EC120 week 17, topic 12, slide 0 Globalization, 1815−1914 : migration and capital flows Topics: Commodity market integration & international convergence International Migration: –Patterns –Explanations –Consequences International Capital Flows: –Patterns –Explanations –Consequences Convergence in the Atlantic Economies Globalisation: late 19th century to 1914

EC120 week 17, topic 12, slide 1 Commodity market integration & convergence, 1. Globalisation: `integration’ of goods & factor markets Commodity market integration and income distribution -> trade patterns -> production patterns -> returns to factors of production -> income distribution

EC120 week 17, topic 12, slide 2 Commodity market integration & convergence, 2. More precisely: –Commodity market integration increases export prices & reduces import prices. Hence: –Factors used intensively in export sectors gain; –Factors used intensively in import sectors lose. O’Rourke & Williamson (1999) : –“Commodity market integration led to factor price convergence in the late nineteenth century.”

EC120 week 17, topic 12, slide 3 International Migration: Patterns Main patterns of 19th century migration (to 1914): –Slave trade from Africa to Americas slows from 1840s –From India & China, mostly to elsewhere in Asia –From Europe to the `New World’: major expansion from 1880s to c1914

EC120 week 17, topic 12, slide 4 International Migration: Explanations Main theories: –“economic” –“structural change and response” –“innovation and diffusion” – “rural ecology” Evidence: variety of economic, social and political forces –Focus on wage-ratios between source and destination

EC120 week 17, topic 12, slide 5 International Migration: Consequences Labour markets absorbed most immigrants without difficulty –Destinations: long-term expansion with labour shortages –Concerns about assimilation & discrimination –Lower earnings for immigrants; but differences decreased with length of stay –Natives responded by shifting occupation & location Migration probably led to real wage convergence

EC120 week 17, topic 12, slide 6 International Capital Flows: Patterns Substantial increase, with fluctuations, during long 19C: –Sources: mainly Britain, also western Europe –Destination: mostly the “New World” –Portfolio investment or Foreign Direct Investment? –USA became significant source by early-20C

EC120 week 17, topic 12, slide 7 International Capital Flows: Explanations Increasingly well-integrated capital markets? –Increasing integration among developed financial centres O’Rourke & Williamson’s classification: –Technology: transport & communication –Financial innovations: improved securities’ contracts –Politics: stability fostered trust

EC120 week 17, topic 12, slide 8 International Capital Flows: Consequences Capital formation accelerated in resource-rich, settler countries Diversion of investment from source nations Greater international dependency Europeans, esp. Britain, amassed overseas wealth stock

EC120 week 17, topic 12, slide 9 Convergence in the Atlantic Economies Convergence of factor incomes in the `Atlantic economy’ O’Rourke & Williamson’s evidence, a summary: –Integration of commodity markets –Mass migrations from Europe –Capital flows from Europe

EC120 week 17, topic 12, slide 10 Globalisation: late 19th century to 1914 `North’ versus `South’ –Divergence, not convergence –The `Great Specialisation’: North exported manufactures in return for primary products –Industrialisation in North may have weakened or strengthened the `South’: mixed evidence