The Heckscher-Ohlin Model Between 1400 and 2000: When It Explained Factor Price Convergence, When It Did Not, and Why

Kevin H. O'Rourke, Jeffrey G. Williamson

NBER Working Paper No. 7411
Issued in November 1999
NBER Program(s):Development of the American Economy, International Trade and Investment

There are two contrasting views of pre-19th century trade and globalization. First, there are the world history scholars like Andre Gunder Frank who attach globalization 'big bang' significance to the dates 1492 (Christopher Colombus stumbles on the Americas in search of spices) and 1498 (Vasco da Gama makes an end run around Africa and snatches monopoly rents away from the Arab and Venetian spice traders). Such scholars are on the side of Adam Smith who believed that these were the two most important events in recorded history. Second, there is the view that the world economy was fragmented and completely de- globalized before the 19th century. This paper offers a novel way to discriminate between these two competing views and we use it to show that there is no evidence that the Ages of Discovery and Commerce had the economic impact on the global economy that world historians assign to them, while there is plenty of evidence of a very big bang in the 19th century. The test involves a close look at the connections between factor prices, commodity prices and endowments world wide.

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Document Object Identifier (DOI): 10.3386/w7411

Published: Findlay, R., L. Jonung and M. Lundahl (eds.) Bertil Ohlin: A Centennial Celebration 1899-1999. MIT Press, 2002.

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