The Cost of Trade Disruptions at Different Stages of Development

McMaster University, Department of Economics Working Paper Series 2019-12

60 Pages Posted: 12 Nov 2019 Last revised: 4 May 2023

See all articles by Juan Carlos Conesa

Juan Carlos Conesa

University of Barcelona

Matt Delventhal

Claremont McKenna College - Robert Day School of Economics and Finance

Pau Pujolas

McMaster University

Gajendran Raveendranathan

McMaster University

Date Written: October 30, 2019

Abstract

We study the impact of trade disruptions at different stages of development. We
calibrate our two-country, three-sector model to Spain and the United Kingdom from
1850 to 2000, accounting for the inter-war trade collapse (IWTC) and the subsequent
catch-up by Spain. In our model, trade disruptions have a stronger impact on the
country that is catching-up (Spain), with more distance to the technological leader
(U.K.) and more trade openness. A collapse today (less distance, more openness)
similar to the IWTC (more distance, less openness) decreases the capital stock threefold
(12% instead of 4%). Furthermore, although the IWTC supported industrialization in
Spain, higher costs today would lead to deindustrialization.

Keywords: Structural Transformation, International Trade

JEL Classification: F11, F12, N10, N60

Suggested Citation

Conesa, Juan Carlos and Delventhal, Matt and Pujolas, Pau and Raveendranathan, Gajendran, The Cost of Trade Disruptions at Different Stages of Development (October 30, 2019). McMaster University, Department of Economics Working Paper Series 2019-12, Available at SSRN: https://ssrn.com/abstract=3478120 or http://dx.doi.org/10.2139/ssrn.3478120

Juan Carlos Conesa

University of Barcelona ( email )

Gran Via de les Corts Catalanes, 585
Barcelona, 08007
Spain

Matt Delventhal

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States

Pau Pujolas

McMaster University ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Gajendran Raveendranathan (Contact Author)

McMaster University ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

HOME PAGE: http://https://sites.google.com/site/gajendranraveendranathan/home

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