NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Globalization and the Great Divergence: Terms of Trade Booms and Volatility in the Poor Periphery 1782-1913

Jeffrey G. Williamson

NBER Working Paper No. 13841
Issued in March 2008
NBER Program(s):   DAE

W. Arthur Lewis argued that a new international economic order emerged between 1870 and 1913, and that global terms of trade forces produced rising primary product specialization and de-industrialization in the poor periphery. More recently, modern economists argue that volatility reduces growth in the poor periphery. This paper assess these de-industrialization and volatility forces between 1782 and 1913 during the Great Divergence. First, it argues that the new economic order had been firmly established by 1870, and that the transition took place in the century before, not after. Second, based on econometric evidence from 1870-1939, we know that while a terms of trade improvement raised long run growth in the rich core, it did not do so in the poor periphery. Given that the secular terms of trade boom in the poor periphery was much bigger over the century before 1870 than after, it seems plausible to infer that it might help explain the great 19th century divergence between core and periphery. Third, the boom and its de-industrialization impact was only part of the story; growth-reducing terms of trade volatility was the other. Between 1820 and 1870, terms of trade volatility was much greater in the poor periphery than the core. It was still very big after 1870, certainly far bigger than in the core. Based on econometric evidence from 1870-2000, we know that terms of trade volatility lowers long run growth in the poor periphery, and that the negative impact is big. Given that terms of trade volatility in the poor periphery was even bigger during the century before 1870, it seems plausible to infer that it also helps explain the great 19th century divergence between core and periphery.

download in pdf format
   (236 K)

email paper

This paper is available as PDF (236 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13841

Published: Williamson, Jeffrey G., 2008. "Globalization and the Great Divergence: terms of trade booms, volatility and the poor periphery, 1782?1913," European Review of Economic History, Cambridge University Press, vol. 12(03), pages 355-391, December.

Users who downloaded this paper also downloaded these:
Blattman, Hwang, and Williamson w10600 The Impact of the Terms of Trade on Economic Development in the Periphery, 1870-1939: Volatility and Secular Change
Hadass and Williamson w8188 Terms of Trade Shocks and Economic Performance 1870-1940: Prebisch and Singer Revisited
Blattman, Hwang, and Williamson w9940 The Terms of Trade and Economic Growth in the Periphery 1870-1938
Engerman and Sokoloff h0066 Factor Endowments: Institutions, and Differential Paths of Growth Among New World Economies: A View from Economic Historians of the United States
Williamson w16344 When, Where, and Why? Early Industrialization in the Poor Periphery 1870-1940
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us