper and coffee (Clemens et al., 1992, Tables 3 and 4). These areas were bound to
benefit much more than the rest of the country from convergence. The effects of convergence in
prices of staple goods, such as rice in India, depended on the level of integration of the domestic
market. Our estimate assumes perfect integration –, e.g. that a change in prices in Rangoon extended
to producers all over India. This is probably an unrealistic assumption, but there is strong evidence of
th
growing integration in the second half of the 19 century in the domestic commodity market in the
United States (Federico and Sharp, 2013), in India (Hurd, 1975; Studer, 2008; Andrabi and
Kuehlwein, 2010) and also in the Dutch East Indies (Marks, 2010; van Zanden and Marks, 2012: 25-
24
26).
The distribution of gains within producing areas depended on the level of competition in the wholesale
market for the export commodities. If the market is not competitive, most gains would accrue to
merchants rather than to producers. The extreme case in point was surely the Cultivation System: the
Dutch colonial administration used its power to extract a huge surplus for the far-away Dutch state. At
the other end of the range, the United States have a solid reputation for being competitive, although
American wheat farmers complained bitterly of being squeezed by railways companies and
middlemen (Persson and Sharp, 2013). Also the markets for silk in China and Japan were broadly
competitive, although far from perfect (Federico, 1997: 162-173). A source lists 32 firms exporting
indigo from Bengal in 1840-1842, although six of them managed about two thirds of the total trade –,
25
a fairly but not very high level of concentration. However, indigo was extracted from a root, and thus
benefits could accrue to industrialists rather than to cultivators. Indeed Ray (2011) argues that the
final demise of the Bengal indigo industry was accelerated by a change in legislation to favor owners
of indigo workshops over peasants. The boom of exports from the Dutch East Indies coincided with a
23
Data from the ATICS data-base (Federico and Sharp, 2013). Wheat output was less concentrated: only 5 states (all in the
West North Central) exceeded 5 per cent of production, with a total share 53 per cent.
24
Interestingly, though, Collins (1999) finds only weak evidence of labour market integration in late ninenteenth-century India.
25
Personal communication by M. Aldous.
36
boom of peasant production (Caldwell, 1964; Booth, 1988: 195-196; van der Eng, 1996: 231 ff.).
These are only examples: the distribution of gains from integration is surely an important and highly
promising venue for future research, but here it is impossible to pursue it further.
It is similarly beyond the scope of this paper to fully discuss the dynamic implications of integration
and the Williamson’s (2008, 2011, 2012) thesis. As a contribution to the debate, however, we
estimate the contribution of price convergence to the improvement of terms of trade in India and the
Dutch East Indies from 1850 onwards. To this aim, we compute counterfactual series of prices ratios
by commodity assuming that monopolies had not been abolished, telegraphic connections had not
been established, and that the duties and freight factors had remained constant at their initial level, in
26
1849 or 1871. We extract the corresponding counterfactual series of export prices in producing
countries, under the alternative hypothesis that producers got half or all the benefits from
27
convergence (as in columns 1 and 2 of Table 9). We use these counterfactual prices, as well as the
actual prices for the same commodities, to compute indexes of export prices, which we divide by the
28
import prices. We thus obtain three sets of terms of trade, a “new” one with actual prices and two
counterfactual ones; we can thus compute the contribution of price convergence to change in terms of
29
trade (Table 10).
Table 10
The contributions of price convergence to changes in the terms of trade (in percentage)
India Indonesia
Terms of trade Contribution Terms of trade Contribution
Original New Half All Original New Half All
1850-1870 12.3 -8.4 -76.2 -46.1 27.5 29.2 29.2 54

1870-1890 52.3 100.5 35.8 49.2 30.1 30.4 45.6 77.2
1890-1912 39.7 20.7 37.5 50.3 -25.6 -24.6 -4.4 -6.9
26
We compute the counterfactual ratio as CRPit= Exp (LOGPRit+0.70*(CEIC-EICt)+0.16*(CNHM1-NHM1t)+0.089*(CNHM2-
NHM2)+0.15*(LOGDUTYit_0-LOGDUTYit)+0.17*(LOGADJFREIGHTit_0-LOGADJFREIGHTit)- 0.10 (CTELEGRAPH -
TELEGRAPH it).The dummies for CEIC and CNHM1 are 1 for India and Indonesia, while CNHM2 and CTELEGRAPH are zero.
Thus the terms (CEIC-EICt) and (CNHM1-NHM1t) are 1 whenever the EIC and NHM1 dummies are 0 (i.e. since 1817 and 1850
respectively) and the term (CNHM2-NHM2) is -1 whenever the NHM2 dummy is 1 (i.e. from 1850 until 1868) and 0 otherwise.
27
We obtain the counterfactual export price series as CPitexport_all=Pitimport/CRPit and CPitexport_half= Pitimport/[CRPit-(CRPit-RPit)*0.5],
where Pit refers to the actual price series.
28
We build separate price indexes for periods 1850-1870 and 1870-1913 to take into account the different composition of
samples. The (Fisher) indexes for the Dutch East Indies include coffee, pepper, sugar and rice in 1850-1870 and coffee,
pepper, sugar and tin in 1870-1913 (accounting respectively for about two thirds of exports in 1870 and for 28 per cent in
1913). For India, we compute a Laspeyres index for 1850-1870 including only jute, indigo linseed and rapeseed (using linseed
as a proxy) and a Fisher for 1870-1913, adding cotton, wheat and rice. The coverage is quite poor for the first index (only 15
per cent in 1870) but it rises to 46 per cent for the 1870-1913 index in 1913. The import prices are from the sources underlying
Figure 2.
29
The contribution is computed thus: Contribution=1-[(CΠt/CΠt-1 -1)*( Π t/ Π t-1 -1)] where Π and CΠ are the estimated and
counterfactual indexes of terms of trade.
37
A look at the two columns on the right shows that our “new” index of terms of trade reproduces almost
perfectly the long-term change of the original one for the Dutch East Indies, while it is less accurate
for India. There, it seems, trends were significantly shaped by prices of exports to Asia, like opium
and cotton manufactures, which we do not include in our data. The relevance of factors other than
global market integration is also signalled by worsening in terms of trade in the Dutch East Indies in
1890-1912, and India 1850-1870 (for our subset only). In these cases, the positive effect of integration
was not sufficiently large to determine the direction of change (negative sign). In 1890-1912, the
contribution of integration with Europe was much lower for the Dutch Indies than for India: this
difference may reflect the growth of export of petroleum and sugar from the Dutch East Indies to other
Asian countries.
Yet, there is no doubt that global market integration emerges as a major determinant of the nineteenth
terms of trade boom in Asia. In the baseline hypothesis of equitable division of gains (column “half”)
price convergence accounted for as much as a third of improvement in terms of trade in India (after
1870) and in the Dutch Indies in 1850-1870 and for almost a half in the Dutch Indies in 1870-1890,
where the overall increase was nevertheless smaller than in India at the same time. Of course, the
contributions would be even higher if price rises in producing countries absorbed more than half total
price convergence, up to the maximum of column “all”. Furthermore, these estimates only measure
the contribution of integration of the increase in export prices, neglecting the effect of import prices. If
price gaps for these latter had fallen as much as price gaps for exports, the total effect of world-wide
integration would have been double.
8) Conclusion
Our results are relevant for two literatures, that on market integration and that on trade and growth in
Asia, which, although clearly related, have so far remained largely distinct. Our work contributes to
filling in gaps in the literature on global market integration, but our results strengthen the consensus
view which is emerging from the literature on Europe (Federico, 2012). The process started early in
the 19th century and it was determined to a large extent by institutional changes. Within Europe and
between Europe and North America, barriers were raised essentially by protectionist trade policies,
while commerce with Asia was hampered by the monopoly of Western trading companies. These
38
barriers were progressively abolished and, at least for the sample of products/routes we are
considering, were only partially re-instated during the Great Depression. Once trade was free from
institutional constraints, further convergence was mainly achieved by cutting transportation costs.
th
These, however, at sea, in contrast to land, were fairly low already at the beginning of the 19 century
and thus exhibited limited scope for improvement.
Was globalization a blessing or a curse for the Asian countries? We have shown that price
convergence did imply sizeable static welfare gains, particularly in India. Future research should
further illuminate how such benefits were shared between consumers in Europe and producers in
Asia. Dynamic effects on the allocation of resources should have implied much more extensive gains
than we were able to measure, but the same forces could have also acted as an impediment to
industrialization and long-term growth in the periphery. In this latter vein, one could speculate that
more significant static gains in British India than in the Dutch East Indies were achieved at the cost of
a poorer performance in the long run. And yet, according to our estimates, the impact of market
integration on terms of trade was about as big in the two cases, at least until the later nineteenth
century. At its height, the influence of price convergence between Asia and Europe may well have
been the main drive behind the nineteenth-century terms of trade boom in Asia. However, this was
not the whole story. The role of intra-Asian trade, for one, would deserve to be examined, too.
39
Appendix A: Statistical Appendix
Table A1
Trends by series and endogenous periods: ECM regression
Good Years From To N. obs Initial Half-life Rate (in Cumulated
ratio (months) percentage) change (in
percentage)
Coffee 1835-1913 Batavia Rotterdam 73 1.607 8 -0.577*** -34.37
Coffee 1835-1875 Batavia Rotterdam 41 1.625 5 -0.591*** -21.52
Coffee 1878-1913 Batavia Rotterdam 30 1.159 9 -0.117 -3.44
Cotton 1798-1845 Calcutta London 48 3.162 12 -2.311*** -67.02
Cotton 1798-1817 Calcutta London 20 3.202 4 -1.347 -23.61
Cotton 1820-1845 Calcutta London 26 1.284 3 0.222 5.95
Cotton 1869-1938 Bombay London 70 0.922 8 0.353*** 28.02
Cotton 1869-1883 Bombay London 15 1.197 0 -2.371*** -29.93
Cotton 1886-1938 Bombay London 53 0.894 4 0.637*** 40.17
Cotton 1803-1938 New York Liverpool 136 1.432 16 -0.256*** -29.38
Cotton 1803-1845 New York Liverpool 43 1.668 14 -0.689 -25.63
Cotton 1848-1938 New York Liverpool 91 1.105 4 0.011 1.04
Indigo 1824-1931 Calcutta London 105 1.444 25 -0.278 -25.34
Indigo 1824-1856 Calcutta London 33 1.983 4 -1.477*** -38.59
Indigo 1859-1931 Calcutta London 71 0.919 3 0.469*** 39.50
Jute 1846-1938 Calcutta London 93 2.054 9 -1.004*** -60.68
Jute 1846-1907 Calcutta London 62 2.481 5 -1.760*** -66.41
Jute 1910-1938 Calcutta London 29 1.027 7 -0.057 -1.64
Linseed 1848-1938 Calcutta London 91 1.501 18 -0.292* -23.34
Linseed 1848-1869 Calcutta London 22 1.945 5 -2.053*** -36.34
Linseed 1872-1913 Calcutta London 42 1.338 0 -0.432*** -16.60
Linseed 1916-1938 Calcutta London 23 1.620 10 -2.111* -38.46
Pepper 1830-1938 Batavia Amsterdam 103 1.835 26 -0.328* -28.68
Pepper 1830-1849 Batavia Amsterdam 20 1.823 9 0.631 13.44
Pepper 1852-1912 Batavia Amsterdam 55 1.721 12 -0.734*** -33.20
Pepper 1915-1938 Batavia Amsterdam 24 2.027 9 -2.031 -38.58
Rapeseed 1873-1921 Calcutta London 49 1.329 17 -0.140 -6.62
Rapeseed 1873-1903 Calcutta London 31 1.394 0 -0.486** -13.98
Rapeseed 1906-1921 Calcutta London 16 1.045 11 2.846 57.68

40
Table A1-continued
percentage)
Rice 1850-1913 Batavia Amsterdam 64 1.989 11 -0.727*** -37.19
Rice 1850-1870 Batavia Amsterdam 21 2.140 4 -0.746 -14.50
Rice 1873-1913 Batavia Amsterdam 41 1.450 6 -0.135 -5.40
Rice 1872-1938 Rangoon London 67 1.344 30 0.341 25.69
Rice 1872-1913 Rangoon London 42 1.705 7 -0.923*** -32.13
Rice 1916-1938 Rangoon London 23 3.030 12 -4.285*** -62.67
Rubber 1915-1938 Batavia London 24 1.135 7 -0.358 -8.23
Rubbera 1913-1917 Batavia London 5 0.974 7.518*** 45.63
Rubber 1920-1938 Batavia London 19 0.975 3 0.738 15.05
Saltpetre 1798-1853 Calcutta London 56 5.667 46 -2.488** -75.17
Saltpetre 1798-1815 Calcutta London 18 4.281 16 3.036 72.71
Saltpetre 1818-1853 Calcutta London 36 1.886 14 -0.067 -2.37
Silk 1798-1856 Calcutta London 59 2.396 16 -1.442*** -56.67
Silk 1798-1819 Calcutta London 22 1.875 7 1.362 34.92
Silk 1822-1834 Calcutta London 13 1.316 3 0.704 9.59
Silk 1837-1856 Calcutta London 20 1.461 2 -2.372** -37.77
Silk 1859-1877 Calcutta Lyon 17 1.178 0 -0.701 -11.24
Silk 1836-1877 Canton London 10 1.320 0 0.233 2.35
Silk 1876-1913 China London 38 1.258 15 -0.353*** -12.23
Silk 1876-1914 China Lyon 39 1.178 19 -0.054 -2.07
Silk 1876-1903 China Lyon 28 1.267 6 -0.568** -14.71
Silk 1906-1914 China Lyon 9 0.963 0 4.398*** 48.56
Silk 1896-1938 Yokohama New York 43 1.149 2 -0.128*** -5.47
Silk 1896-1914 Yokohama Lyon 19 1.168 5 -0.352 -6.47
Sugar 1798-1856 Calcutta London 59 2.422 38 -1.269** -52.70
Sugar 1798-1817 Calcutta London 20 2.695 8 -0.894 -16.38
Sugar 1824-1938 Batavia London 115 1.641 18 -0.406*** -37.31
Sugar 1824-1842 Batavia London 19 1.194 17 3.576 97.27
Sugar 1845-1875 Batavia London 31 1.481 4 -0.435* -12.61

