《国际政治经济学》文献资料（Political Economy of Migration）Globalization, Convergence, and History

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THE JOURNAL OF ECONOMIC HISTORY VOLUME 56 JUNE 1996 NUMBER 2 Globalization,Convergence,and History JEFFREY G.WILLIAMSON There were three epochs of growth experience after the mid-nineteenth century for what is now called the OECD"club":the late nineteenth century,the middle years between 1914 and 1950,and the late twentieth century.The first and last epochs were ones of overall fast growth,globalization,and convergence.The middle years were ones of overall slow growth,deglobalization,and divergence.Thus history offers an unambiguous positive correlation between globalization and convergence.When the pre-World War I years are examined in detail,the correlation turns out to be causal: globalization played the critical role in contributing to convergence. THEORY NEEDS HISTORY Wwo important features of the late twentieth-century international omy characterized the late nineteenth centuras elF earlier period was one of rapid globalization:capital and labor flowed across national frontiers in unprecedented quantities,and commodity trade boomed as transport costs declined sharply.Second,the late nineteenth century underwent an impressive convergence in living stan- dards,at least within most of what we would now call the OECD club.Poor countries at the periphery of the European club tended to grow faster than the rich industrial leaders at the center of the Old World and often even faster than the richer countries overseas in the New World.This club excluded,of course,most of the Third World and eastern Europe,and even around this limited periphery there were some who failed to catch up. But whereas Spain and Portugal lagged behind the leaders,others-like Ireland,Italy,and the Scandinavian countries-underwent a spectacular catch-up from the Great Famine to the Great War.To what extent were globalization and convergence connected? The Journal of Economic History,Vol.56,No.2(June 1996).The Economic History Association.All rights reserved.ISSN 0022-0507. Jeffrey G.Williamson is the Laird Bell Professor of Economics at Harvard University,Cambridge, MA02138. This article is an expanded version of the Presidential Address to the annual meeting of the Economic History Association,Chicago,8-10 September 1995. The research has been supported since 1990 by National Science Foundation grants SES-90-21951 and SBR-92-23002,for which I am grateful.I am also grateful for the excellent research assistance(and insightful comments)of Bill Collins.In addition,I want to thank my collaborators Tim Hatton,Kevin O'Rourke,and Alan Taylor with whom I have shared so many of the discoveries surveyed in this article.They,Moe Abramovitz,Don Davis,Mike Edelstein,Anne Krueger,Cormac O Grada,and Jeff Sachs have all offered advice that has greatly improved the final product. 277 17.15 PM

THE JOURNAL OF ECONOMIC HISTORY VOLUME 56 JUNE 1996 NUMBER 2 Globalization, Convergence, and History JEFFREY G. WILLIAMSON There were three epochs of growth experience after the mid-nineteenth century for what is now called the OECD "club": the late nineteenth century, the middle years between 1914 and 1950, and the late twentieth century. The first and last epochs were ones of overall fast growth, globalization, and convergence. The middle years were ones of overall slow growth, deglobalization, and divergence. Thus history offers an unambiguous positive correlation between globalization and convergence. When the pre-World War I years are examined in detail, the correlation turns out to be causal: globalization played the critical role in contributing to convergence. THEORY NEEDS HISTORY T wo important features of the late twentieth-century international economy characterized the late nineteenth century as well. First, the earlier period was one of rapid globalization: capital and labor flowed across national frontiers in unprecedented quantities, and commodity trade boomed as transport costs declined sharply. Second, the late nineteenth century underwent an impressive convergence in living standards, at least within most of what we would now call the OECD club. Poor countries at the periphery of the European club tended to grow faster than the rich industrial leaders at the center of the Old World and often even faster than the richer countries overseas in the New World. This club excluded, of course, most of the Third World and eastern Europe, and even around this limited periphery there were some who failed to catch up. But whereas Spain and Portugal lagged behind the leaders, others-like Ireland, Italy, and the Scandinavian countries-underwent a spectacular catch-up from the Great Famine to the Great War. To what extent were globalization and convergence connected? The Joumnal of Economic History, Vol. 56, No. 2 (June 1996). ? The Economic History Association. All rights reserved. ISSN 0022-0507. Jeffrey G. Williamson is the Laird Bell Professor of Economics at Harvard University, Cambridge, MA 02138. This article is an expanded version of the Presidential Address to the annual meeting of the Economic History Association, Chicago, 8-10 September 1995. The research has been supported since 1990 by National Science Foundation grants SES-90-21951 and SBR-92-23002, for which I am grateful. I am also grateful for the excellent research assistance (and insightful comments) of Bill Collins. In addition, I want to thank my collaborators Tim Hatton, Kevin O'Rourke, and Alan Taylor with whom I have shared so many of the discoveries surveyed in this article. They, Moe Abramovitz, Don Davis, Mike Edelstein, Anne Krueger, Cormac 6 Grada, and Jeff Sachs have all offered advice that has greatly improved the final product. 277 This content downloaded from 211.80.95.69 on Sun, 20 Oct 2013 19:57:15 PM All use subject to JSTOR Terms and Conditions

