The Last Free Traders? Interwar Trade Policy in the Netherlands and Netherlands East Indies (with Pim de Zwart and Markus Lampe)
There has still been too little detailed work on the protectionism that emerged in the wake of the Great Depression. In this paper we explore the experiences of two countries that have been largely neglected in the literature, the Netherlands and Netherlands East Indies (NEI). How did these traditionally free-trading economies respond to the Depression? We construct a detailed product-level database of tariff and non-tariff barriers to trade based on primary sources. While ad valorem tariff increases in the Netherlands were largely due to deflation, the country protected agriculture and textiles in a number of ways. The NEI quota system was largely geared to protecting Dutch exporters, but the reverse was not true: Dutch trade policies benefited the metropole more than its largest colony.
Deliberate Surrender? The Impact of Interwar Indian Protection (previous title: The Impact of Interwar Protection: Evidence from India) (with Vellore Arthi, Markus Lampe and Ashwin Nair).
What is the role of trade policy in promoting intra-Empire trade? We address the question in the context of interwar India, whose trade policies have been accused of harming British export interests. We quantify the impact of trade policy on the value and composition of Indian imports, using novel disaggregated data on both trade policies and imports for 114 commodity categories coming from 42 countries. We find that even though Indian protection lowered total imports, it substantially boosted imports from the UK. Despite the rising tariff barriers facing British ex- porters, trade diversion from other countries ensured that Indian trade policy benefited them overall.
The gravitational constant? (with David S. Jacks and Alan M. Taylor).
We introduce a new dataset on British exports at the bilateral, commodity-level from 1700 to 1899. We then pit two primary determinants of bilateral trade against one another: the trade-diminishing effects of distance versus the trade-enhancing effects of the British Empire. We find that gravity exerted its pull as early as 1700, but the distance effect then attenuated and had almost vanished by 1800. Meanwhile the empire effect peaked sometime in the late 18th century before significantly declining in value. It was only after 1950 that distance would once again exert the same influence that it has today.
The ends of 27 big depressions (with Martin Ellison and Sang Seok Lee).
How did countries recover from the Great Depression? In this paper we explore the argument that leaving the gold standard helped by boosting inflationary expectations and lowering real interest rates. We do so for a sample of 30 countries, using modern nowcasting methods and a new dataset containing more than 230,000 monthly and quarterly observations for over 1,500 variables. In those cases where the departure from gold happened on clearly defined dates, it seems clear that inflationary expectations rose in the wake of departure. IV regressions and synthetic matching techniques suggest that the relationship is causal. Data
Trade, Technology, and the Great Divergence (with Ahmed S. Rahman and Alan M. Taylor).
Why did per capita income divergence occur so dramatically during the 19th century, rather than at the outset of the Industrial Revolution? How were some countries able to reverse this trend during the globalization of the late 20th century? To answer these questions, this paper develops a trade-and-growth model that captures the key features of the Industrial Revolution and Great Divergence between a core industrializing region and a peripheral and potentially lagging region. The model includes both endogenous biased technological change and intercontinental trade. An Industrial Revolution begins as a sequence of more unskilled-labor-intensive innovations in one or both regions. We show that the subsequent co-evolution of trade and directed technologies can create a delayed but inevitable divergence in demographics and living standards—the peripheral region increasingly specializes in production that worsens its terms of trade and spurs even greater fertility increases and educational declines. Allowing for eventual technological diffusion between regions can mitigate and even reverse divergence, spurring a reversal of fortune for peripheral regions.
Kevin Hjortshøj O'Rourke 