41
Table A1-continued
percentage)
Sugar 1878-1914 Batavia London 37 1.173 5 -0.214* -7.60
Sugar 1917-1938 Batavia London 22 1.506 7 -2.353** -40.40
Tea 1895-1931 Calcutta London 37 1.382 12 -0.166 -5.94
Tea 1895-1905 Calcutta London 11 1.564 0 -1.359** -13.88
Tea 1908-1915 Calcutta London 8 1.055 0 2.846** 25.56
Tea 1918-1931 Calcutta London 14 2.084 0 -5.547*** -54.00
Tea 1813-1831 Canton England 19 2.466 4 -1.552*** -25.54
Tea 1813-1823 Canton England 11 2.458 0 -1.631*** -16.42
Tea 1826-1831 Canton England 6 2.095 0 -3.616** -19.50
Tea 1821-1877 Canton London 23 1.997 12 -1.398** -27.50
Tea 1821-1834 Canton London 14 1.922 11 0.659 9.67
Tea 1837-1877 Canton London 7 1.037 5 0.076 0.53
Tea 1895-1938 Batavia Amsterdam 44 1.154 6 0.272 12.73
Tin 1865-1913 Batavia Amsterdam 49 1.206 3 -0.309*** -14.06
Tin 1865-1871 Batavia Amsterdam 7 1.168 0 1.469** 10.83
Tin 1874-1913 Batavia Amsterdam 40 1.149 0 -0.232*** -8.86
Wheat 1863-1931 Calcutta London 54 1.632 3 -0.809*** -35.38
Wheat 1863-1894 Calcutta London 29 1.613 0 -0.447 -12.15
Wheat 1897-1931 Calcutta London 23 1.078 0 -0.115 -2.61
Wheat 1802-1937 New York London 121 1.828 16 -0.584*** -50.67
Wheat 1802-1846 New York London 45 1.541 9 0.447 22.29
Wheat 1849-1878 New York London 27 1.318 3 -0.543** -13.65
Wheat 1881-1937 New York London 45 1.011 11 -0.171 -7.42
Notes: a there are not enough observations for the ECM regression in this case.

42
Table A2
Stationarity tests: Augmented Dickey Fuller and Kwiatkowski-Phillips-Schmidt-Shin
LOG_RATIO
Good From To ADF t-stat Stationary? LM-Stat Stationary?
Coffee Batavia Rotterdam -2.497 No 1.111*** No
Cotton Calcutta London -2.445 No 0.813*** No
Cotton Bombay London -5.214*** Yes 0.466** No
Cotton New York Liverpool -5.822*** Yes 0.714** No
Indigo Calcutta London -2.967** Yes 0.568** No
Jute Calcutta London -2.174 No 1.150*** No
Linseed Calcutta London -4.025*** Yes 0.593** No
Pepper Batavia Amsterdam -3.941*** Yes 0.551** No
Rapeseed Calcutta London -3.366** Yes 0.121 Yes
Rice Batavia Amsterdam -4.177*** Yes 0.977*** No
Rice Rangoon London -3.553*** Yes 0.113 Yes
Rubber Batavia London -3.803*** Yes 0.151 Yes
Saltpetre Calcutta London -2.004 No 0.737** No
Silk Calcutta London -2.490 No 0.902*** No
Silk Calcutta Lyon -3.658** Yes 0.406* No
Silk Canton London 0.183 Yes
Silk China London -3.577** Yes 0.454* No
Silk China Lyon -3.181** Yes 0.262 Yes
Silk Yokohama Lyon -1.653 No 0.372 No
Silk Yokohama New York -5.370*** Yes 0.243 Yes
Sugar Calcutta London -2.160 No 0.708*** No
Sugar Batavia London -4.137*** Yes 0.868*** No
Tea Calcutta London -4.060*** Yes 0.101 Yes
Tea Canton England 0.001 No 0.596*** No
Tea Canton London 0.762*** No
Tea Batavia Amsterdam -4.957*** Yes 0.188 Yes
Tin Batavia Amsterdam -3.849*** Yes 0.766*** No
Wheat Calcutta London -4.057*** Yes 0.979*** No
Wheat New York London -1.582 No 1.256*** No
43
Table A2-continued
LOG_DUTY
Coffee Batavia Rotterdam -2.259 No 0.304 Yes
Cotton Calcutta London -0.957 No 0.663** No
Cotton Bombay London 0.425* No
Cotton New York Liverpool -2.623* Yes 0.752*** No
Indigo Calcutta London -1.568 No 0.875*** No
Jute Calcutta London -3.954*** Yes 0.472** No
Linseed Calcutta London -2.865* Yes 0.445* No
Pepper Batavia Amsterdam -2.401 No 0.228 Yes
Rapeseed Calcutta London 0.405* No
Rice Batavia Amsterdam -2.302 No 0.643** No
Rice Rangoon London 0.401* No
Rubber Batavia London 0.072 No 0.468** No
Saltpetre Calcutta London -5.448*** Yes 0.520** No
Silk Calcutta London -1.067 No 0.694** No
Silk Calcutta Lyon -0.524 No 0.503** No
Silk Canton London
Silk China London
Silk China Lyon
Silk Yokohama Lyon
Silk Yokohama New York
Sugar Calcutta London -2.328 No 0.236 Yes
Sugar Batavia London -2.046 No 0.673** No
Tea Calcutta London
Tea Canton England
Tea Canton London
Tea Batavia Amsterdam -4.719*** Yes 0.422* No
Tin Batavia Amsterdam -2.774* Yes 0.268 Yes
Wheat Calcutta London 0.676** No
Wheat New York London -2.616* Yes 0.847*** No
44
Table A2-continued
LOG_FREIGHT
Coffee Batavia Rotterdam -1.353 No 1.138*** No
Cotton Calcutta London -1.715 No 0.728** No
Cotton Bombay London -3.200** Yes 0.280 Yes
Cotton New York Liverpool -2.791* Yes 0.626** No
Indigo Calcutta London -2.837* Yes 0.803*** No
Jute Calcutta London -2.789* Yes 1.089*** No
Linseed Calcutta London -2.950** Yes 0.754*** No
Pepper Batavia Amsterdam -2.165 No 0.921*** No
Rapeseed Calcutta London -2.674* Yes 0.159 Yes
Rice Batavia Amsterdam -1.289 No 0.995*** No
Rice Rangoon London -3.145** Yes 0.215 Yes
Rubber Batavia London -2.697* Yes 0.383 No
Saltpetre Calcutta London -1.598 No 0.783*** No
Silk Calcutta London -1.635 No 0.817*** No
Silk Calcutta Lyon -1.819 No 0.149 Yes
Silk Canton London
Silk China London
Silk China Lyon
Silk Yokohama Lyon
Sugar Calcutta London -1.729 No 0.764*** No
Sugar Batavia London -4.308*** Yes 0.431* No
Tea Calcutta London -2.455 No 0.146 Yes
Tea Canton England
Tea Canton London
Tea Batavia Amsterdam -3.382** Yes 0.073 Yes
Tin Batavia Amsterdam -1.277 No 0.852*** No
Wheat Calcutta London -3.544** Yes 1.097*** No
Wheat New York London -2.653* Yes 1.216*** No
45
Table A2-continued
LOG_FREIGHT_ADJ
Coffee Batavia Rotterdam -3.323** Yes 0.523** No
Cotton Calcutta London -3.633*** Yes 0.373* No
Cotton Bombay London -3.200** Yes 0.280 Yes
Cotton New York Liverpool -2.791* Yes 0.626** No
Indigo Calcutta London -2.837* Yes 0.803*** No
Jute Calcutta London -2.789* Yes 1.089*** No
Linseed Calcutta London -2.950** Yes 0.754*** No
Pepper Batavia Amsterdam -3.007** Yes 0.438* No
Rapeseed Calcutta London -2.674** Yes 0.159 Yes
Rice Batavia Amsterdam -2.209 No 0.630** No
Rice Rangoon London -3.145** Yes 0.215 Yes
Rubber Batavia London -2.697** Yes 0.383* No
Saltpetre Calcutta London -3.410** Yes 0.338 Yes
Silk Calcutta London -4.013*** Yes 0.685** No
Silk Calcutta Lyon -1.819 No 0.149 Yes
Silk Canton London
Silk China London
Silk China Lyon
Silk Yokohama Lyon
Sugar Calcutta London -3.600*** Yes 0.181 Yes
Sugar Batavia London -3.805*** Yes 0.968*** No
Tea Calcutta London -2.455 No 0.146 Yes
Tea Canton England
Tea Canton London
Tea Batavia Amsterdam -3.382** Yes 0.073 Yes
Tin Batavia Amsterdam -0.842 No 0.647** No
Wheat Calcutta London -3.544** Yes 1.097*** No
Wheat New York London -2.653** Yes 1.216*** No

46
Table A3
Panel regression: descriptive statistics
Std.
Description N. obs Mean Dev. Min Max
LOG_RP Log of price ratio 1534 0.313 0.337 -0.704 2.168
LOG_DUTY Log of duty factor+1 1534 0.123 0.262 0 1.680
ATLANTIC Dummy for Atlantic trade 1534 0.151 0.358 0 1
INDIA Dummy for Indian trade 1534 0.535 0.499 0 1
INDONESIA Dummy for Indonesian trade 1534 0.314 0.464 0 1
EIC Dummy for the EIC, 1797-1816, Indian trade 1534 0.052 0.222 0 1
NHM1 Dummy for the NHM, 1823-1850, Indonesian trade 1534 0.044 0.206 0 1
NHM2 Dummy for the NHM, 1851-1868, Indonesian trade 1534 0.048 0.213 0 1
AAA Dummy for the AAA on cotton exports, 1934 ff., Atlantic trade 1534 0.003 0.057 0 1
VJSP Dummy for the private marketing board for Java sugar, 1918-1931 1534 0.009 0.095 0 1
NIVAS Dummy for the private marketing board for Java sugar, 1932 ff. 1534 0.005 0.067 0 1
LOG_FREIGHT Log of freight factor 1534 -2.721 1.506 -7.044 1.972
LOG_FREIGHT_ADJ Log of freight factor net of monopolies' mark-ups 1534 -2.935 1.420 -7.044 1.972
LOG_FREIGHT_HP_SMOOTH HP smoothed trend of log of freight factor 1534 -2.723 1.473 -6.897 0.959
LOG_FREIGHT_ADJ_HP_SMOOTH HP smoothed trend of log of freight factor net of monopolies' mark-ups 1534 -2.937 1.383 -6.898 0.644
LIGHT Dummy for freight factors less than for wheat 1534 0.613 0.487 0 1
BULKY Dummy for freight factors equal or more than for wheat 1534 0.387 0.487 0 1
TELEGRAPH Dummy for telegraphic connection, 1867 ff. for Atlantic and 1875 ff. for Indian Ocean trades 1534 0.578 0.494 0 1
YEAR Year 1534 1878.226 35.921 1797 1938
JAVA_WAR Dummy for Java War, 1825-1827, Indonesian trade 1534 0.002 0.044 0 1
MUTINY Dummy for Indian mutiny, 1857-1859, Indian trade 1534 0.005 0.067 0 1
SLAVE Dummy for ban on West Indian sugar, Java and Indian sugar, 1840-1845 1534 0.008 0.088 0 1
CIVIL_WAR Dummy for American Civil War, 1861-1865, Atlantic trade 1534 0.007 0.081 0 1
WWI Dummy for World War I, 1914-1918 1534 0.038 0.192 0 1

47
Table A4
Panel regression: correlation matrix of the independent variables
LOG_DUTY LOG_DUTY*ATLANTIC LOG_DUTY*INDIA LOG_DUTY*INDONESIA EIC

