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Dr. Luigi Pascali

Universitat Pompeu Fabra, Barcelona, Spain

Author: Luigi Pascali

Abstract: The period 1870-1913 marked the birth of the first era of trade globalization. What was the effect of this gigantic increase in trade on economic development? This work isolates a causality channel by exploiting the fact that the steamship produced an asymmetric change in trade distances across countries. Before its invention trade routes used to depend on wind patterns. The introduction of the steamship in the shipping industry not only reduced shipping costs and time but it did it in a disproportional way across countries and trade routes. Using this source of variation and novel trade data, I find that 1) the adoption of the steamship was the major responsible of the first wave of trade globalization 2) the effect of trade on urbanization rates and development was positive only in those countries characterized by more inclusive institutions

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