European Goods Market Integration in the Very Long Run: From the Black Death to the First World War

Abstract

This paper examines price convergence and changes in the efficiency of wheat markets, covering the period from the mid-fourteenth to the early twentieth century and most of Europe. The analysis is based on a new data set of prices from almost 600 markets. Unlike previous research, we find that convergence was a predominantly pre-modern phenomenon. It started in the late fifteenth century, advanced rapidly until the beginning of the seventeenth century when it temporarily stalled, resumed after the Thirty Years’ War, and accelerated after the Napoleonic Wars in response to trade liberalization. From the late 1840s, convergence petered out and turned into divergence after 1875 as policy decisions dominated technological change. Our results point to the ‘Little Divergence’ between North-Western Europe and the rest of the continent as starting about 1600. Long-term improvements in market efficiency began in the early sixteenth century, with advances over time being as uneven as in price convergence. We trace this to differential institutional change and the non-synchronous spread of modern media and systems of information transmission that affected the ability of merchants to react to news.

A Bayesian Spatio-Temporal Analysis of Markets During the Finnish 1860s Famine

“…the coefficient of variation of regional rye prices was about 0.1, roughly at par with the contemporary Western European economics, and signalling reasonably well‐integrated markets in terms of sigma convergence (e.g. Federico et al, 2021). The 1860s famine, which peaked in terms of mortality in the winter and spring of 1867–1868, was foreshadowed by multiple harvest failures earlier in the decade.…”

Has Eastern Europe Always Lagged Behind the West? Historical Evidence from Pre‐1870

“…Another potential inconsistency between CESEEcentered and pan-European / global approaches relates to what drove market integration. The CESEE-centered research has tended to highlight infrastructure improvements-and the railways in particular-as the driving force behind market integration, whereas the more general research has argued, in recent contributions anyway, that most of the price convergence process had already taken place by the time such improvements happened (Jacks, 2006;Federico et al, 2018). Some of the inconsistencies mentioned might be attributed either to the fact that Austria-Hungary and Russia were relatively closed economies with large domestic markets; or that infrastructure improvements related to the railway had a much larger impact on the region given that riverine transportation had played a bigger role earlier on in Western Europe.…”

“…Federico et al . (2018) address some of this imbalance by including observations for Russia, but there are again no observations for the entire Balkan peninsula with the exception of Greece. From their sample of 500 cities, less than 10 percent belong to the Eastern half of the European continent.…”

“…Another potential inconsistency between CESEE‐centered and pan‐European / global approaches relates to what drove market integration. The CESEE‐centered research has tended to highlight infrastructure improvements—and the railways in particular—as the driving force behind market integration, whereas the more general research has argued, in recent contributions anyway, that most of the price convergence process had already taken place by the time such improvements happened (Jacks, 2006; Federico et al ., 2018).…”

“…Covering the long period from 1620 to 1913, they are able to include 100 cities into their sample; yet only six of them are located in Central Europe and their data do not contain a single observation of historical Russia or of South-East Europe. Federico et al (2018) address some of this imbalance by including observations for Russia, but there are again no observations for the entire Balkan peninsula with the exception of Greece. From their sample of 500 cities, less than 10 percent belong to the Eastern half of the European continent.…”