LOG_DUTY 1.000 0.362 0.492 0.714 0.217
LOG_DUTY*ATLANTIC 0.362 1.000 -0.046 -0.046 -0.037
LOG_DUTY*INDIA 0.492 -0.046 1.000 -0.088 0.494
LOG_DUTY*INDONESIA 0.714 -0.046 -0.088 1.000 -0.070
EIC 0.217 -0.037 0.494 -0.070 1.000
NHM1 0.320 -0.034 -0.064 0.472 -0.051
NHM2 0.030 -0.035 -0.066 0.105 -0.052
AAA -0.027 -0.009 -0.017 -0.017 -0.013
VJSP 0.162 -0.015 -0.028 0.235 -0.023
NIVAS 0.140 -0.011 -0.020 0.199 -0.016
LOG_FREIGHT 0.187 0.116 0.182 0.042 0.286
LOG_FREIGHT_ADJ 0.060 0.146 0.084 -0.065 0.052
LOG_FREIGHT*LIGHT 0.038 0.150 0.044 -0.066 0.121
LOG_FREIGHT*BULKY 0.202 -0.121 0.181 0.189 0.186
LOG_FREIGHT*ATLANTIC 0.084 -0.184 0.118 0.119 0.094
LOG_FREIGHT*INDIA 0.183 0.116 -0.068 0.221 0.062
LOG_FREIGHT*INDONESIA -0.093 0.097 0.184 -0.307 0.146
TELEGRAPH -0.314 -0.158 -0.346 -0.058 -0.275
YEAR*ATLANTIC -0.018 0.360 -0.125 -0.125 -0.099
YEAR*INDIA -0.170 -0.167 0.260 -0.319 0.202
YEAR*INDONESIA 0.181 -0.105 -0.200 0.436 -0.159
JAVA_WAR 0.217 -0.007 -0.013 0.290 -0.010
MUTINY -0.031 -0.011 -0.019 -0.020 -0.016
SLAVE 0.280 -0.014 0.138 0.262 -0.021
CIVIL_WAR -0.034 -0.003 -0.024 -0.024 -0.019
WWI*ATLANTIC -0.024 -0.008 -0.015 -0.015 -0.012
WWI*INDIA -0.072 -0.024 -0.045 -0.045 -0.036
WWI*INDONESIA 0.028 -0.018 -0.034 0.070 -0.027
LOG_RATIO1 0.187 0.057 0.267 0.010 0.550
48
Table A4-continued
NHM1 NHM2 AAA VJSP NIVAS
LOG_DUTY 0.320 0.030 -0.027 0.162 0.140
LOG_DUTY*ATLANTIC -0.034 -0.035 -0.009 -0.015 -0.011
LOG_DUTY*INDIA -0.064 -0.066 -0.017 -0.028 -0.020
LOG_DUTY*INDONESIA 0.472 0.105 -0.017 0.235 0.199
EIC -0.051 -0.052 -0.013 -0.023 -0.016
NHM1 1.000 -0.048 -0.012 -0.021 -0.015
NHM2 -0.048 1.000 -0.013 -0.022 -0.015
AAA -0.012 -0.013 1.000 -0.006 -0.004
VJSP -0.021 -0.022 -0.006 1.000 -0.007
NIVAS -0.015 -0.015 -0.004 -0.007 1.000
LOG_FREIGHT 0.143 0.089 -0.024 0.026 0.023
LOG_FREIGHT_ADJ -0.060 -0.045 -0.017 0.042 0.034
LOG_FREIGHT*LIGHT 0.039 0.028 -0.038 -0.012 -0.005
LOG_FREIGHT*BULKY 0.135 0.077 0.037 0.061 0.043
LOG_FREIGHT*ATLANTIC 0.086 0.089 -0.167 0.038 0.027
LOG_FREIGHT*INDIA 0.160 0.166 0.043 0.072 0.050
LOG_FREIGHT*INDONESIA -0.111 -0.175 0.036 -0.087 -0.057
TELEGRAPH -0.252 -0.262 0.049 0.082 0.058
YEAR*ATLANTIC -0.091 -0.094 0.141 -0.040 -0.029
YEAR*INDIA -0.231 -0.240 -0.061 -0.103 -0.073
YEAR*INDONESIA 0.307 0.323 -0.039 0.146 0.104
JAVA_WAR 0.206 -0.010 -0.003 -0.004 -0.003
MUTINY -0.015 -0.015 -0.004 -0.007 -0.005
SLAVE 0.197 -0.020 -0.005 -0.009 -0.006
CIVIL_WAR -0.017 -0.018 -0.005 -0.008 -0.006
WWI*ATLANTIC -0.011 -0.011 -0.003 -0.005 -0.004
WWI*INDIA -0.033 -0.034 -0.009 -0.015 -0.010
WWI*INDONESIA -0.025 -0.026 -0.007 0.049 -0.008
LOG_RATIO1 0.136 0.088 -0.025 -0.019 -0.054
49
Table A4-continued
LOG_FREIGHT LOG_FREIGHT_ADJ LOG_FREIGHT*LIGHT LOG_FREIGHT*BULKY LOG_FREIGHT*ATLANTIC
LOG_DUTY 0.187 0.060 0.038 0.202 0.084
LOG_DUTY*ATLANTIC 0.116 0.146 0.150 -0.121 -0.184
LOG_DUTY*INDIA 0.182 0.084 0.044 0.181 0.118
LOG_DUTY*INDONESIA 0.042 -0.065 -0.066 0.189 0.119
EIC 0.286 0.052 0.121 0.186 0.094
NHM1 0.143 -0.060 0.039 0.135 0.086
NHM2 0.089 -0.045 0.028 0.077 0.089
AAA -0.024 -0.017 -0.038 0.037 -0.167
VJSP 0.026 0.042 -0.012 0.061 0.038
NIVAS 0.023 0.034 -0.005 0.043 0.027
LOG_FREIGHT 1.000 0.936 0.862 -0.198 0.058
LOG_FREIGHT_ADJ 0.936 1.000 0.868 -0.305 0.002
LOG_FREIGHT*LIGHT 0.862 0.868 1.000 -0.667 -0.047
LOG_FREIGHT*BULKY -0.198 -0.305 -0.667 1.000 0.176
LOG_FREIGHT*ATLANTIC 0.058 0.002 -0.047 0.176 1.000
LOG_FREIGHT*INDIA 0.561 0.513 0.452 -0.050 -0.297
LOG_FREIGHT*INDONESIA 0.272 0.303 0.337 -0.253 -0.248
TELEGRAPH -0.248 -0.087 -0.052 -0.264 -0.055
YEAR*ATLANTIC 0.007 0.071 0.104 -0.190 -0.953
YEAR*INDIA 0.104 0.149 0.132 -0.103 0.428
YEAR*INDONESIA -0.129 -0.218 -0.224 0.244 0.270
JAVA_WAR 0.032 -0.010 0.010 0.028 0.018
MUTINY 0.048 0.061 0.048 -0.022 0.027
SLAVE 0.038 0.003 -0.001 0.057 0.036
CIVIL_WAR -0.015 -0.004 0.001 -0.023 -0.207
WWI*ATLANTIC 0.028 0.037 0.004 0.033 -0.076
WWI*INDIA 0.121 0.152 0.059 0.064 0.061
WWI*INDONESIA -0.004 0.013 -0.041 0.074 0.046
LOG_RATIO1 0.527 0.363 0.298 0.199 0.216
50
Table A4-continued
LOG_FREIGHT*INDIA LOG_FREIGHT*INDONESIA TELEGRAPH YEAR*ATLANTIC YEAR*INDIA
LOG_DUTY 0.183 -0.093 -0.314 -0.018 -0.170
LOG_DUTY*ATLANTIC 0.116 0.097 -0.158 0.360 -0.167
LOG_DUTY*INDIA -0.068 0.184 -0.346 -0.125 0.260
LOG_DUTY*INDONESIA 0.221 -0.307 -0.058 -0.125 -0.319
EIC 0.062 0.146 -0.275 -0.099 0.202
NHM1 0.160 -0.111 -0.252 -0.091 -0.231
NHM2 0.166 -0.175 -0.262 -0.094 -0.240
AAA 0.043 0.036 0.049 0.141 -0.061
VJSP 0.072 -0.087 0.082 -0.040 -0.103
NIVAS 0.050 -0.057 0.058 -0.029 -0.073
LOG_FREIGHT 0.561 0.272 -0.248 0.007 0.104
LOG_FREIGHT_ADJ 0.513 0.303 -0.087 0.071 0.149
LOG_FREIGHT*LIGHT 0.452 0.337 -0.052 0.104 0.132
LOG_FREIGHT*BULKY -0.050 -0.253 -0.264 -0.190 -0.103
LOG_FREIGHT*ATLANTIC -0.297 -0.248 -0.055 -0.953 0.428
LOG_FREIGHT*INDIA 1.000 -0.463 0.005 0.313 -0.698
LOG_FREIGHT*INDONESIA -0.463 1.000 -0.216 0.262 0.667
TELEGRAPH 0.005 -0.216 1.000 -0.010 -0.054
YEAR*ATLANTIC 0.313 0.262 -0.010 1.000 -0.452
YEAR*INDIA -0.698 0.667 -0.054 -0.452 1.000
YEAR*INDONESIA 0.504 -0.923 0.100 -0.285 -0.726
JAVA_WAR 0.033 -0.020 -0.052 -0.019 -0.048
MUTINY -0.010 0.042 -0.079 -0.029 0.062
SLAVE 0.013 -0.002 -0.104 -0.037 -0.008
CIVIL_WAR 0.060 0.050 -0.095 0.191 -0.087
WWI*ATLANTIC 0.038 0.032 0.044 0.125 -0.055
WWI*INDIA -0.013 0.095 0.131 -0.064 0.149
WWI*INDONESIA 0.086 -0.139 0.098 -0.048 -0.123
LOG_RATIO1 0.201 0.134 -0.475 -0.177 0.151
51
Table A4-continued
YEAR*INDONESIA JAVA_WAR MUTINY SLAVE CIVIL_WAR
LOG_DUTY 0.181 0.217 -0.031 0.280 -0.034
LOG_DUTY*ATLANTIC -0.105 -0.007 -0.011 -0.014 -0.003
LOG_DUTY*INDIA -0.200 -0.013 -0.019 0.138 -0.024
LOG_DUTY*INDONESIA 0.436 0.290 -0.020 0.262 -0.024
EIC -0.159 -0.010 -0.016 -0.021 -0.019
NHM1 0.307 0.206 -0.015 0.197 -0.017
NHM2 0.323 -0.010 -0.015 -0.020 -0.018
AAA -0.039 -0.003 -0.004 -0.005 -0.005
VJSP 0.146 -0.004 -0.007 -0.009 -0.008
NIVAS 0.104 -0.003 -0.005 -0.006 -0.006
LOG_FREIGHT -0.129 0.032 0.048 0.038 -0.015
LOG_FREIGHT_ADJ -0.218 -0.010 0.061 0.003 -0.004
LOG_FREIGHT*LIGHT -0.224 0.010 0.048 -0.001 0.001
LOG_FREIGHT*BULKY 0.244 0.028 -0.022 0.057 -0.023
LOG_FREIGHT*ATLANTIC 0.270 0.018 0.027 0.036 -0.207
LOG_FREIGHT*INDIA 0.504 0.033 -0.010 0.013 0.060
LOG_FREIGHT*INDONESIA -0.923 -0.020 0.042 -0.002 0.050
TELEGRAPH 0.100 -0.052 -0.079 -0.104 -0.095
YEAR*ATLANTIC -0.285 -0.019 -0.029 -0.037 0.191
YEAR*INDIA -0.726 -0.048 0.062 -0.008 -0.087
YEAR*INDONESIA 1.000 0.062 -0.046 0.033 -0.055
JAVA_WAR 0.062 1.000 -0.003 -0.004 -0.004
MUTINY -0.046 -0.003 1.000 -0.006 -0.006
SLAVE 0.033 -0.004 -0.006 1.000 -0.007
CIVIL_WAR -0.055 -0.004 -0.006 -0.007 1.000
WWI*ATLANTIC -0.035 -0.002 -0.004 -0.005 -0.004
WWI*INDIA -0.103 -0.007 -0.010 -0.014 -0.012
WWI*INDONESIA 0.174 -0.005 -0.008 -0.010 -0.009
LOG_RATIO1 -0.048 0.029 0.013 0.110 -0.023
52
Table A4-continued
WWI*ATLANTIC WWI*INDIA WWI*INDONESIA LOG_RATIO1
LOG_DUTY -0.024 -0.072 0.028 0.187
LOG_DUTY*ATLANTIC -0.008 -0.024 -0.018 0.057
LOG_DUTY*INDIA -0.015 -0.045 -0.034 0.267
LOG_DUTY*INDONESIA -0.015 -0.045 0.070 0.010
EIC -0.012 -0.036 -0.027 0.550
NHM1 -0.011 -0.033 -0.025 0.136
NHM2 -0.011 -0.034 -0.026 0.088
AAA -0.003 -0.009 -0.007 -0.025
VJSP -0.005 -0.015 0.049 -0.019
NIVAS -0.004 -0.010 -0.008 -0.054
LOG_FREIGHT 0.028 0.121 -0.004 0.527
LOG_FREIGHT_ADJ 0.037 0.152 0.013 0.363
LOG_FREIGHT*LIGHT 0.004 0.059 -0.041 0.298
LOG_FREIGHT*BULKY 0.033 0.064 0.074 0.199
LOG_FREIGHT*ATLANTIC -0.076 0.061 0.046 0.216
LOG_FREIGHT*INDIA 0.038 -0.013 0.086 0.201
LOG_FREIGHT*INDONESIA 0.032 0.095 -0.139 0.134
TELEGRAPH 0.044 0.131 0.098 -0.475
YEAR*ATLANTIC 0.125 -0.064 -0.048 -0.177
YEAR*INDIA -0.055 0.149 -0.123 0.151
YEAR*INDONESIA -0.035 -0.103 0.174 -0.048
JAVA_WAR -0.002 -0.007 -0.005 0.029
MUTINY -0.004 -0.010 -0.008 0.013
SLAVE -0.005 -0.014 -0.010 0.110
CIVIL_WAR -0.004 -0.012 -0.009 -0.023
WWI*ATLANTIC 1.000 -0.008 -0.006 -0.028
WWI*INDIA -0.008 1.000 -0.018 0.035
WWI*INDONESIA -0.006 -0.018 1.000 -0.002
LOG_RATIO1 -0.028 0.035 -0.002 1.000

53
Table A5
The causes of integration: panel least squares results
(1) (2) (3) (4)

PCSE PCSE PCSE PCSE
C 0.524 -1.117 0.487 0.533
(17.27)*** (-1.65)* (16.61)*** (16.88)***
LOG_DUTY 0.073 0.082 0.063
(3.34)*** (3.65)*** (2.83)***
LOG_DUTY*ATLANTIC 0.102
(2.74)***
LOG_DUTY*INDIA 0.003
(0.04)
LOG_DUTY*INDONESIA 0.082
(2.65)***
EIC 0.389 0.160 0.216 0.106
(11.75)*** (4.53)*** (6.19)*** (2.73)***
NHM1 0.112 -0.037 -0.026 -0.007
(4.80)*** (-1.12) (-1.04) (-0.25)
NHM2 0.082 -0.032 -0.030 0.005
(3.84)*** (-1.27) (-1.48) (0.20)
AAA 0.030 -0.020 0.016 0.020
(0.64) (-0.41) (0.36) (0.45)
VJSP -0.087 -0.147 -0.064 -0.053
(-2.29)** (-3.51)*** (-1.67)* (-1.39)
NIVAS -0.210 -0.292 -0.187 -0.172
(-4.06)*** (-5.14)*** (-3.63)*** (-3.30)***
LOG_FREIGHT 0.138
(14.17)***
LOG_FREIGHT_ADJ 0.130
(13.89)***
LOG_FREIGHT*LIGHT 0.094
(9.97)***
LOG_FREIGHT*BULKY 0.180
(14.46)***
LOG_FREIGHT*ATLANTIC 0.109
(8.20)***
LOG_FREIGHT*INDIA 0.175
(11.40)***
LOG_FREIGHT*INDONESIA 0.084
(8.39)***
TELEGRAPH -0.023 -0.050 -0.018 -0.014
(-1.34) (-2.25)** (-1.06) (-0.77)
YEAR*ATLANTIC 0.001
(2.75)***
54
Table A5-continued
(1) (2) (3) (4)

