Proposal preview

Agricultural efficiency in the great specialization

The story of the first era of globalization ca. 1870-1913 is also one of increased specialization by comparative advantage – a specialization which inspired the famous model by Eli Heckscher (1919) and Bertil Ohlin (1933). Of course economic actors at the time were unaware of this model, and even if they had been, the development literature has demonstrated that knowing what exactly to specialize in is a difficult challenge. It is therefore important for countries to undergo a process of what Dani Rodrik and Ricardo Hausmann have termed ‘self-discovery’, whereby they discover the product or products in which they have a comparative advantage. The aim of this session is to explore this issue with a particular focus on agriculture during the first globalization.

Organizer(s)

  • Markus Lampe Vienna University of Economics and Business, Austria markus.lampe@wu.ac.at
  • Paul R Sharp University of Southern Denmark pauls@sam.sdu.dk

Session members

  • Alan Dye, Barnard College, Columbia University, United States
  • Giovanni Federico , University of Pisa, Italy
  • Laura Maravall, University of Tuebingen
  • Pablo Martinelli Lasheras, Universidad Carlos III Madrid, Spain
  • Vicente Pinilla , University of Zaragoza, Spain
  • Nina Boberg-Fazlic, Universit of Southern Denmark
  • Agustina Rayes, Universidad Nacional del Centro de Buenos Aires, Argentina

Discussant(s)

Papers

Panel abstract

The story of the first era of globalization ca. 1870-1913 is also one of increased specialization by comparative advantage – a specialization which inspired the famous model by Eli Heckscher (1919) and Bertil Ohlin (1933). Of course economic actors at the time were unaware of this model, and even if they had been, the development literature has demonstrated that knowing what exactly to specialize in is a difficult challenge. It is therefore important for countries to undergo a process of what Dani Rodrik and Ricardo Hausmann have termed ‘self-discovery’, whereby they discover the product or products in which they have a comparative advantage. The aim of this session is to explore this issue with a particular focus on agriculture during the first globalization.

1st half

Accounting for Smithian Specialization: A Case Study Using the Emergence of Modern Accounting in Danish Dairying

Markus Lampe, Paul Sharp

We provide an historical example illustrating the importance of dynamics for trade theory, specialization choices under uncertainty, and ultimately how successful specialization can lead to economic growth. We discuss how trade theory, however, largely ignored the sort of dynamic specialization described by Adam Smith, and followed a static Ricardian framework. We present unique ‘real time’ data from nineteenth century Denmark on how an understanding developed of what to specialize in during a period of considerable uncertainty. Specifically, a group of large farmers – owners and administrators of landed estates – argued for modern accounting methods in agriculture. They succeeded in spreading their ideas: initially to their peers, but later to the peasantry through the cooperative movement, thus transforming agricultural practice, and the economy as a whole, in their wake. In this way, they established a compelling case of export-led growth in times of uncertainty.

We provide an historical example illustrating the importance of dynamics for trade theory, specialization choices under uncertainty, and ultimately how successful specialization can lead to economic growth. We discuss how trade theory, however, largely ignored the sort of dynamic specialization described by Adam Smith, and followed a static Ricardian framework. We present unique ‘real time’ data from nineteenth century Denmark on how an understanding developed of what to specialize in during a period of considerable uncertainty. Specifically, a group of large farmers – owners and administrators of landed estates – argued for modern accounting methods in agriculture. They succeeded in spreading their ideas: initially to their peers, but later to the peasantry through the cooperative movement, thus transforming agricultural practice, and the economy as a whole, in their wake. In this way, they established a compelling case of export-led growth in times of uncertainty.

Risk management in traditional agriculture: intercropping in Italian wine-growing.

Giovanni Federico, Pablo Martinelli Lasheras

This paper is a study of intercropped viticulture, the practice of growing dispersed vines in fields along with other crops instead of in specialized vineyards. This strategy was long used in Mediterranean countries, but was particularly important in Italy up to WWII, when it started a fast and irreversible decline. We argue that intercropping was a traditional peasant risk-management strategy that made of each plot a risk-minimizing portfolio. As such, it was preferred to vineyard specialization as long as its benefits outweighed the differential costs in terms of increased travel and transport costs. Exploiting geographical variation in Italian settlement patterns in 1931, we find that distance to the fields was strongly correlated to the prevalence of intercropping as a vine-growing strategy. Exogenous variation in exposure to Barbary pirates during the Early Modern period (a historical determinant of settlement patterns across the peninsula) suggests that the correlation is causal.

