Trade Costs and the Two Globalizations: 1827-2012
Wednesday, 25 February, 2015

On Friday, February 20th, Jules Hugot from Sciences Po (Paris) gave a presentation of his job market paper "Trade Costs and the Two Globalizations: 1827-2012".

There are two main periods of the modern era in trade literature: the First Globalization of the 19th century and the post-World War II Globalization. The first period is associated with the development of transportation and communication technologies (steamship and telegraph) and pro-trade policy (like the gold standard). However, one of the main contributions of Dr. Hugot’s paper was to show that the first globalization period in Europe started in the 1840s, much earlier than the previous literature suggested.

In order to prove his suggestion, the author compiled a set of more than 1.3 million unique bilateral trade observations for a 186-year period ranging from 1827 to 2012, constructed a model based on The Jacks et al. measure of trade costs (AER PP, 2008) and showed that trade costs began to fall in Europe in the 1840s.

In the next part of his paper, the author examined border and distance effects on trade costs and found a significant increase in distance effects for both globalization periods mentioned above. This finding suggests that both globalization processes were mainly caused by the regionalization of trade.

In the end, Dr. Hugot suggested that the first globalization period could have been caused by a long period of peace from the Congress of Vienna till World War I and also the development of shipping technology in the early 19th century. He raised a question for future research to better examine these causes.