The Impact of Globalization on Pre-Industrial, Technologically Quiescent Economies

44 Pages Posted: 10 Sep 1999 Last revised: 27 Apr 2023

See all articles by Jeffrey G. Williamson

Jeffrey G. Williamson

Harvard University - Department of Economics, Laird Bell Professor of Economics, Emeritus; Honorary Fellow, University of Wisconsin - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

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Date Written: February 1999

Abstract

This paper uses a new pre-1940 Third World data base documenting real wages and relative factor prices to explore their determinants. There are three possibilities: external price shocks, factor endowment changes, and technological change. As the paper's title suggests, technological change is an unlikely explanation. The paper lays out an explicit econometric agenda for the future, although more casual empiricism suggests that external price shocks were doing most of the work, and declining-transport-cost-induced commodity price convergence in particular. Real wages in Asia, the Middle East, and Latin America never showed any signs of catching up with the European industrial leaders prior to 1914 hold their own. The ratio of wages to land rents, on the other hand, declined up to World War I and so did the ratio of wages to GDP per capita. The trend reversed thereafter. These relative factor price movements help sharpen our understanding of the sources of growth (or lack of it) in Asia and Latin America prior to 1940. They also offer strong hints about changes in income distribution there.

Suggested Citation

Williamson, Jeffrey G., The Impact of Globalization on Pre-Industrial, Technologically Quiescent Economies (February 1999). NBER Working Paper No. h0115, Available at SSRN: https://ssrn.com/abstract=171349

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