PCSE PCSE PCSE PCSE
YEAR*INDIA 0.000
(0.66)
YEAR*INDONESIA 0.002
(3.63)***
JAVA_WAR 0.073 0.091 0.078 0.058
(0.95) (1.14) (1.00) (0.74)
MUTINY -0.060 -0.073 -0.078 -0.084
(-0.68) (-0.83) (-0.90) (-0.96)
SLAVE 0.246 0.243 0.239 0.245
(5.78)*** (5.65)*** (5.57)*** (5.67)****
CIVIL_WAR 0.005 0.003 -0.024 0.007
(0.14) (0.09) (-0.64) (0.20)
WWI*ATLANTIC -0.084 -0.125 -0.048 -0.064
(-1.55) (-2.31)** (-0.98) (-1.22)
WWI*INDIA 0.071 0.061 0.057 0.015
(1.67)* (1.38) (1.34) (0.33)
WWI*INDONESIA 0.163 0.148 0.195 0.205
(5.38)*** (4.74)*** (6.58)*** (6.89)***
LOG_RATIO1 0.444 0.440 0.403 0.428
(17.76)*** (17.70)*** (15.79)*** (17.15)***
N 1534 1534 1534 1534

Adjusted R-squared 0.79 0.79 0.80 0.80
F 155.62*** 145.67*** 158.98*** 145.16***
LLC t-stat -33.38*** -35.42*** -33.16*** -34.20***

55
Table A6
The causes of integration: econometric analysis by trade route
Atlantic India Indonesia

PCSE/IV PCSE/IV PCSE/IV
C 0.293 0.482 0.386
(6.09)*** (8.28)*** (8.28)***
LOG_DUTY 0.087 0.033 0.104
(2.26)** (0.54) (3.24)***
EIC 0.168
(3.84)***
NHM1 0.025
(0.79)
NHM2 0.012
(0.45)
AAA 0.009
(0.20)
VJSP -0.037
(-0.97)
NIVAS -0.170
(-3.26)***
LOG_FREIGHT 0.079
(4.65)***
LOG_FREIGHT_ADJ 0.117 0.066
(5.58)*** (5.86)***
TELEGRAPH -0.021 -0.046 -0.047
(-0.97) (-1.50) (-2.08)**
JAVA_WAR 0.029
(0.36)
MUTINY -0.071
(-0.80)
SLAVE 0.330 0.110
(5.88)*** (1.77)*
CIVIL_WAR -0.014
(-0.37)
WWI -0.026 0.086 0.233
(-0.47) (1.70)* (7.75)***
LOG_RATIO1 0.545 0.484 0.348
(10.29)*** (15.05)*** (8.64)***
N 231 821 482

Adjusted R-squared 0.75 0.80 0.76
F 79.35*** 140.06*** 81.17***
LLC t-stat -16.81*** -27.33*** -22.33***
56
Table A6-continued
Atlantic India Indonesia

PCSE/IV PCSE/IV PCSE/IV
Wooldridge exogeneity test chi-squared stat 3.16* 29.91*** 19.37***
Wooldridge exogeneity test F stat 3.30* 30.48*** 20.15***
Adjusted R-squared first stage 0.93 0.98 0.93
Partial R-squared first stage 0.79 0.70 0.83
F first stage 973.77*** 1366.66*** 1306.13***

57
Table A7
The welfare effect of price convergence: results by product
1 2 3 1 2 3
100 per 100 per
Equitable 100 per cent Equitable 100 per cent
cent cent
division consumers division consumers
producers producers
1870-1913 1816-1913
India
Cotton 0.00 0.00 Cotton 0.54 1.33

Indigo 0.00 0.00 Indigo 0.01 0.02
Jute 0.08 0.30 Jute 0.56 1.36
Linseed 0.00 0.02 Linseed 0.05 0.14
Rice 1.31 4.29 Rice 1.07 3.73
Tea 0.02 0.06 Tea 0.09 0.19
Wheat 0.36 1.08 Wheat 0.55 1.59
Total 1.77 5.74 Total 2.86 8.36
Indonesia 0.43 0.89 Indonesia 0.6 1.28
United States
Cotton 0.00 0.01 Cotton 0.14 0.32

Wheat 0.03 0.08 Wheat 0.11 0.36
Total 0.03 0.08 Total 0.25 0.68
United Kindgom
Coffee 0.01 0.02 Coffee 0.02 0.05

Cotton 0.01 0.02 Cotton 0.40 0.86
Indigo 0.00 0.00 Indigo 0.00 0.00
Jute 0.06 0.13 Jute 0.11 0.25
Linseed 0.03 0.06 Linseed 0.09 0.21
Rice 0.02 0.03 Rice 0.02 0.03
Pepper 0.00 0.00 Pepper 0.00 0.00
Sugar 0.10 0.20 Sugar 0.04 0.09
Tea 0.07 0.15 Tea 0.07 0.15
Wheat 0.22 0.47 Wheat 0.60 1.40
Total 0.51 1.10 Total 1.35 3.05