Globalization,Convergence,and History 279 CONVERGENCE IN THE PAST What does history have to say about convergence?To answer that question,we have to agree on the meaning of convergence.The critical bottom line for me is whether the living standard gap between rich and poor countries falls over time.Convergence implies an erosion in this gap, at least in percentage terms.New growth theorists call this sigma- convergence.To get sigma-convergence,poor countries must grow faster than rich,an event new growth theorists call beta-convergence.Second, what history?My interest has always been in what Simon Kuznets called modern economic growth,and that translates here into the century and a half since about 1850.Third,convergence of what?There appear to be two data sets that can be used for such analysis.Angus Maddison's GDP per worker-hour estimates offer one (originally published in 1982,now super- seded by his 1991 book and by even more recent revisions).My real wages of the urban unskilled offer another.2 Fourth,convergence among whom? As the introduction suggests,my net will only capture members of the present OECD club with European origin (plus Argentina and Brazil).3 All of us know that much of the convergence since 1870 disappears when the net is widened to include Eastern Europe,and if it were widened still further to include the Third World,convergence would totally evaporate. Why the small net?Because I think the sources of convergence in the OECD club are themselves misunderstood,and it matters to get the facts right. Figure 1 and Table 1 document real wage convergence from midcentury to the Great War.Although the convergence was not as fast as that of the late twentieth century,it was pronounced,and about as fast as average convergence over the full 150 years since 1850.Figure 2 and Table 2 show that the late nineteenth-century real wage convergence was replicated by gross domestic product (GDP)per worker-hour.However,real wage convergence was a lot faster than GDP per worker-hour,and the global- ization arguments that follow offer some reasons why.Table 3 reports the A's that emerge when so-called unconditional convergence equations are applied to this historical epoch.They imply a peak rate of real wage convergence between 1870 and 1890 of 1.2 percent per annum,and about 1 percent per annum over the 1870 to 1913 period as a whole. Although impressive,the late nineteenth-century rate of convergence Maddison,Phases,Dynamic Forces,and"Explaining the Economic Performance." 2These wages are purchasing-power-parity adjusted;see Williamson,"Evolution." 3 The full real wage 17-country sample is Australia,Argentina,Belgium,Brazil,Canada,Denmark, France,Germany,Great Britain,Ireland,Italy,the Netherlands,Norway,Portugal,Spain,Sweden, and the United States.The full(1991)GDP per worker-hour 15-country sample subtracts Argentina, Brazil,Ireland,Portugal,and Spain,but adds Austria,Finland,and Switzerland.Thus,Maddison's sample has no Latin observations,either Old World or New,and does not treat separately one of the best examples of catching-up,Ireland.His 1994 sample repairs this damage.See his"Explaining the Economic Performance." 4 DeLong,.“Productivity Growth.” 17.15 PM

