The Long-run Relationship Between Trade and the Growth of Cities

University Of Oregon Eugene, Eugene OR

Investigators

Abstract

Abstract Historically, cities arise and grow at important points along trade routes, and thus many of today's major cities are natural seaports or are located where their geography makes them obvious centers for trade. In contrast, there are many recent examples where new modern seaports are constructed outside of cities. This project collects a new and unique database on international trade, population, wages, and prices for ocean port cities across the world that spans back into the early 1800s. The project then examines the impact of international trade on the local population and income growth for these port cities. The project also considers if this effect varies for different areas of the world and over time. There is a critical need to understand whether the handling of major trade flows leads to improved growth of ports local economy to inform effective public policy, as many local and regional governments direct local tax dollars into improving and maintaining port infrastructure. Also, the project helps in understanding the implications of recent changes in the Arctic region that creates potentials for seaports and trade routes on the economic growth in this region. This research will examine and characterize the relationship between international trade activity and regional growth and welfare over the past two centuries. The analysis will determine not only the strength of this relationship, but the extent to which spatial or temporal factors influence this relationship. Existing datasets are at an aggregate national level and have not collected the essential data required to look at this important issue. This project undertakes a substantial collection of historical data on population, international trade, wages, and prices at the city level from a variety of historical records, such as the British and French colonial reports, covering a broad set of cities across the world back well into the 19thcentury. These data are generally not available electronically online and will be gathered through archival research. To examine the causal impact of international trade on port-city growth, the project introduces a new strategy that adapts a Bartik-type shift-share procedure that also instruments the initial share variable with interactions of shocks to international transport with geographic heterogeneity across port cities. This novel data combined with the identification strategy allow exploration of the causal relationship between trade activity and regional growth over time for both port and nearby inland cities, as well as the impact of globalization on real wages across worker types during the first era of globalization. The project, thus, has broader impacts on issues that relate to international trade, infrastructure investment and economic growth, which has implications for recent developments in the world such as how potential trade routes in the new Arctic may affect regional growth. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.