58
Appendix B: data sources
1. Prices
Coffee. Korthals Altes (1994) reports two prices only for Indonesia: the NHM net series (1833-1922, series
n.05) and the average price of exports (1833-1913, series n.01). Here, as in other cases, given the choice,
we avoided relying on NHM series because according to Korthals Altes (1994: 73), the net proceeds of
sales, exclusive of costs (freights, sales commissions, registration duties etc.), “may [only] broadly be
compared with the free on board prices in the Netherlands-Indies”. This statement is somewhat vague and
one might suspect that the delay between purchase and sale add further noise. The NHM series for coffee in
particular exhibits significant differences with the one we used in the analysis. All prices from Korthals Altes
(1978, 1994) are yearly means (with the only exception of the tin series, cf. below) and, except for tea,
whose prices are quoted in Dutch gulden per 0.5 kg, are in Dutch gulden per quintal. The average price of
export is related to the average price in Rotterdam for “good ordinary Java” (1830-1913, series n.07). The
resulting ratio is thus not adjusted for quality changes.
Cotton, Calcutta-London. The prices in Calcutta are from the Bengal Commercial Reports (henceforth BCR),
and have been converted from rupees per maund into shillings per lb. All the prices from this source are
drawn from yearly issues from 1795/96 to 1845/46 and have been adjusted from fiscal to calendar years; the
computations are based on averages between highest and lowest yearly prices (monthly for 1795/96 only).
Specifically, the prices used are of "Naugpore" in 1795/96 and 1797/98, “cotton” in 1796/97, and between
1798/99 and 1828/29, and “Talloon” between 1829/30 and 1845/46. Hence, the quality is not homogeneous;
nonetheless years with overlapping series evidence small differences in price between qualities. The prices
in London compared with those in Calcutta are from Tooke and Newmarch (1928). All prices from this source
are also based on averages between highest and lowest prices, which are reported up to four times during
each year. The cotton prices are in shillings per lb and all refer to “Cotton wool, Bengal and Surat”. Thus, we
can be sure that they are prices of cotton imported from India.
Cotton, Bombay-London. Until 1922 the Bombay prices are from Prices and Wages in India (henceforth,
P&W). As with the other goods relying on this source, the prices have been drawn from various issues
(1891, 1902, 1913, 1915, 1920 and 1923) and are for selected months, usually January and July; at times,
they refer to the yearly average of the available monthly data. From 1923 the source becomes the Statistical
Abstract of British India (henceforth, SABI). Both for cotton and the other goods relying on this source, the
prices are drawn from the 1933, 1938, 1941 and 1949 issues, which report prices in selected months and
59
yearly averages based on them. In 1867-1869 and 1899-1939 the prices have been quality-adjusted to
"Dohllera fair" on the basis of "Broach", in 1870-1898 the prices refer to "Dohllera Fair". Here, as with the
other series, the quality-adjustment is made on the basis of the average of the ratios between prices of
different qualities when the series overlap. The Bombay prices have been converted into shillings per lb from
rupees per candy. The London series is all from Sauerbeck (1886 and ff.) and refers to "Fair Dohllera" in
shillings per lb. In short, the assumption of homogeneous quality within and across markets is reasonable for
this series.
Cotton, New York-Liverpool. The prices in New York in US $ per lb are for “middling Upland” and are from
Carter et al. (2006, series cc 222-223). In Liverpool the prices in pence per lb are for “middling American”
and are from Mitchell (1988: 760-761). Hence it is reasonable to assume that the quality is homogeneous
both within and between markets, for these series.
Indigo. The Calcutta prices for 1822 to 1845 are from BCR (in rupees per maund), for 1846-1910 are from
P&W (in rupees per factory maund), and for 1911-1931 are from SABI. Both series are (in rupees per factory
maund). Various qualities have been used to construct the series: 1821/22-1824/25: "Indigo, 1st sort",
1825/26-1828/9: "Indigo", 1829/30: "Indigo fine purple violet", 1830/31-1833/4: "Indigo fine purple", 1834/35-
1845/46: "Indigo purple"; 1846-1857: quality-adjusted to "Bengal, good" on basis of "good and middling",
1859-1872, 1874-1885: quality-adjusted to "Bengal, good" on basis of "good", 1886-1910: quality-adjusted to
"Bengal, good" on basis of "good, middling to good", 1873, 1911-1931: "Bengal, good". In particular, there is
a major dividing line after 1845; until that date the prices refer to indigo of high quality; henceforth to indigo of
only good quality. Nonetheless, efforts have been made to ensure that the exported quality matched the
imported one as closely as possible. Thus, the London series for 1822 to 1845 is based on monthly data
from Gayer, Rostow, and Schwartz (1953); it refers to “East Indies Indigo” and matches closely the series of
prices of “superior” East India indigo from Tooke and Newmarch (1928); the London series for 1845 to 1931
is from Sauerbeck (1886 and ff.) and refers to "Bengal, good". Hence, although the requirement of
homogenous quality within markets is only imperfectly met, the assumption that quality is homogenous
across markets is reasonable for the indigo series.
Jute. The Calcutta series has been converted from rupees per bale and has been drawn from three sources:
P&W (1844-1920), SABI (1921-1936), and International Yearbook of Agricultural Statistics (henceforth IYAS)
(1937-1938). As with all the prices drawn from the latter source, we consulted the volumes for 1930/1,
1934/5 and 1939/40; the prices are yearly averages of weekly data. Although it would have been possible to
draw from this source data back to 1927, in an effort to minimise the variety of sources used (and hence, of
60
collection methods) and to rely as much as possible on primary sources, we only used the IYAS for years not
covered by the other sources; in practice, the actual difference implied by this choice is negligible. The
quality of jute is not homogenous: "serajgunge" in 1844-1858, "picked" in 1859-1903, adjusted to "picked" on
the basis of “C.D.M.” in 1904-1921, "reds" in 1922-1931, adjusted to "reds" on the basis of “raw” in 1932-
1936, and "first marks" in 1937-1938. The London series is drawn from Sauerbeck (1886 and ff.) until 1936
and from the IYAS for 1937 and 1938. These prices are in UK £ per long ton and refer to "Good to medium"
and "first marks" jute, respectively. As there are only tiny differences in price across qualities, both within
Calcutta and London, and between them, in practice, it is as if the quality were homogenous.
Linseed. The Calcutta sources for this series are: until 1910 P&W (in rupees per bazar maund); and, for
1911 to 1938 SABI (in rupees per bazar maund). The quality is unspecified until 1858; henceforth it is as
follows: 1859-1890: "fine, bold, clean", 1891-1898: "bold", 1899-1931: adjusted to "fine, bold, clean" on the
basis of “small to medium”, and 1932-1938: adjusted to "fine, bold, clean" on the basis of “small grain, 5 per
cent, refraction”. The London series is from Sauerbeck (1886 and ff.); it does not specify the quality and is in
shillings per quarter. As there are only tiny differences in price across qualities, in practice, it can be
assumed that the quality were homogenous both within Calcutta and London, and between them.
Pepper. Korthals Altes (1994) reports export prices for “black pepper” for the period 1828-1832 (series n.31)
and two series of market quotations for the same good, without specifying the difference (series n.31 for
1833 to 1855 and n.32 from 1848 to 1939). The final series is obtained by extrapolating the series n.32 to
1832 with the series n.31. Notably, the two series are fairly well correlated when overlapping and the level is
almost identical. The market price for “black pepper” in Amsterdam (1828-1939, series n.33) is our proxy for
the European price (Korthals Altes reports also a series for “black pepper” in London 1885-1939; its
coefficient of correlation with the Amsterdam series is 0.862). The ratio is therefore not quality-adjusted.
Rapeseed. Both the Calcutta and the London series are from P&W. The quality in Calcutta is as follows:
1871-1904: "Yellow, mixed", 1905-1914: "Yellow, medium mixed, Patna 4 percent", and 1915-1921: "Brown
5 per cent"; the prices are in rupees per bazar maund until 1888 and shillings per quarter henceforth. The
quality in London is: 1871-1899: "Calcutta", and 1900-1921: "Cawnpore". The prices are in shillings per
quarter in 1871-1872 and 1874-1888; in 1873 and in 1888-1921 are in shillings per cwt. There are only tiny
differences in prices across quality and thus the assumption of homogenous quality within and across
markets is reasonable. It would have been possible to extend the series to cover the years 1930-1938 with
data from IYAS, but we decided not to since the Indian price reproduced by this source is for Karachi,
instead of Calcutta.
61
Rice, Batavia-Amsterdam. The source for Batavia is Korthals Altes (1978). The series has been quality-
adjusted to "billiton tenders" on the basis of "no. 1 quality, Batavia" for 1848 to 1862 and is "billiton tenders"
henceforth. The Amsterdam series is from van Zanden (on-line data-base
http://www.iisg.nl/hpw/prijzen19earthur.xls) and refers to "hulled Java rice" (in Dutch gulden per quintal).
Thus, only the Batavia series can be considered of homogenous quality. Nonetheless, there are only small
differences in price across qualities at Batavia, and we can be confident that the Amsterdam prices refer to
qualities imported from there.
Rice, Rangoon-London. The Rangoon prices have been drawn from P&W (until 1922), SABI (until 1932) and
IYAS (henceforth). The quality is "Ngatsain" until 1932 (prices in rupees per cwt) and "N. 2" between 1933
and 1938 (prices in rupees per 3402 kg). The London series is from Sauerbeck (1886 and ff.) for 1870-1931
("from Rangoon", prices in shillings per cwt) and IYAS for 1932-1938 ("N. 2", also in shillings per cwt). The
assumption of homogenous quality is strongly met in Rangoon until 1932 and across Rangoon and London
between 1933 and 1938. Still, there were non-negligible differences in export price across qualities in
Rangoon that are bound to introduce an element of noise before 1933.
Rubber. Prices in both Batavia and London are from Korthals Altes (1994). The Batavia series is of
homogeneous quality: "standard sheets & crepe" (series number 51: rubber, Batavia). That in London is
formed of two qualities: "standard crepe" between 1913 and 1917, and "standard quality ribbed smoked
sheet" henceforth. Nonetheless, there is no break in the level of the London series, suggesting that for
practical purposes the quality can be considered homogenous across markets. By contrast, changes in the
quality of the Indonesian series (number 53) between 1900 and 1922 would have introduced a sudden break
in the price ratios in 1912; since this is probably spurious, we decided against including these data.
Saltpetre. The Calcutta prices are from two sources: BCR between 1796 and 1845 (in rupees per maund)
and P&W from 1846 until 1849 (in rupees per factory maund). The qualities are as follows: 1795/96-1827/28:
"Aubee", 1828/29, 1834/35: quality-adjusted to "3rd sort" on basis of "2nd sort", 1829/30-1833/34, 1835/36-
1843/44: "3rd sort", 1844/45-1845/46: "unrefined", 1846: "Bengal", 1847-1849: quality-adjusted to "Bengal"
on basis of "Chupra". Although the quality is heterogeneous, the prices all refer to the lowest quality cited in
the sources in each period. The London prices also refer to poor quality saltpetre: "Rough (East Indies)"
between 1796 and 1850, and "East India, Rough" between 1851 and 1853. Hence it is reasonable to expect
little noise introduced by differences in quality for this price ratios series. The sources for London are: Gayer,
62
Rostow, and Schwartz (1953) until 1850 and Tooke and Newmarch (1928) for 1851 to 1853. Both sources
report prices in shillings per cwt.
Silk, Calcutta-London. The Calcutta series is from BCR (in R per seer). The qualities are as follows: 1795/96-
1818/19, 1825/26-1828/29, 1831/32-1843/44, 1845/46, 1846-1856: "Cossimbazar", 1819/20-1825/26,
1844/45: "silk", 1829/30-1830/31: quality-adjusted to "Cossimbazar" on basis of "Radangore". Although to
some extent the quality is heterogeneous, the prices all refer to the highest quality cited by the source for
each period. The London series refers to "Bengal raw". Hence, it is not quality-adjusted; yet at Calcutta
differences in price between different qualities tend to be relatively small; therefore quality is expected to
impact only to a limited extent on the reliability of the comparison. The source of the London series is Tooke
and Newmarch (1928); the unit is shillings per lb.
Silk, Calcutta-Lyon. The Calcutta prices are from P&W and are in rupees per factory seer. The series is
formed of the following qualities: 1857-1861: quality adjusted to "Surdah" on the basis of "Cossimbazar",
1862-1877: "Surdah". This matches the quality in Lyon: “Bengal Surdah 12/16”. The source of the Lyon
series is the Bulletin des Soies et Soieries (various issues), which quotes prices in French Francs per kg.
Silk, Canton-London. The prices in Canton are from various HPP. Specifically, 1834 to 1838 and 1842 to
1846: HPP (1847b: 30-33), 1865: HPP (1865: 97), 1867: HPP (1868a: 53), 1868: HPP (1869: 39), 1869:
HPP (1870: 56-57), 1871-1872: HPP (1873: 13, 15), 1876: HPP (1877: 5), and 1877: HPP (1878: 22-23). We
compute the yearly means on the basis of the highest and the lowest prices in selected months. The prices
are in Spanish $ per picul, except in 1871 and 1872, when they are in UK £ per picul. The price series has
been quality-adjusted to “Tsatlee” as follows: 1834-1846, 1871-1872: "Tsatlee", 1847, 1855, 1856, and 1858:
extrapolated on the basis of Shangae prices of "Tsatlee", 1865-1869: quality-adjusted to "Tsatlee" on basis
of "How-kong no. 1", 1876-1877: "Tsatlee no. 4". The sources for the Shangae prices are HPP (1849: 66,
1856: 50-52, 1861: 20, 1870: 21, 1871a: 13, 1875: 158, 1877, 31-32, 1878: 15). The London prices are from
Gayer, Rostow, and Schwartz (1953) until 1850 and from Sauerbeck (1886 and ff.) henceforth. Like the
Cantonese prices, they all refer to “Tsatlee” silk; they are in shillings per lb.
Silk, China-London. The export prices of Chinese silk are computed on the basis of the yearly values (in
Haikwan taels) and quantities (in piculs) of exports reported by Hsiao (1974: 102-103). Specifically, they
refer to "Raw Silk, White, not re-reeled and not steam filature". These prices are matched with those of
“Tsatlee” in London taken from Sauerbeck (1886 and ff.). As before, these prices are in shillings per lb.
Although it would have been possible to extend the series up to 1938, we decided against it since exports of
this quality of silk were sharply falling and we lack evidence that Chinese silk was exported to the UK in
63
these years; hence, the marked disintegration that the figures would imply for 1914-1938 may well be
spurious, or, at any rate, unrepresentative. While, strictly speaking, only in London the quality can be
considered as homogeneous, that in China should be similar.
Silk, China-Lyon. The export prices of Chinese silk are the same as for the China-London series. “Tsatlee
no. 4” prices in French Francs per kg at Lyon are from the Bulletin des Soies et Soieries (various issues).
The same source reports also prices for “white” silk; using this series yields the same trend, though the level
is somewhat lower. The same remarks about quality as for China-London apply to this series.
Silk, Yokohama-Lyon. The Yokohama series is from Fujino et al. (1979: 296-297). It refers to the "Quoted
Yokohama price of silk" in Yen per kg. The Lyon series is formed of monthly data and is from the Bulletin des
Soies et Soieries (various issues). It refers to “Japan” silk quoted in French Francs per quintal. Hence,
although the import price refers to silk imported from Japan, neither the import nor the export series are
qualitatively homogenous.
Silk, Yokohama-New York. Until 1927 the source of the Yokohama prices is the same as for Yokohama-
Lyon. Henceforth, the source is IYAS; these prices are in yen per 60 kg and refer to "D grade". Silk prices in
New York refer to "Japanese best filature" or "Japanese filature, 1st" in US $ per lb and are taken from Coyle
(1926) for 1894-1914 and 1919-1923 and from the Annual Report of the Silk Association of America for
1915-1919 and 1924-1926. The source for 1927-1938 is IYAS, which reports prices of "Japan, crack, xx
(78per cent) 13/15" in US $ per lb. Hence, although the qualities should be comparable, both within and
between places, they are nevertheless diverse, and there is a break from 1927.
Sugar, Calcutta-London. The Calcutta series is from BCR (in rupees per maund) until 1845 and from P&W
(in rupees per bazar maund) henceforth. The quality is pretty homogenous: 1795/96-1819/20: "Benares",
1820/21-1828/29, 1844/5-1845/6: "Benares 1st sort", 1829/30-1843/44: "Benares 1st sort new", 1846-1856:
"Benares 1st quality". The London series is in shillings per cwt and is from Tooke and Newmarch (1928). It
refers to "East India, white"; the prices of this quality were significantly higher than those of “East India,
brown” and should be directly comparable to the Calcutta series, which also refers to high quality sugar.
Sugar, Batavia-London. For the Dutch East Indies, Korthals Altes (1994) reports four different series, the
NHM net prices 1837-1873 (series n.66), the average export price according to trade statistics 1822-1936
(series n.65), a series of prices for specific qualities in Batavia 1848-1913 (series n.62, referring to n.16 from
1848 to 1868, to n.14 1869-1894, n.15 1895-1913) and a series of “wholesale price Batavia second hand”
1913-1939 (series n.63, referring to a mix of qualities over n.16). The final series is obtained by, firstly,
adjusting the Batavia prices to a common quality for the period 1848-1913; secondly, extrapolating
64
backwards to 1837 with the NHM series and to 1822 with the series of export prices, and forward to 1939
with the “wholesale prices”. When the two series overlap, the coefficient of correlation between the baseline
series and the NHM net prices (0.794) is somewhat higher than the same series and the export prices (only
0.611). For London, Korthals Altes (1994) provides only two series, referring to generic raw sugar for the
period 1820-1845 (series n.68) and to Java sugar 1845-1939 (series n.69). Thus, the ratios seem more
accurate for the period since 1848 than for earlier years.
Tea, Calcutta-London. The Calcutta prices are from P&W and SABI (in rupees per lb). The prices are quality
adjusted to good/fair “Souchong” as follows: 1893-1910: "Good Sochoung", 1911-1922: "Fair (Cachan and
Syleth) Pekoe Souchoung", 1923-1931: quality-adjusted to "Fair (Cachan and Syleth) Pekoe Souchoung" on
basis of "Fair (Assam) Pekoe Souchong". The London prices are from Sauerbeck (1886 and ff.); they are in
shillings per lb and refer to “Indian good and medium”. Although it would have been possible to extend the
series backward to 1871 on the basis of the London “Congou” prices, we decided against it since the latter
tends to have a significantly lower level (about 50 per cent) than and is only imperfectly correlated (the
correlation coefficient is 0.73) with the series of Indian prices; evidently it is influenced by qualities of tea
coming from China and the upward trend detected in 1871-1893 may well have been spurious. With the
exception of “Fine Pekoe”, which is consistently and significantly higher than the others, all quoted prices in
Calcutta are similar. Hence, the matching of medium/good Indian qualities implies that quality is not
expected to be a major issue for these ratios.
Tea, Canton-England. Both the Canton and the England series are drawn from the same sources: HPP
(1829, 1831,1833). The export and import prices are computed on the basis of the yearly “prime cost” and
“sale amount” (in UK £), respectively, and quantities (in lb). The estimated prices are then adjusted form
fiscal to calendar years. Although the quality is mixed at both ends, since all these figures refer to tea
imported and sold at auctions by the East India Company, we expect the quality mix to be similar in the
same year (though not necessarily across years).
Tea, Canton-London. The sources for the Canton prices are as follows: MacGregor (1850: 64): 1818/19 (in
taels per picul), 1829 (in shillings per lb), 1831/32 (in taels per picul) and 1833/4 (in taels per picul), HPP
(1824: 5): 1819/20-1822/23 (in UK £ per lb), HPP (1830: 1072-1073): 1823/24-1828/29, 1830/31 (in shillings
per lb), HPP (1847b: 30-33, 494): 1832, 1834-1838, 1842-1846 (selected days, in taels per picul), HPP
(1868a: 43): 1867 (in taels per picul), HPP (1869: 39): 1868 (eight quotes, in taels per picul), HPP (1870: 56-
57): 1869 (monthly data, in taels per picul), HPP (1879: 13, 15): 1871-1872 (in UK £ per picul), HPP (1878:
23): 1877 (in taels per picul). The prices have been quality-adjusted to “Congou” thus: 1819-1843, 1845-
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1846, 1871-1872: "Congou", 1844: quality-adjusted to "Congou" on basis of "Congou, new", 1855-1858,
1875-1876: extrapolated on basis of prices of "Congou" in Shangai, 1867-1869: quality-adjusted to "Congou"
on basis of "Orange Pekoe, scented", 1877: "Mok-Lei". The sources of the Shangae prices are: HPP (1856:
31-32, 1857: 50-52, 1861: 20, 1877: 31-32, 1879: 10). The sources for the London series are Gayer,
Rostow, and Schwartz (1953) until 1846 and Sauerbeck (1886 and ff.) henceforth 1819-1846 (both in pence
per lb); their qualities are "Middling (Congou)", 1855-1877: quality-adjusted to "Middling (Congou)", on basis
of "Congou, common". In short, the assumptions of homogeneous quality within and across markets are
reasonable in this case.
Tea, Batavia-Amsterdam. Both series are for Korthals Altes (1994). Although the qualities are mixed at both
ends, the Amsterdam price refers to tea imported from Java and years with quality-specific prices evidence
only tiny differences in price, either between themselves or as compared to the average. Hence, quality
heterogeneity is not expected to significantly affect the reliability of the series.
Tin. Korthals Altes (1994) provides a series of export prices, from official statistics (1823-1936, series n.82),
a net NHM series (series n.84, 1839-1920) and two market quotation, a series called “tin from Belitung”,
traded in Batavia (1862-1913 series n. 81), and a series for “tin in Singapore‟, allegedly net of transport costs
(1913-1939, series n.83). European markets are represented by a series of prices of “East Indian tin” in
Amsterdam from Posthumus (1840-1914, series n.87) and two series for London, one for “Straits” – i.e.
Malayan- tin from Sauerbeck (1886 and ff.) and another from the average sales in all the market as reported
by the Tin Bulletin (1871-1940 series n. 89). Quality is clearly a decisive factor in determining price, and to
mitigate this issue only the “tin from Beilitung”, adjusting it from fiscal years (ending April 30st) to calendar
years, and “East Indian tin” Amsterdam series have been used.
Wheat, Calcutta-London. The prices in Calcutta are from P&W and SABI (in rupees per bazar maund). The
quality can be considered as homogeneous, given that it has been adjusted to “doodiah” thus: 1861-1922:
"doodiah", 1923-1931: quality-adjusted to "doodiah" on the basis of "club, no. 2". This remark, however, does
not apply to the London prices, whose source is the same as for New York-London ratios.
Wheat, New York-London. The prices series in New York and London 1800-1913 have been kindly provided
by David Jacks (Jacks, 2005). For the post-war period, the prices in New York 1924-1937 are from the
Statistisches Jarhbuch (1939 issue) and in London from the Journal of Wheat Studies ad annum (originally
from IYAS) – both in dollars per quintal. Unfortunately, none of these sources allow controlling for quality
differentials. The quality-adjusted series by Persson (2004), however, covers only the period 1850-1900 and
are converted in gold (rather than paper) dollars from 1862 to 1878. The ratio is similar to that yielded by
66
Jacks’ data (0.96) and the two series are co-integrated at 2 per cent; the coefficient of correlation for the
whole period is 0.565 and for 1878-1900 is 0.872.
Weight conversion rates. 1 bazar maund=82.286 lb (from P&W), 1 bale=400 lb (from P&W), 1 candy=784 lb
(from SABI), 1 cwt=112 lb, 1 factory maund=74.67 lb (from P&W), 1 factory seer=1.86 lb (from P&W), 1
maund=82 lb (from P&W), 1 picul=133.3333 lb (from Hsiao, 1974: 297), 1 lb=0.4536 kg (from IYAS), 1
quarter=416 lb (from P&W) and 1 seer=2.05 lb (from Chakrabarti, 2004: 14).
Exchange rates. US $ into British £: Carter et al.’s (2006) series for 1800-1913 and Global Financial Data (at
http://www.globalfinancialdata.com/, henceforth GFD) for 1914-1939. Indian rupees (Sicca rupees until
1835) to British £: 1797-1801: BCR (1795-1802 and 1796-1802 volumes, adjusted from financial to calendar
years); 1802-1818: interpolated; 1819-1843: Denzel (2010: 500); 1844 to 1922: P&W (1891, 1902, 1920 and
1923 issues, selected months); 1912 to 1938: SABI (1922, 1933, 1938, 1941 and 1948 issues, yearly
averages of monthly data). French francs into UK £ (1857-1877) and Italian £ into US $ (1894-1897): GFD.
Spanish $ into British £ at Canton: 1834-1838: Denzel (2010:517-518), 1842-1844, 1867-1868, 1876-1877:
interpolated; 1845: HPP (1847a: 18); 1846: HPP (1848a: 12); 1865: HPP (1865: 105), 1869: HPP (1870: 47).
Spanish $ into British £ at Shangae: 1844, 1846: interpolated, 1845: HPP (1847a: 75), 1855-1856:
extrapolated on the basis of exchange rates of Sahangae taels into UK £ reported in HPP (1856: 18, 45).
Canton tael into UK £: 1832, 1834, 1835, 1838, 1842, 1843, 1844, 1846, and 1877: interpolated, 1836: HPP
(1847b: 38); 1845, and 1869: extrapolated on the basis of exchange rates of Spanish $ into UK £ at Canton
reported in HPP (1847a: 18) and HPP (1871a: 147), 1867: HPP (1868a: 178), 1876: (HPP, 1877: 2).
Shangae tael into UK £: 1855 and 1856: HPP (1856: 18, 45), 1858: HPP (1861: 20), 1875: interpolated,
1876: HPP (1878: 13), 1877: HPP (1879: 8). Chinese Haikwan taels in US $, UK £ and French francs
between 1874 and 1932 and Chinese $ in US $ and UK £ from 1933 are from Hsiao (1974: 190-192).
Japanese yen in US $ (1893-1938) and French Francs (1893-1914) are from Statistics Bureau (1988: 104-
107) (averages of highest and lowest yearly values).
2. Duties
Atlantic. The wheat import duties in the UK until 1868 are from Sharp (2010). They are in shillings per
quarter, except for 1815-1816 and 1819-1824 when importing wheat was allowed only at selected times, and
thus duty rates are not directly comparable with those in other years. For the purpose of the analysis this are
assumed to be 200 per cent of the export price, so as to capture unusually high barriers to trade. After being
abolished from 1869, import duties on non-imperial wheat were revived by the UK government from 1932.
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For these years we relied on various issues of the Annual Statement of Trade of the United Kingdom of
Foreign Countries and British Possessions (henceforth ASTUK), which report yearly values of non-imperial
imports and revenues from tariffs on them, yielding a duty of 2 shillings per quarter. Import duties on cotton
are from Tooke and Newmarch (1928); they refer to cotton from Georgia and are in shilling per 100 lb,
except for 1821-1831, when they are quoted as six per cent of the sale price.
India. Banerjea (1922) reports export duties on cotton, indigo, jute, linseed, rapeseed, rice, sugar, silk, tea
and wheat from 1800 to 1920. At times they are in rupees or anna per maund or seer; usually, however, they
are quoted as a percentage of the export price; until the 1843 they varied across presidencies. We assumed
that: duties did not change between 1796 and 1800, and exports remained duty-free between 1921 and
1938. Although such assumptions may introduce some noise, in India export duties were of a fiscal nature
and thus they were small; on average, the duty factor was about only 5 per cent, when positive; hence, the
assumptions are not expected to significantly harm the precision of the analysis. Import duties were usually
more substantial than export duties; those on Indian cotton (in shillings per 100 lb, except for 1823-1827,
when the duty was 6 per cent of the sale price), indigo (in shillings per 100 lb), saltpetre (in shillings per cwt)
and silk (in shillings per lb) are from Tooke and Newmarch (1928). As some of the figures reported by this
source for sugar are un-plausibly high, the duty rates on sugar are drawn from HPP (1851: 4-5, 1868b: 4),
where they are reported in UK £ per cwt, distinguishing by origin and quality; we assumed that duty rates in
1796-1799 were the same as in 1800-1802. Finally the import duties on wheat before they were abolished in
1869 are from Sharp (2010), as before.
Indonesia. Between 1830 and 1873 Korthals Altes (1991) reports export duties only on coffee and sugar,
differentiated by destination/flag. Table 8a reports percentage ad valorem duties for three cases a) Dutch
flag Dutch port, b) Dutch flag foreign port; c) foreign flag foreign port. We selected the destination according
to the European series and assumed Dutch flag. Duties applied only on exports on private account, and not
to export on government account. Thus, we assumed that until 1868 they applied to Java to London, but not
Java to Rotterdam, which should have been a NHM monopoly. After 1874, in table 8b, Korthals Altes (1991)
reports gross revenues for coffee, rubber, sugar and tin. The implicit duty is derived as revenue/exports on
private account for coffee and tin, and to total export for sugar and rubber, since the source does not provide
series for trade on private account in these cases. Apparently, there were no duties on rice and pepper,
while the duties on coffee and sugar were abolished in 1898 and 1902, respectively. The duty on tin is
reported until 1930; that on rubber until 1938. Interpolation was used for rubber for 1931-1933, sugar for
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1888-1893 and tin for 1869-1873. As for India, the fiscal nature of the export duties implies that they were
mostly very small; again, on average about 5 per cent of the export price, when positive.
Import duties on Java sugar in the UK until 1874, when they were temporarily abolished, are from HPP
(1851: 4-5, 1868b: 4, 1871b: 2, 1874a: 2); they are in UK £ per cwt and distinguish by origin and quality of
the sugar. Between 1901 and 1938, the source is ASTUK, which reports values of imports and revenues.
Unfortunately, this source reports revenues on either refined/non refined sugar, lumping together preferential
and non-preferential duties, or full/preferential for both refined and unrefined. Thus, it is possible to estimate
either duty on all non-refined sugar or preferential duty on all sugar, but not separate series for preferential
and full duty on refined and unrefined sugar. Nonetheless, the issue is not too serious: as the great majority
of sugar imported from Java was unrefined, the implicit duty rate on unrefined sugar is a good proxy. ASTUK
is used also for computing implicit UK import duties on rubber between 1932 and 1938 (before it was duty
free).
The Netherlands abolished most import duties from 1862, but revived them in 1924, to increase them in
1930. In the absence of detailed information on the evolution of duties before 1862, we assumed that tariffs
on rice, coffee, pepper and tin remained the same as in 1822; for that year they are reported by Wright
(1955: 226-229) in Dutch gulden per quintal; coffee directly imported from Batavia was exempt. The
hypothesis that duties on colonial goods remained stationary is confirmed for pepper, whose duty remained
at 1.5 Dutch gulden per quintal between 1868 and 1913, the Dutch commercial statistics (Statistiek van den
In-, Uit-en Doorvoer, henceforth SD, various issues) report. The latter source also reports import duties on
tea for 1893-1913 in Dutch gulden per quintal. For the inter-war years we relied on Bacon and Schloemer
(1940), who reports changes in duties on pepper (as a percentage of the sale price) and on tea (in Dutch
gulden per quintal).
3. Freights
Atlantic. There are at least eight available series of freights for transport of wheat across the Atlantic, from six
works, by five different authors i) North (1958) freight factor for American (East Coast), 1826-1913, which
can be transformed back into shilling/quarter by multiplying by the Gazette price (Mitchell 1988), which North
used as denominator; ii) Harley’s (1988) “New York grain series”, for 1855-1872, presumably in cents/bushel;
iii) Shah-Williamson’s (2004) indexes (1884=1) of freights from East North America, 1869-1938 and from the
Gulf Coast 1884-1939; iv) Persson (2004) freights from Liverpool to London, 1850-1900 in shillings/quarter;
v) Klovland’s (2006) series of freights from New York to London or Liverpool, 1848-1861 in pence/bushel; vi)
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Harley’s (2008) rates for “Cork for order” (i.e. for specialized tramp shipping) for 1863-1908 and for “New
York Liverpool berth” (i.e. for transport as supplementary cargo in ships carrying live animals or frozen meat)
for 1868-1913. Table B1 reports the coefficients of correlation among the five most important (in terms of
length and representativeness) series, by North, Persson, Harley (1 stands for “Cork for order” and 2 for
liner) and Shah-Williamson (1 stands for East Coast, 2 for the Gulf).
Table B1
Correlation coefficients between Atlantic freights for wheat
North Harley 1 Harley 2 Persson Shah-W 1

