Quantifying the evolution of world trade, 1870–1949

Abstract

The typical narrative regarding the evolution of world trade prior to World War II refers to a secular rise starting around 1870 and a subsequent collapse beginning in 1914. This narrative, however, is based on measures of trade openness that do not fully take into account purchasing power di¤erences across countries. Due to lack of alternative data, the measures employed in the existing literature are typically based on non-PPP-adjusted trade data denominated by PPP-adjusted GDP data. The present paper seeks to resolve this inconsistency by constructing new trade share estimates for 62 countries, representing 90% of world GDP, for the period from 1870 to 1949. Our estimates combine historical import and export …gures with non-PPP-adjusted GDP values that we estimate via the "short-cut" method. Our estimates con…rm qualitatively the narrative of a dramatic rise and fall of world trade over this period. Yet, they indicate that this rise and fall was quantitatively much more pronounced. We …nd that trade shares were on average 38% higher than previously documented, while the world's level of trade openness in 1913 was comparable to that in 1974.

When Britain Turned Inward: The Impact of Interwar British Protection

“…Nominal exchange rates were calculated as annual averages of closing daily exchange rates, and were taken from Global Financial Data. 30 Nominal GDP was taken from Klasing and Milionis (2014), adjusted for interwar borders using the adjustment coefficients from Broadberry and Klein (2012). 31 Online Appendix 2 provides summary statistics for all variables.…”

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“…Nominal exchange rates were calculated as annual averages of closing daily exchange rates, and were taken from Global Financial Data. 27 Nominal GDP was taken from Klasing and Milionis (2014), adjusted for interwar borders using the adjustment coefficients from Broadberry and Klein (2012).…”

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“…Note: The trade openness index is defined as the sum of world exports and imports divided by world GDP, 1870 to 1949 data from Klasing and Millionis (2014); 1950 to 2017 data are from Penn World Tables (9.0).…”