Globalization, Convergence, and History 279 CONVERGENCE IN THE PAST What does history have to say about convergence? To answer that question, we have to agree on the meaning of convergence. The critical bottom line for me is whether the living standard gap between rich and poor countries falls over time. Convergence implies an erosion in this gap, at least in percentage terms. New growth theorists call this sigmaconvergence. To get sigma-convergence, poor countries must grow faster than rich, an event new growth theorists call beta-convergence. Second, what history? My interest has always been in what Simon Kuznets called modern economic growth, and that translates here into the century and a half since about 1850. Third, convergence of what? There appear to be two data sets that can be used for such analysis. Angus Maddison's GDP per worker-hour estimates offer one (originally published in 1982, now superseded by his 1991 book and by even more recent revisions).1 My real wages of the urban unskilled offer another.2 Fourth, convergence among whom? As the introduction suggests, my net will only capture members of the present OECD club with European origin (plus Argentina and Brazil).3 All of us know that much of the convergence since 1870 disappears when the net is widened to include Eastern Europe, and if it were widened still further to include the Third World, convergence would totally evaporate.4 Why the small net? Because I think the sources of convergence in the OECD club are themselves misunderstood, and it matters to get the facts right. Figure 1 and Table 1 document real wage convergence from midcentury to the Great War. Although the convergence was not as fast as that of the late twentieth century, it was pronounced, and about as fast as average convergence over the full 150 years since 1850. Figure 2 and Table 2 show that the late nineteenth-century real wage convergence was replicated by gross domestic product (GDP) per worker-hour. However, real wage convergence was a lot faster than GDP per worker-hour, and the globalization arguments that follow offer some reasons why. Table 3 reports the A's that emerge when so-called unconditional convergence equations are applied to this historical epoch. They imply a peak rate of real wage convergence between 1870 and 1890 of 1.2 percent per annum, and about 1 percent per annum over the 1870 to 1913 period as a whole. Although impressive, the late nineteenth-century rate of convergence 1 Maddison, Phases, Dynamic Forces, and "Explaining the Economic Performance." 2 These wages are purchasing-power-parity adjusted; see Williamson, "Evolution." 3 The full real wage 17-country sample is Australia, Argentina, Belgium, Brazil, Canada, Denmark, France, Germany, Great Britain, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, and the United States. The full (1991) GDP per worker-hour 15-country sample subtracts Argentina, Brazil, Ireland, Portugal, and Spain, but adds Austria, Finland, and Switzerland. Thus, Maddison's sample has no Latin observations, either Old World or New, and does not treat separately one of the best examples of catching-up, Ireland. His 1994 sample repairs this damage. See his "Explaining the Economic Performance." 4 DeLong, "Productivity Growth." This content downloaded from 211.80.95.69 on Sun, 20 Oct 2013 19:57:15 PM All use subject to JSTOR Terms and Conditions

280 Williamson TABLE 1 COEFFICIENTS OF VARIATION OF REAL WAGES,1854-1939 Full Sample Less Full Sample Less Full Sample North America North America and Iberia C(13) C(17) C(16) C(12) C(15) C(14) C(10) C(13) 1854 0.326 0.308 0.340 1870 0.254 0.255 0.224 0.223 0.229 0.232 1890 0.199 0.114 0.102 1913 0.191 0.068 0.039 1914 0.103 0.085 0.068 1926 0.148 0.146 0.138 1927 0.188 0.147 0.186 0.142 0.131 1939 0.285 0.200 0.138 Notes:The "full sample"includes the following 13 countries until 1870:Australia,the United States Belgium,France,Germany,Great Britain,Ireland,Netherlands,Norway,Spain,Sweden,Brazil,and Portugal.In 1870 the following four countries are added to the sample:Argentina,Canada,Denmark. and Italy.Portugal drops from the sample from 1914 to 1926 and then rejoins.The "full sample less North America"excludes Canada and the United States,implying that we start with 12 countries and then increase to 15 in 1870.Again,Portugal drops from the sample between 1914 and 1926.The"full sample less North America and Iberia"excludes the United States,Canada,Spain,and Portugal, implying that we start with 10 countries and expand to 13 in 1870. Source:Williamson,"Evolution,"with Great Britain revised. TABLE 2 COEFFICIENTS OF VARIATION OF GDP PER WORKER-HOUR,1870-1938 Full Sample Less Full Sample North America C(15) C(13) 1870 0.153 0.169 1890 0.118 0.122 1913 0.107 0.088 1929 0.110 0.080 1938 0.090 0.054 Notes:The "full sample"includes Australia,Austria,Belgium,Canada,Denmark,Finland,France Germany,Italy,the Netherlands,Norway,Sweden,Switzerland,the United Kingdom,and the United States.It does not include Japan.The"full sample less North America"drops Canada and the United States from the sample. Source:Maddison,Dynamic Forces. TABLE 3 THE ESTIMATED RATE OF CONVERGENCE(A)1854-1939 Real Wages GDP per Worker Hour Less North Less Iberia and Less North Epoch Full Sample America North America Full Sample America 18541870 +0.005 +0.006 +0.004 1870-1890 +0.012 +0.020 +0.021 +0.004 +0.005 1890-1913 +0.008 +0.017 +0.033 +0.007 +0.011 19141926 -0.011 -0.016 -0.030 1927-1939 -0.003 +0.002 -0.001 1913-1929 +0.002 +0.005 1929-1938 +0.019 +0.024 Notes:The rate of convergence is A=1/t In (B+1),where B is the coefficient in convergence equation on log of initial real wages or GDP per worker-hour,and t is the time span. Source:Data underlying Tables 1 and 2. 219575