North
Harley 1 0.952
Harley 2 0.920 0.968
Persson 0.932 0.935 0.988
Shah-W 1 0.761 0.760 0.747 0.672
Shah-W 2 0.778 0.830 0.717 0.671 0.526
Sources: see the text
The coefficients of correlation between the series by North, Harley and Persson are quite high, and thus
ultimately the choice of any of them would not affect the long-term trends. However, the levels differ hugely,
as the transport by liners cost about half: the average ratio of Harley 1 to Harley 2 is 0.60 (DS 0.15), to
Persson is 0.44 (DS 0.05) and to North is 0.51 (DS 0.07). Thus, any change in the market share of liners
would affect the average freight. Although data are very scarce, the anecdotal evidence suggests a sharp
increase in that share since in the 1880s, up to about 60-70 per cent in the mid-1890s (Harley 2008). To
capture this effect, the final series of freights to 1913 is a weighted average of the series of tramp freight by
North and of liners rates by Harley, assuming the weight of the latter to have increased from 1 per cent in
1860 to 10 per cent in 1880, and to 66 per cent in 1890. The tramp freights are taken from North (1958),
which extends back to 1832, with a ten years break from 1833 to 1842. In those years, and in the years
1814-1832, the series is interpolated, faute de mieux, with the series of overall freight by North (1968). Last
but not least, the series is extrapolated forward to 1939 with Shah-Williamson (2004) East Coast grain index.
The published evidence on freights for cotton is decidedly less abundant than for wheat. It includes i)
Harley’s (1988) series of tramp from Charleston (1812-1860), New Orleans (1817-1860) and New York
(1823-1860), probably in cents/lb; ii) Shah-Williamson’s (2004) index (1884=100) for Gulf cotton 1878-1910;
iii) Klovland’s (2006) series for transport of cotton from New York and New Orleans, in pence/lb; iv) North
(1965) series of freight factor (computed as freight/CIF import price) 1810-1906 One can add the index by
North (1968), which Harley reckons to cover mostly cotton (1988 p. 856) -, a statement which is buttressed
70
by the very high coefficient of correlation with Harley’s New York series when overlapping (0.92). The
starting point for building the series is Harley’s series of freights from New York, suitably extended
backwards to 1814 with his own series from Charleston. Unfortunately, there are no cotton-specific series
until 1878 and after 1911. The gaps had to be filled in with data for wheat – respectively the North (1958)
index for 1861-1877 (when there are no gaps) and the Shah-Williamson East Coast index for 1911 onwards.
China. The sources for freights from Canton to London are as follows (all in UK £ per long ton): generic
freight rates, yearly data: HPP (1824: 4): 1822-23, HPP (1830: 671): 1824-1829, freight rates for tea,
monthly data: HPP (1847b: 505): 1846-1847, HPP (1855: 15): 1854, HPP (1856: 32): 1855, HPP (1857: 25):
1856, generic freight rates, selected days: the Asiatic Journal and Monthly Register for British and Foreign
India, China, and Australasia (1835, vol. 18: 128, 256, 1836, vol. 20: 185-246, 1839, vol. 28: 54, 310, vol. 30:
165, 1840, vol. 32: 351, 1842, vol. 38: 330): 1835-1836, 1838-1840, 1842. Although only in June 1846 data
for silk is also available for this route, that freight rates on silk tended to be about 1.25 times those on tea is
broadly corroborated by monthly data for Shangae-London in 1855-1858 (HPP, 1856: 32, 1857: 54, 1861:
21), which detects ratios ranging from 1.09 to 2.66 and averaging 1.63. Hence, generic freight rates can be
only imperfectly compared to product-specific freight rates. Yet, by a long shot, such noise falls short of
accounting for the 71 per cent downward level shift in nominal freights observed in the aftermath of the end
of the monopoly of the East India Company in 1833.
India. The Indian freights have been constructed drawing on a range of sources (unless otherwise specified
the freight rates are in UK £ per long ton, equal to 2240 lb, and the data is yearly): BCR: generic freight rates
from Calcutta to London in 1795/96 to 1801/1802, HPP (1810a: 4-5): generic freight rates from India to
England for 1798-1809, HPP (1810b: 1-4): generic freight rates from Calcutta to London in 1803-1805 and
from Bombay to London in 1806, HPP (1814: 88-89): generic freight rates from India to England in 1813,
HPP (1821a: 28): generic freight rates from India to England in 1816 and 1821, the Asiatic Journal and
Monthly Register for British India and its Dependencies (1817, vol. 4: 541, 1819, vol. 8: 308, 501, 1820, vol.
9: 90, 189, 309, 509, 625, 1821, vol. 11: 389, 1822, vol. 14: 607, 1823, vol. 15: 419, 533, 1825, vol. 19: 179,
vol. 20: 453, 1828, vol. 25: 511, 1829, vol. 27: 239, 372, vol. 28: 104, 221, 354, 488, 602, 623, vol. 29: 344,
475, 734): generic freight rates (mostly selected days) for: India-England (1817), Bombay-London (1819,
1828, 1829) and Calcutta-London (1819, 1820, 1822-1825, 1827-1829), the Asiatic Journal and Monthly
Register for British and Foreign India, China, and Australasia (1830, vol. 1: 32, 37, 103, 155, 161, 234, 239,
vol. 2: 32, 37, 98, 159, 220, 1831, vol. 4: 36, 102, 105, 145, 161, 221, vol. 5: 35, 39, 88, 144, 1832, vol. 8:
39, 49, 53, 110, 158, vol. 9: 35, 39, 94, 145, 149, 192, 1833, vol. 10: 46, 79, 123, 156, vol. 11: 38, vol. 12:
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20, 27, 112, 116, 237, 240, 1834, vol. 11: 39, 118, 122, 203, 269, 272, vol. 15: 100, 172, 234, 1835, vol. 16:
65, 136, 144, 213, 270, vol. 18: 32, 36, 127, 188, 243, 250, 255-256, 1836, vol. 20: 46, 53, 105, 112, vol. 21:
37, 163, 188, 1837, vol. 24: 105, 207, 281, 1838, vol. 25: 44, 179, 297, vol. 26: 44, 52, 104, 248, 1839, vol.
28: 52, 153-154, 233, 309, vol. 29: 62, 73, 306, 316, vol. 30: 49, 52, 72, 155, 164, 338, 354, 1840, vol. 31:
73-74, 83, 186, 255, 397, vol. 32: 60, 70, 178, vol. 33: 75, 147, 149, 238, 311, 373, 1841, vol. 34: 60, 64,
1842, vol. 37: 167, vol. 39: 312, 1843, vol. 40: 69, 81, 146, 159, 325, 428): generic freight rates (selected
days) for: Bombay-London (1829-1843) and Calcutta-London (1829-1835), freight rates (selected days) for
Calcutta-London for: cotton (1836, 1839, 1842), indigo (1831, 1835-1842), jute (1837, 1839-1842), linseed
(1835-1836, 1839), rice (1835-1842), saltpetre (1835-1842), silk (1831, 1835-1842), and sugar (1835-1842),
Statistics of British India , Part II Commercial, 1909 and 1912 issues, freight rates in selected months for:
Bombay-London: wheat (1887-1911), Bombay-Liverpool: cotton (1872-1911), Calcutta-London: jute (1872,
1874-1911), linseed (1871-1911), rice (1871-1911), tea (1871-1911), and wheat (1871-1911), Shah-and
Williamson (2004): freight index (1884=1) for grain (1869-1917, 1919-1938) and lighter commodities (1871-
1873, 1879-1920) from Calcutta to London, Jacks (on-line data-base
http://www.sfu.ca/~djacks/data/publications/index.html, accessed 10 October 2010): freight rates (in pence
per long ton) for jute between Calcutta and London (1871-1873, 1879-1913) and rice between Rangoon and
London (1869-1913), Klovland (2006): generic freight rates (in shillings per long ton) for Bombay-London
(1872-1913) and Calcutta-London (1849-1861).
Whenever there was an overlap, primary sources have been preferred to secondary ones. The estimation
proceeded as follows. Firstly, a Calcutta general freight rate was constructed extrapolating on the basis of
India-England (1802, 1806-1809, 1813, 1816-1817, 1821), indigo (1836-1842), Bombay-London (1843), the
grain index (1869-1871, 1912-1917, 1919-1938), wheat (1872-1911), and the index for lighter commodities
(1918); interpolation was used for 1810-1812, 1814-1815, 1818, 1826, 1844-1848, and 1862-1868.
Secondly, to exploit the available information on differential trends across goods, whenever possible, the
indexes were used to extrapolate the trend of product-specific freight rates, using the lighter commodities
index for cotton, indigo, and tea. Thirdly, for the other missing years, the Calcutta-London general series was
used, assuming that the freight rate for silk between Calcutta and Lyon was the same as for Calcutta-
London, and that for rapeseed was the same as for linseed. The following normalising rates obtained: 1
(India-England, general/Calcutta-London, general), 1.30 (Calcutta-London, indigo/general and silk/general),
1.03 (Calcutta-London, saltpetre/general), 1.07(Calcutta-London, sugar/general), 0.88 (Calcutta-London,
jute/general), 1.17 (Calcutta-London, linseed/general), 1.02 (Calcutta-London, cotton/general), 0.97

