Economic Integration and Convergence

Economic Integration and Convergence: an Historical Perspective

Theory is ambiguous as to how globalization influences the relative performances of rich and poor countries. This paper surveys some recent literature on the historical links between international commodity and factor market integration and convergence. Focussing on the late 19th century, a period both of globalization and convergence, it shows that trade had an important impact on factor prices in some countries, just as Heckscher and Ohlin would have predicted. Migration was however a more important force for convergence during this period, while international capital flows led to both convergence and divergence. The analysis suggests that more attention should be paid to open economy forces when discussing convergence. (JEL Classification: F02)