Resumen de Essays on monetary integration and the political economy of international trade, 1860-1913
In recent times, the benefits of globalization have increasingly been called into question. In particular, the support for economic globalization, i.e. the experimented surge of market integration (including monetary integration) and trade, has been waning.
However, for long time, trade has been regarded as one of the dynamic forces beyond the process of economic growth. Trade not only would provide growth opportunities directly, but also indirectly, through the channels of innovation and productivity. Even if most of the empirical studies on these issues backed this positive view, recent works found evidence for a series of backlashes deriving from trade, pointing at the increasing competition deriving from trade as the driver of increases in unemployment (Autor et al., 2013), lower wages (Ashournia et al., 2014), the developments in within-countries inequality (Goldberg and Pavcnik, 2007; Milanovic and Squire, 2007) or as the responsible for extremist political and electoral patterns (see Colantone and Stanig, forthcoming (a); Colantone and Stanig, forthcoming (b); Che et al., 2016; Autor et al., 2016). Rodrik (2018) also highlights how a “poor management” of the globalization is the possible main transmission channel.
To understand how international agreements – being these free trade agreements, currency unions or treaties of other characteristics – shape the course of trade, how trade per se evolves and expands over time, and how these agreements are formed, accepted or rejected are therefore fundamental questions to be asked.
Consequently, in this thesis, Chapter 1 deals with currency unions and their potential heterogeneous effects on trade, using the Latin Monetary Union (LMU) as a case study. The Latin Monetary Union (LMU) agreement signed in December 1865 by France, Italy, Belgium and Switzerland standardised gold and silver coinage in member countries and allowed free circulation of national coins in the Union. In his seminal study, Flandreau found no evidence of an overall positive effect of the LMU on trade. In this chapter, I estimate the effects of this currency agreement on trade. In my gravity model I explicitly take into account the changing conditions in the international environment that affected the LMU underlying economic foundations (i.e., the limits on silver coinage agreed upon in 1874) and its rules (i.e., the “liquidation clause” of 1885). I also test the existence of heterogeneous effects on bilateral trade within the LMU. In line with Flandreau, I find no significant “overall” LMU trade effects. However, I find support for the hypothesis that the LMU had significant trade effects for the period 1865–1874. These effects were nonetheless concentrated in trade flows between France and the rest of LMU members, following a hub-and-spokes structure. Moreover, I find evidence for the existence of a 1874 “LMU-wide” structural break, which affected the course of trade flows within the Union.
Chapter 2 focuses on the margins of trade, market entry and sector spillovers, using Italy (1862-1913) during the first wave of globalization as a case study. Indeed, between its Unification and WWI, Italy faced a period of increasing participation in the international economy. The growth of Italian exports was gradual, and alternately promoted by its intensive and extensive margins. In this chapter, using a disaggregated database at country-product level, I first construct the intensive and extensive margins of trade (for Italian imports and exports) and, second, within a quasi-gravity model framework, I estimate the drivers of market entry for Italian exports, with particular attention to the presence of eventual sector spillover effects. I find that the presence of “similar” exported products increased the probability of entry in the destination market (export spillovers), even if with diminishing marginal effects, potentially linked to a “saturation”/“congestion” of the market. Equally, I find that the higher the imports’ growth rate for a specific product, the more likely it was to be internationalised by Italian exporters (import spillovers).
Finally, Chapter 3 concentrates on the vote determinants of trade agreements, using the rejection of the 1905 Spanish-Italian trade treaty as a case study. On 17 December 1905 the Italian Parliament rejected to ratify the Spanish-Italian trade agreement signed by the Italian government one month earlier, on a diatribe related to the lowering of wine import tariffs. This decision left the two countries without a bilateral treaty for an entire decade. In the literature, broader political issues and local interests are alternatively indicated as the main drivers of treaty rejection. Based on a manually assembled database which collects economic and political variables, including MPs personal features, and using a probit model, the chapter provides a quantitative analysis of the vote. Results show that it is not possible to discard that local interest, proxied by wine production, had a role in the rejection of the bilateral trade agreement.