280 Williamson TABLE 1 COEFFICIENTS OF VARIATION OF REAL WAGES, 1854-1939 Full Sample Less Full Sample Less Full Sample North America North America and Iberia C(13) C(17) C(16) C(12) C(15) C(14) C(10) C(13) 1854 0.326 0.308 0.340 1870 0.254 0.255 0.224 0.223 0.229 0.232 1890 0.199 0.114 0.102 1913 0.191 0.068 0.039 1914 0.103 0.085 0.068 1926 0.148 0.146 0.138 1927 0.188 0.147 0.186 0.142 0.131 1939 0.285 0.200 0.138 Notes: The "full sample" includes the following 13 countries until 1870: Australia, the United States, Belgium, France, Germany, Great Britain, Ireland, Netherlands, Norway, Spain, Sweden, Brazil, and Portugal. In 1870 the following four countries are added to the sample: Argentina, Canada, Denmark, and Italy. Portugal drops from the sample from 1914 to 1926 and then rejoins. The "full sample less North America" excludes Canada and the United States, implying that we start with 12 countries and then increase to 15 in 1870. Again, Portugal drops from the sample between 1914 and 1926. The "full sample less North America and Iberia" excludes the United States, Canada, Spain, and Portugal, implying that we start with 10 countries and expand to 13 in 1870. Source: Williamson, "Evolution," with Great Britain revised. TABLE 2 COEFFICIENTS OF VARIATION OF GDP PER WORKER-HOUR, 1870-1938 Full Sample Less Full Sample North America C(15) C(13) 1870 0.153 0.169 1890 0.118 0.122 1913 0.107 0.088 1929 0.110 0.080 1938 0.090 0.054 Notes: The "full sample" includes Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom, and the United States. It does not include Japan. The "full sample less North America" drops Canada and the United States from the sample. Source: Maddison, Dynamic Forces. TABLE 3 THE ESTIMATED RATE OF CONVERGENCE (A) 1854-1939 Real Wages GDP per Worker Hour Less North Less Iberia and Less North Epoch Full Sample America North America Full Sample America 1854-1870 +0.005 +0.006 +0.004 - 1870-1890 +0.012 +0.020 +0.021 +0.004 +0.005 1890-1913 +0.008 +0.017 +0.033 +0.007 +0.011 1914-1926 -0.011 -0.016 -0.030 - 1927-1939 -0.003 +0.002 -0.001 - 1913-1929 - - +0.002 +0.005 1929-1938 - - - +0.019 +0.024 Notes: The rate of convergence is A = 1 / t ln (X3 + 1), where 3 is the coefficient in convergence equation on log of initial real wages or GDP per worker-hour, and t is the time span. Source: Data underlying Tables 1 and 2. This content downloaded from 211.80.95.69 on Sun, 20 Oct 2013 19:57:15 PM All use subject to JSTOR Terms and Conditions

284 Williamson 1890,supporting convergence;but by 1913 the United States regained everything it had lost.Canada offers an even better example of North American resistance to convergence.Canada improved its real wage superiority from 48 percent above Britain in 1870 to 57 percent in 1900 and,riding the prairie wheat boom,to 123 percent in 1913. This deviant North American behavior tended to retard the rate of convergence in the late nineteenth century,and Figures 1 and 2 show just how much.The "full sample less North America"converges faster than the full sample itself.Indeed,although the former traces out an abrupt switch from real wage convergence to divergence around the turn of the century, the latter continues the post-1850 convergence at about the same rate (Figure 1).The GDP per worker-hour evidence suggests the same(Figure 2) Some might argue that this deviant behavior would be even more pronounced if the industrial North were treated separately.Maybe yes, maybe no.After all,regional inequality was not simply an American problem,for it applied with equal drama to European countries like Italy. Although I will stick to national definitions in what follows,I am aware of regional experience with convergence and divergence,and of an older literature that distinguished between regional“backwash,.”“polarization,” and"spread"effects.There is reason to believe that the globalization and convergence forces that operated at the national level also operated at the regional level,but I do not have the space here to pursue the issue in depth.? What about Europe?Given the great debate about Britain's loss of industrial leadership to her close competitors,most of us would look for evidence of,say,German catch-up on the leader.We would be looking in the wrong place.What matters far more to European convergence is the performance of poor countries around the European periphery.Over the thirty years following 1870,four of these poor countries dramatically improved their real wages relative to Britain:Denmark rose from 54 to 85 percent;Ireland,from 73 to 89 percent;Sweden,from 42 to 82 percent; and Norway,from 42 to 65 percent.Italy also made gains,but they were more modest and were centered in the North.The Iberians lost ground: Portugal fell from 48 to 42 percent of Britain,and Spain,from 76 to 48 percent. If convergence was relatively slow in Europe in the late nineteenth century,it was the rise in the historically persistent wage gap between the Latin south and the non-Latin north that accounts for it-and this in spite of so much attention to an alleged late Victorian and Edwardian failure in England.Late Victorian and Edwardian failure helps explain continued convergence in the north of Europe,but what dominated European Williamson,"Regional Inequality";Hirschman,Strategy;and Myrdal,Economic Theory. See Barro and Sala-i-Matin,"Convergence,"for a modern look by two macroeconomists