72
(Calcutta-London, wheat/general), 0.83 (general, Calcutta-London/general Bombay-London), and 1.18
(cotton, Bombay-London/general, Calcutta-London). The sizes of these normalising rates suggest a
relatively small noise introduced by the use of the general freight rates to estimate product-specific rates:
freight rates tended to be quite close across products.
Indonesia. Korthals Altes (1994) reports a generic freight index (1912=100) for 1823-1938, as well as
specific freight rates in Dutch gulden per quintal for sugar for 1832-1929 (with gaps in 1874-1875, 1913 and
1926) and for coffee for 1870-1931 (with a gap in 1913). On the basis of this data, product-specific freight
rates have been extrapolated following two principles. Firstly, freight rates tend to increase with the value to
bulk ratio. Accordingly, coffee freight rates are used to estimate those for rubber, tea and tin; sugar freight
rates are used to estimate the levels for pepper; the levels of rice freight rates are also estimated on the
basis of those for sugar, but they are normalised with the average ratio between freight rates on sugar and
wheat from Calcutta to London between 1869 and 1871 (0.873). Secondly, the trend depends on the extent
to which the NHM enjoyed a monopoly in the transport of the product. Thus, for sugar, both the series
referring to the transport to the Netherlands (“homeward”) on behalf of the NHM (series n. 02 for 1832-1870
and n.03 for 1868-1876) detect a sudden drop in 1869, when the level became close to that of the “Java-UK”
series (1869-1929, series n. 04). By contrast, the generic freight index, which refers also to goods whose
production was not managed by state monopolies, and therefore with a looser connection to the national
trading company, detects a more gradual fall than for sugar from the mid-1850s. Accordingly, until 1869, the
sugar series is used to extrapolate trends for coffee, which was under the cultivation system, and tin, whose
trade was carried out solely by the NHM; the generic freight index is used to estimate trends for rice and
pepper, as the latter ceased being under the cultivation system from 1863 and even before then was not as
central to it as sugar and coffee. To minimise discontinuities, the sugar series has been constructed by using
series n. 02 until 1868 and n. 04 from 1869 onwards. The remaining gaps were filled in by extrapolating from
the generic freight index.
4. Quantities
Atlantic. Until 1853 the sources for cotton are: HPP (1809: 1, 1848b:2, 1854a: 255). These report continuous
imports in the UK from the US of “cotton wool” in lb from 1806, but with a hole in 1809-1814. The sources for
wheat are: HPP (1827a: 9, 1827b: 2-3, 1832: 2-5, 1843a: 59, 64, 1844: 6, 1847c: 8, 1854a: 4). These report
continuous imports in the UK from the US of “wheat”, “wheat meal and flour” or “wheat and wheat flour” in
73
quarters since 1800. From 1854, our source is ASTUK, for both “raw cotton” (in cwt or centals of 100 lb) and
“wheat” (in cwt). In both cases, the series of exports from the US to the UK are without holes.
Far East. Continuous series of data on silk exports from China to the UK in lb from 1786 until 1858 can be
found in HPP (1806: 3, 1818, 1819, 1820, 1821b: 368-369, 1823: 6-7, 1828:24, 1829: 38, 47, 1840: 128-142,
1859: 7). Continuous series of data on tea exports from China to the UK in lb from 1792 until 1858 can be
found in HPP (1813: 4, 1818, 1820, 1821b: 368-369, 1823: 6-7, 1828: 24, 1829: 38, 47, 1831: 10, 18, 1833:
16, 19, 1840: 128-142, 1859: 7). ASTUK reports tea and silk exports from China to the UK in lb until 1913,
with holes in 1910 and 1911. The series resumes in 1919, but only in 1920 more data is published. The data
therefore suggests that after 1913 trade in these goods between China and the UK ceased, or at any rate
became sluggish. Although we did not collect data on French imports of silk from China and Japan, there is
little doubt that trade was taking place between 1874 and 1914, when China and increasingly Japan were
major players in the world silk market and Lyon was the main trading centre for silk in Europe. Continuous
data on Japanese silk exports to the US in thousands of lb from 1892 to 1937 is published by Fujino et al.
(1979: 308-309).
India. Continuous exports into the UK of cotton wool (in lb) for 1792-1848 with gaps only in 1812 and 1813
are documented in HPP (1813: 2, 1827c: 16, 1828: 4, 1840: 47, 1843b: 16, 1847d: 12, 1848b: 4, 1850: 4).
Continuous data on exports of Indian indigo into the UK in lb from 1785 until 1857, with just one hole in 1813,
can be found in HPP (1813, 1818, 1820, 1821b: 368-369, 1823: 6-7, 1827c: 15, 1827d: 2, 1828: 24, 1832:
19, 1833: 5-18, 1836: 2, 1840: 42, 1847d: 10, 1848c: 3, 1850: 3, 1854b: 5, 1858: 5). Continuous data on
exports of jute from Bengal (in cwt) between 1828/1829 to 1872/73 can be found in HPP (1874b: 63-65).
Although the source usually does not specify the destination, the figures for the US and France are very
small in comparison to the total, suggesting that the great bulk of these exports was destined to the UK. This
is also confirmed by ASTUK data from 1855 (cf. below). Continuous data on exports to the UK of linseed and
flaxseed in quarters for 1844-1857 were found in HPP (1854c: 4-5, 1858: 6). Continuous data on exports to
the UK of saltpetre in cwt for 1792-1857, with gaps only in 1793, 1795 and 1812-1813, were found in HPP
(1813: 4, 1818, 1820, 1821b: 368-369, 1823: 6-7, 1828: 24, 1831: 19, 1833: 7, 18, 1836: 3, 1840: 42, 1847d:
11, 17, 1848c: 4, 1850: 4, 1854b: 6, 1858: 6). Continuous exports into the UK of silk (in lb) for 1786-1857 are
documented in HPP (1806: 2, 1817: 2, 1819, 1820,1821b: 368-369, 1823: 6-7, 1828: 24, 1829: 39, 1840: 42,
1847d: 11-16, 1848c: 4, 1850: 4, 1854b: 6, 1858: 6). Continuous exports into the UK of sugar (in cwt) for
1792-1857 with gaps only in 1812 and 1813 are documented in HPP (1813: 4, 1818, 1821: 368-369, 1823:
6-7, 1820, 1828: 24, 1831: 19, 1833: 7, 18, 1840: 42, 1847d: 12, 17, 1847e, 1848c: 4, 1850: 4, 1854b: 6,
74
1858: 5-7). ASTUK reports continuous data on exports to the UK from 1855 (unless otherwise specified) to
1938 for cotton (in cwt, data from Bombay starts in 1864), indigo (in cwt), jute (in cwt or long ton), linseed (in
quarters or long tons, flax and linseed for 1855-1858, 1871 ff.), rapeseed (in quarters or long ton), rice (in
cwt, data from Burma starts in 1871), tea (in lb) and wheat (in cwt or quarter, the data starts in 1856, but
becomes continuous, with gaps only in 1932 and 1933, from 1871). Finally, data on French imports of Indian
raw silk in kg for 1857-1877 (with gaps only in 1861-1862) can be found in Tableau Général du Commerce
de la France avec ses Colonies et les Pussances Ètrangérs (various issues).
Indonesia. De Bruijn Kops (1857: 132-137, 166-169, 186-190, 198-201) documents continuous exports of
coffee, pepper and tin from Java and Madura to the Netherlands (in pikols of 67.7613 kg) for 1825 to 1856.
The same source reports data on exports of sugar to the UK (also in pikols) for the same years, but with
gaps from 1826 to 1832. SD reports data on Dutch imports from the Dutch East Indies (in ponds of 1 kg)
from 1846 for coffee, pepper, rice, tea and tin; in our years the only gaps are found in 1871, 1881, 1891,
1898, 1913, and for pepper in in 1917 and 1918. Continuous data on exports of rice from Java to the
Netherlands (in 1000s tons) between 1827 and 1916 can be found also in Korthals Altes (1978). ASTUK
reports data on imports of Java sugar into the UK (in cwt) from 1855, with gaps in 1864-1867, 1902 and
1936 and on UK imports of rubber from the Dutch East Indies (in centals of 100 lb) between 1913 and 1934,
with just one gap in 1918.
5. Welfare analysis
The parameter α (Formula 3) is the share of the i-th product on total GDP. The numerator should be the
value added (VA), but all sources report the gross output, inclusive of expenditures. We thus estimate the VA
by product by multiplying gross output by a country-specific ratio gross output/VA from Federico (2004). We
estimate β under the assumption that consumers buy raw materials (cotton, wheat etc.) separately from
processing and selling services. We compute the consumption as gross output less net exports, which is
equivalent to imports for goods not produced in the country (e.g. tea in the United Kingdom).
In all cases but the Dutch East Indies, we compute the welfare gains separately by product. We cover ten
products for European consumers (coffee, cotton, indigo, jute, linseed, pepper, rice, sugar, tea and wheat),
two for American producers and seven for Indian ones (coffee, cotton, indigo, jute, linseed, rice and wheat).
For the United States, we obtain data on gross output of wheat and cotton from Strauss and Bean (1940,
Tables 13 and 25) and on GDP, consumption and net exports from Carter et al. (2006, Tables Ca188, Cd1,
Ee571 and Ee575). The ratio VA/output is 0.84. We get data on gross output of wheat in the United
75
30
Kingdom, from Ojala (1952: 208-209) and we use a VA/GDP ratio of 0.66. Imports are from ASTUK (1913
issue); total consumption and GDP are from Feinstein (1972, Table T9). For India, we assume a VA/output
0.95 and we take data on gross output by product and total GDP from Sivasubramonian (2000, Tables 3 (c)
31
and 6.10), averaging two consecutive crop years and on value of trade from SABI (1913 issue).
The Dutch Indies are an exception because the estimates of national accounts by van der Eng (1992, Table
A4) divide total agricultural production in three categories, food crops, cash crops and estate crops. We use
32
the sum of the two last categories as proxy of the share of the production of exportable goods on total VA.
We assume that all products were exported and we compute the price change as an average of product-
specific changes weighted with the shares on trade in 1913.
References (appendix)
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New Trade Policies. Rome: International Institute of Agriculture.
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Statistics of the United States. Earliest Times to the Present. Millennial Edition. Vol. 3. Cambridge:
Cambridge University Press.
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Orient Longman.
Coyle, E. (1926) ‘Raw silk prices and the business cycle’, Review of Economics and Statistics, 6, pp. 21-31.
De Bruijn Kops, G. F. (1857) Statistiek van den Handel en de Scheepvaart op Java en Madura sedert 1825.
Batavia: Lange & co.
Denzel, M. A. (2010) Handbook of World Exchange Rates, 1590-1914. Farnham: Ashgate.
Federico, G. (2004) “The growth of world agricultural production, 1800-1938”, Research in Economic History,
22, pp.125-181.
Feinstein, C. H. (1972) National Income, Expenditure and Output of the United Kingdom, 1855-1965.
Cambridge: Cambridge University Press.
Fujino, S., Fujino, S. and Ono, A. (1979) ‘Textiles’, in Ohkawa, K., Miyohei, S., Mataji, U. (eds.) Estimates of
Long-term Economic Statistics of Japan since 1868. Vol. 11. Tokyo: Toyo Keizai Shinposha, pp. 296-297.
Harley, K. (1988) ‘Ocean freight rates and productivity, 1740-1913: the primacy of mechanical invention
reaffirmed’, Journal of Economic History, 48, pp. 851-876.
Harley, K. (2008) ‘Steers afloat: the North Atlantic meat trade, liner predominance and freight rates, 1870-
1913’, Journal of Economic History, 68, pp.1028-1058.
30
The production of sugar beet was irrelevant before the war.
31
The source does not report data on trade in linseed. We assume exports accounted for 15 per cent of gross output, as for rapeseed.
32
The sum covers coffee, copra, palm oil, rubber, sugar, tea, and tobacco (van der Eng, 1992: 255). Thus it includes four products we
do not consider (copra, rubber, palm oil and tobacco), but it does not consider tin and rice.
76
House of Commons Parliamentary Papers (1806) An account of the quantity and value of raw and thrown
silk imported into, and exported from, Great Britain, for twenty years, ending the 5th January 1806: showing
the rate and amount of duty in each year.
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of the rates and amount of duties collected thereon, in the years ending the 5th January 1807, 1808, and
1809; distinguishing each year, and the quarters of the respective years; and distinguishing the quantities
imported from the states of America, from the British colonies, from the Portoguese settlements in
America, from Asia, and the continent of Europe.
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produce of the East Indies and China, imported into, and exported from, Great Britain, in each year, from
1792 to 1811, both inclusive; specifying the quantities of the principal articles, and aggregate value thereof;
and also, distinguishing the produce of India from that of China, as far as the same can be ascertained.
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Committee of the House of Commons on petitions relating to East-India-built shipping.
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silk imported into, and exported from Great Britain from the 5th January 1806 to the 5th January 1817;
showing the rate, and amount of duty, in each year.
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also distinguishing the produce of India from that of China, as far as the same can be ascertained.
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silk imported into, and exported from Great Britain from the 5th January 1817 to the 5th January 1819;
showing the rate, and amount of duty, in each year.
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the East Indies and China, imported into, and exported from, Great Britain, for two years, ending 5th April
1820, distinguishing each year; specifying the quantities of the principal articles, and the aggregate value
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China] from the Select Committee of the House of Lords, appointed to inquire into the means of extending
and securing the foreign trade of the country, and to report to the House; together with the minutes of
evidence taken in sessions 1820 and 1821, before the said committee:-- 11 April 1821.
House of Commons Parliamentary Papers (1823) East India trade. Accounts of ships and tonnage, and of
imports and exports between Great Britain, the East Indies, and China: 1820, 1821, 1822.
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Company: 1819-1823.
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Great Britain from foreign parts; imported from Ireland; and, the average price of grains; from January 1825
to January 1827.
77
House of Commons Parliamentary Papers (1827c) East and West India trade. Five accounts, of the real and
official value of exports to the East Indies, and to the British West Indies; of imports from the East Indies, and
from the British West Indies; and of duties received.
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orders of the Honourable House of Commons, dated 26th March 1827; for accounts of the quantities of
indigo, cochineal, lac lake and lac dye and madder, imported into Great Britain since January 1783; the
quantity re-exported, and the quantity charged with duty.
House of Commons Parliamentary Papers (1828) Accounts relating to the trade between Great Britain and
the East Indies, 1824-1828.
House of Commons Parliamentary Papers (1829) India and China trade. Papers relating to the trade with
India and China, including information respecting the consumption, prices, & c. of tea in foreign countries.
House of Commons Parliamentary Papers (1830) Appendix to the report from the select committee of the
House of Lords appointed to inquire into the present state of affairs of the East India Company, and into
the trade between Great Britain, the East Indies and China, with the minutes of evidence taken before the
committee.
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House of Commons, dated 3 February 1831; -for, a continuation (t the latest period to which they can
made up) of all the accounts relating to the trade of India and China, and to the finances of India, which were
presented to the House by His Majesty's command in the years 1829 and 1830; and also, of all such further
accounts relating to the same matters, which have been ordered by the House during the last year.
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stated in quarters, imported into Great Britain from foreign parts, in each year from 5th January 1827;
distinguishing each sort, as well as the country from whence imported, together with the average price of
each sort of grain in Great Britain, in each year.
House of Commons Parliamentary Papers (1833) East India Company. (India and China trade.) Return to an
order of the Honourable House of Commons, dated 3 April 1833; -for, continuation to the latest period to
which they can be made up, of all accounts relating to the trade of India and China, and to the finances of
India, which were presented to this House, by His Majesty's command, in the years 1829 and 1830; and
also, of all such other accounts relating to the same matters as have been ordered by this House during the
last two years.
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exports, customs duties, and tonnage of vessels.
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House of Commons, dated 1st April 1840. Accounts relating to imports and exports: the East Indies, China,
the British Colonies, and Great Britain; together with correspondence concerning the duties of customs, and
the cultivation of cotton, in India.
House of Commons Parliamentary Papers (1843a) Corn. Returns relating to the importation and exportation
of corn, foreign and colonial; annual and weekly average price of wheat and other grain; quantities imported;
amount of duty received, & c.
House of Commons Parliamentary Papers (1843b) Exports and imports. Accounts of the exports and
imports, and of shipping employed, to and from the British West India colonies, North American colonies,
the East India Company's territories, and Ceylon.
House of Commons Parliamentary Papers (1844) Corn, &c. Accounts relative to the import, export, and
consumption of corn, grain, meal, and flour, in the year 1843, ending the 5th January 1844.--(In continuation
of Parliamentary Paper, no. 177, of sess. 1843).
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year 1846.
House of Commons Parliamentary Papers (1847b) Report from the select committee on commercial
relations with China.
78
House of Commons Parliamentary Papers (1847c) Corn. Returns relating to the import and export entries,
prices, &c., of wheat and other grain and flour.
House of Commons Parliamentary Papers (1847d) Exports and imports. Accounts of exports to and imports
from the British West India colonies, the East Indies, Ceylon, China, & c. for each of the past seven years
ending 5 January 1847; also the number of ships that have entered and cleared for the above places during
the same period.
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Kingdom of sugar, molasses, rum and coffee, from Calcutta, Madras, Ceylon and the Mauritius, for the years
1831 to 1846, both inclusive, distinguishing the quantities imported from each place in each year; similar to
return, no. 438, of the present session.
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Kong.
House of Commons Parliamentary Papers (1848b) Cotton, and cotton manufactures. Accounts of cotton
wool imported; of cotton manufactures and cotton twist, yarn or thread exported; official value of exports and
imports, & c., 1815-1847.
House of Commons Parliamentary Papers (1848c) Exports and imports. Accounts of exports to and imports
from the British West India colonies, the East Indies, Ceylon, China, & c. for the year ending 5 January 1848;
also the number of ships that have entered and cleared for the above places during the same period.
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year 1847 and 1848.
House of Commons Parliamentary Papers (1850) Exports to British West India colonies, & c.. Accounts of
exports to and imports from the British West India colonies, the East Indies, Ceylon, China, & c., for the
year ending 5 January 1849; also the number of ships that have entered and cleared for the above places
during each year of the period; together with a statement of the customs duties received in the United
Kingdom for the year ended 5 April 1849.
House of Commons Parliamentary Papers (1851) Sugar, & c. A return of the quantities of sugar imported
and retained for home consumption, with rate of duty charged, and revenue therefrom, from 1800 to 1850
inclusive. An account of the imports into the United Kingdom of sugar, molasses, rum, coffee, cocoa and
cotton, from the West Indies, British Guiana, Mauritius, and the British possessions in India, for the years
1831 to 1850;--also, the quantities of foreign sugar imported, for the same periods.
House of Commons Parliamentary Papers (1854a) Exports, imports, & c. Accounts of the quantities and
declared value of the produce and manufactures of the United Kingdom, exported to the United States and
British possessions in North America; similar accounts from each, imported into the United Kingdom;
number of tonnage of British ships cleared outwards and entered inwards, to and from the United States;
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4; Annual Statement of the Trade of the United Kingdom with Foreign Countries and British Posessions in
the year 1855, 1856.
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and imports from the British West India colonies, the East Indies, Ceylon, China, & c., for the seven
years ending 5 January 1853; also the number of ships that have entered and cleared for the above
places during each year of the period.
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train oil, seprmaceti, hemp, flax, flax seed, hides and skins, and sheep's wool, imported into the United
Kingdom during the years 1844 to 1853 inclusive, specifying the quantities imported from each country.
House of Commons Parliamentary Papers (1855) Abstract of reports on the trade of various countries and
places, for the year 1854, received by the Board of Trade (through the Foreign Office from Her Majesty's
ministers and consuls).
places, for the year 1855, received by the Board of Trade (through the Foreign Office from Her Majesty's
ministers and consuls).
79
places, for the years 1856-1857, received by the Board of Trade (through the Foreign Office) from Her
Majesty's ministers and consuls.
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from the East India Company's territories, Ceylon, and China, from 1853 to 1857 inclusive; also the
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the trade of India and China, from 1814 to 1858.
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ministers and consuls.
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Japan and Siam.
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and retained for home consumption, with rate of duty charged, and revenue therefrom, from 1844 to 1867
inclusive. An account of the imports into the United Kingdom of sugar, molasses, rum, coffee, cocoa and
cotton, from the West Indies, British Guiana, Mauritius, and the British possessions in India, for the years
1845 to 1867;--also, the quantities of foreign sugar imported, for the same periods. An account of the
quantity of refined sugar and sugar candy imported into the United Kingdom, in the years 1848 to 1867,
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account of the imports into the United Kingdom of sugar, molasses, rum, coffee, cocoa, and cotton,
from the West Indies, British Guiana, Mauritius, and the British possessions in India, for the year 1870;--also,
the quantities of foreign sugar imported, for the same period. An account of the quantity of refined sugar and
sugar candy imported into the United Kingdom in the year 1870. An account of the quantity and declared
value of British refined sugar exported from the United Kingdom in the year 1870.
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cotton, from the West Indies, British Guiana, Mauritius, and the British possessions in India, for the year
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Economic History Working Papers No: 183/2013