284 Williamson 1890, supporting convergence; but by 1913 the United States regained everything it had lost. Canada offers an even better example of North American resistance to convergence. Canada improved its real wage superiority from 48 percent above Britain in 1870 to 57 percent in 1900 and, riding the prairie wheat boom, to 123 percent in 1913. This deviant North American behavior tended to retard the rate of convergence in the late nineteenth century, and Figures 1 and 2 show just how much. The "full sample less North America" converges faster than the full sample itself. Indeed, although the former traces out an abrupt switch from real wage convergence to divergence around the turn of the century, the latter continues the post-1850 convergence at about the same rate (Figure 1). The GDP per worker-hour evidence suggests the same (Figure 2). Some might argue that this deviant behavior would be even more pronounced if the industrial North were treated separately. Maybe yes, maybe no. After all, regional inequality was not simply an American problem, for it applied with equal drama to European countries like Italy. Although I will stick to national definitions in what follows, I am aware of regional experience with convergence and divergence, and of an older literature that distinguished between regional "backwash,"polarization," and "spread" effects.6 There is reason to believe that the globalization and convergence forces that operated at the national level also operated at the regional level, but I do not have the space here to pursue the issue in depth.7 What about Europe? Given the great debate about Britain's loss of industrialeadership to her close competitors, most of us would look for evidence of, say, German catch-up on the leader. We would be looking in the wrong place. What matters far more to European convergence is the performance of poor countries around the European periphery. Over the thirty years following 1870, four of these poor countries dramatically improved their real wages relative to Britain: Denmark rose from 54 to 85 percent; Ireland, from 73 to 89 percent; Sweden, from 42 to 82 percent; and Norway, from 42 to 65 percent. Italy also made gains, but they were more modest and were centered in the North. The Iberians lost ground: Portugal fell from 48 to 42 percent of Britain, and Spain, from 76 to 48 percent. If convergence was relatively slow in Europe in the late nineteenth century, it was the rise in the historically persistent wage gap between the Latin south and the non-Latin north that accounts for it-and this in spite of so much attention to an alleged late Victorian and Edwardian failure in England. Late Victorian and Edwardian failure helps explain continued convergence in the north of Europe, but what dominated European 6Williamson, "Regional Inequality"; Hirschman, Strategy; and Myrdal, Economic Theory. 7 See Barro and Sala-i-Matin, "Convergence," for a modern look by two macroeconomists. This content downloaded from 211.80.95.69 on Sun, 20 Oct 2013 19:57:15 PM All use subject to JSTOR Terms and Conditions