Asian globalizations: market integration,

Asian Globalisations: Market Integration, trade

JEL Codes: F1, F6, N7, O4.

Keywords: globalization; market integration; international trade;economic growth; Asia; nineteenth

Broadberry and Gupta, 2006; Allen et al., 2011).

conventionally named as “twilight of mercantilism”, “early globalization”, “heyday of globalization” and

2) The growth of Asian trade: a quantitative overview

States, came close to match this stellar growth.

United States World

Source: Federico and Tena (2013)

Source: Federico and Tena (2013)

meet three conditions:

be equal to transaction costs, inclusive of monopoly mark-ups.

Within markets Across

Sources: see the Appendix B

comparatively low for Japan.

purposes. We can now turn to the results.

4) The process of integration: a statistical analysis

only by technological progress in shipping.

Saltpetre Rice Rangoon-London

Sugar Jakarta London Pepper

observations for China and Japan.

Sources: see the text and the Appendix B

way before becoming really efficient.

according to the traditional periodization, as stated in the introduction (Table 5).

Sources: see the text and the Appendix B

of the pre-globalization era.

with monthly or weekly data.

Total change in the Contribution of Implicit rate of

5) The causes of convergence: transport costs and barriers to trade

a) Transport costs (freight factors)

Saltpetre Sugar Jakarta London

b) Import and export duties

Saltpetre Sugar East Indies

Sources: see the Appendix B

period. It must be supplemented by an analysis of the process of dismantling of institutional barriers,

effectively ended after the second opium war (1858).

hands and in all likelihood the market was competitive.

contribution of these causes to overall convergence

6) The causes of integration: an econometric analysis

We can sum up the implicit causation model in a regression

Log RPit=F(B, Em, Tc) 2)

varied according to the specific procedure they adopted.

ii) Sugar Dutch East Indies

Sources: see the text and the Appendix B

residuals with a Levin et al. (2002) test for panel regressions.

specification with panel corrected standard errors to address cross-section heteroskedasticity

The causes of integration: econometric analysis

(1) (2) (3) (4) (5) (6)

(1) (2) (3) (4) (5) (6)

N 1534 1534 1534 1534 1534 1534

Sources: see the text and Appendix B

sample bias is low. Turning to the results:

reflect the increasing exposure to price shocks originating in other markets.

(1) (2) (3) (4) (5) (6) (7)

EIC 33.58 43.60 57.73 70.06

Total 97.31 109.93 112.60 97.32 78.84 91.41 84.10

Δ DWL/GNPi = ΔPi| α – β | + 0.5* ΔPi [ ηαj + ε*βj] 3)