Globalization,Convergence,and History 285 experience was not Britain's failure(which hastened convergence),but the failure of the Latin economies (which retarded convergence).Figure 1 shows this clearly:real wage convergence in the OECD club is consider- ably greater when the two Iberian countries are removed from the sample. Three countries illustrate the convergence best:Ireland,Sweden,and the United States.In 1854,real wages in Sweden were only 48 percent of those of Britain,whereas in 1913 they were at par,an impressive catch-up by any standard.In 1854,and shortly after the Famine,real wages in Ireland were only 60 percent of those of Britain,a figure that had hardly changed at all over the previous three decades.Real wages in Ireland started a dramatic convergence on those across the Irish Sea during the 1850s (and notably,in the absence of any Irish industrialization),so that they were 73 percent of Britain's by 1870.By 1913 they were 92 percent of Britain's.Ireland was transformed over this period of convergence from a poverty-stricken,peasant economy that had served as a source of elastic labor supply for Britain's booming cities to an economy at the start of the twentieth century that boasted urban wages close to those prevailing in English cities.Irish and Swedish wages even converged on those of the New World between 1854 and 1913:as a percentage of U.S.wages,Irish wages rose from 38 to 53 and Swedish wages rose from 24 to 53.8 Now,why do I think globalization accounts for most of this conver- gence? GLOBALIZATION IN COMMODITY MARKETS:THE FACTOR PRICE CONVERGENCE THEOREM AT WORK The factor price equalization theorem has been a durable tool for trade theorists ever since Eli Heckscher and Bertil Ohlin made their seminal contributions in 1919 and 1924,although it was convergence not equaliza- tion that held the interests of these two Swedes.The Heckscher-Ohlin paradigm argues that countries export commodities that use intensively the factors in which they are well endowed,whereas they import commod- ities that use intensively the factors in which they are poorly endowed.Let falling transport costs tend to equalize prices of the traded commodities, encouraging more trade.Countries will now export more of the goods that exploit their favorable factor endowment.The demand for the abundant and cheap factor booms,while that for the scarce and expensive factor falls.Thus,commodity price convergence tends to produce factor price convergence:for example,wages should rise in poor countries relative to 8As it turns out,the average wage gap between New World and Old drives a large share of the convergence over the half century from 1854 to 1913(Williamson,"Evolution"). Flam and Flanders,Heckscher-Ohlin Trade Theory.This section draws heavily on a recent collaboration with O'Rourke on late nineteenth-century Scandinavian catch-up ("Open Economy Forces"and "Education"),as well as earlier joint work on Anglo-America("Were Heckscher and Ohlin Right?")

Globalization, Convergence, and History 285 experience was not Britain's failure (which hastened convergence), but the failure of the Latin economies (which retarded convergence). Figure 1 shows this clearly: real wage convergence in the OECD club is considerably greater when the two Iberian countries are removed from the sample. Three countries illustrate the convergence best: Ireland, Sweden, and the United States. In 1854, real wages in Sweden were only 48 percent of those of Britain, whereas in 1913 they were at par, an impressive catch-up by any standard. In 1854, and shortly after the Famine, real wages in Ireland were only 60 percent of those of Britain, a figure that had hardly changed at all over the previous three decades. Real wages in Ireland started a dramatic convergence on those across the Irish Sea during the 1850s (and notably, in the absence of any Irish industrialization), so that they were 73 percent of Britain's by 1870. By 1913 they were 92 percent of Britain's. Ireland was transformed over this period of convergence from a poverty-stricken, peasant economy that had served as a source of elastic labor supply for Britain's booming cities to an economy at the start of the twentieth century that boasted urban wages close to those prevailing in English cities. Irish and Swedish wages even converged on those of the New World between 1854 and 1913: as a percentage of U.S. wages, Irish wages rose from 38 to 53 and Swedish wages rose from 24 to 53.8 Now, why do I think globalization accounts for most of this convergence? GLOBALIZATION IN COMMODITY MARKETS: THE FACTOR PRICE CONVERGENCE THEOREM AT WORK The factor price equalization theorem has been a durable tool for trade theorists ever since Eli Heckscher and Bertil Ohlin made their seminal contributions in 1919 and 1924, although it was convergence not equalization that held the interests of these two Swedes.9 The Heckscher-Ohlin paradigm argues that countries export commodities that use intensively the factors in which they are well endowed, whereas they import commodities that use intensively the factors in which they are poorly endowed. Let falling transport costs tend to equalize prices of the traded commodities, encouraging more trade. Countries will now export more of the goods that exploit their favorable factor endowment. The demand for the abundant and cheap factor booms, while that for the scarce and expensive factor falls. Thus, commodity price convergence tends to produce factor price convergence: for example, wages should rise in poor countries relative to 8 As it turns out, the average wage gap between New World and Old drives a large share of the convergence over the half century from 1854 to 1913 (Williamson, "Evolution"). 9 Flam and Flanders, Heckscher-Ohlin Trade Theory. This section draws heavily on a recent collaboration with O'Rourke on late nineteenth-century Scandinavian catch-up ("Open Economy Forces" and "Education"), as well as earlier joint work on Anglo-America ("Were Heckscher and Ohlin Right?"). This content downloaded from 211.80.95.69 on Sun, 20 Oct 2013 19:57:15 PM All use subject to JSTOR Terms and Conditions

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