This paper is a study of intercropped viticulture, the practice of growing dispersed vines in fields along with other crops instead of in specialized vineyards. This strategy was long used in Mediterranean countries, but was particularly important in Italy up to WWII, when it started a fast and irreversible decline. We argue that intercropping was a traditional peasant risk-management strategy that made of each plot a risk-minimizing portfolio. As such, it was preferred to vineyard specialization as long as its benefits outweighed the differential costs in terms of increased travel and transport costs. Exploiting geographical variation in Italian settlement patterns in 1931, we find that distance to the fields was strongly correlated to the prevalence of intercropping as a vine-growing strategy. Exogenous variation in exposure to Barbary pirates during the Early Modern period (a historical determinant of settlement patterns across the peninsula) suggests that the correlation is causal.

Build It, and They Will Come? Secondary Railways and Population Density in French Algeria

Laura Maravall Buckwalter

This paper estimates the effect of gaining access to railways on settler and indigenous population densities in nineteenth century French Algeria. Few studies point out that railways increased marginalization in areas that did not have the required geographic characteristics needed to engage in international markets. By taking advantage of territorial population data and digitized historical colonization maps in the Constantine region, this paper uses differences-in-differences with propensity score matching to quantify the impact of railways in relatively isolated areas where the infrastructure arrived later. Results show that the indigenous population responded positively to rail infrastructure only in the regions where settler density was already high, while the settler population growth did not respond to the new infrastructure. A more detailed analysis of freight and passenger transport shows that the potential gains were restricted by tariffs, which mirrored Constantine’s fertile land scarcity and the vulnerability of agricultural production to climate.

This paper estimates the effect of gaining access to railways on settler and indigenous population densities in nineteenth century French Algeria. Few studies point out that railways increased marginalization in areas that did not have the required geographic characteristics needed to engage in international markets. By taking advantage of territorial population data and digitized historical colonization maps in the Constantine region, this paper uses differences-in-differences with propensity score matching to quantify the impact of railways in relatively isolated areas where the infrastructure arrived later. Results show that the indigenous population responded positively to rail infrastructure only in the regions where settler density was already high, while the settler population growth did not respond to the new infrastructure. A more detailed analysis of freight and passenger transport shows that the potential gains were restricted by tariffs, which mirrored Constantine’s fertile land scarcity and the vulnerability of agricultural production to climate.

2nd half

Why did Argentina become a super-exporter of agricultural and food products during the first globalisation (1880-1929)

Vicente Pinilla, Agustina Rayes

The objective of this paper is to explain, from a cliometric perspective, the determinants of the growth of Argentina’s exports between 1880 and 1929. To do this, we construct a gravity model with the principal products exported each year by Argentina to its most important trading partners. In this way, we believe that this study constitutes a relevant and original contribution to the analysis of economic growth from a historical perspective and specifically in explaining the factors determining the export success of the settler countries during the first wave of globalisation. Our results show that Argentina’s export-led growth must be explained from both the supply and demand sides. We also find that the reduction in transatlantic transport costs boosted exports. We also support the idea that Argentina had a successful agro-export sector because it offered a diverse basket of products to the different European and American countries that consumed them.

The objective of this paper is to explain, from a cliometric perspective, the determinants of the growth of Argentina’s exports between 1880 and 1929. To do this, we construct a gravity model with the principal products exported each year by Argentina to its most important trading partners. In this way, we believe that this study constitutes a relevant and original contribution to the analysis of economic growth from a historical perspective and specifically in explaining the factors determining the export success of the settler countries during the first wave of globalisation. Our results show that Argentina’s export-led growth must be explained from both the supply and demand sides. We also find that the reduction in transatlantic transport costs boosted exports. We also support the idea that Argentina had a successful agro-export sector because it offered a diverse basket of products to the different European and American countries that consumed them.

Imperialism and Entrepreneurship in Cuban Sugar, 1898-1929

Alan Dye

Studies of imperialism tend to overlook the question of the local entrepreneur. A common view of Cuba holds that the US military occupation and the imposition of institutions of imperialist Domination left locals at a disadvantage economically, unable to recover from the devastating war of independence of 1895-1898. The literature focuses on the entry of American corporations and tends to overlook the importance of local entrepreneurs in the recovery, expansion and restructuring of the industry. This paper presents new evidence on the role of foreign and local entrepreneurship in the postwar recovery. It shows that the role of local entrepreneurs has been underestimated, and the forces leading to large market shares of foreign corporations are misunderstood. Local entrepreneurs led the recovery. The large market shares of North American corporations emerged during and after World War I and were associated with the banking crisis of 1920-21.

Studies of imperialism tend to overlook the question of the local entrepreneur. A common view of Cuba holds that the US military occupation and the imposition of institutions of imperialist Domination left locals at a disadvantage economically, unable to recover from the devastating war of independence of 1895-1898. The literature focuses on the entry of American corporations and tends to overlook the importance of local entrepreneurs in the recovery, expansion and restructuring of the industry. This paper presents new evidence on the role of foreign and local entrepreneurship in the postwar recovery. It shows that the role of local entrepreneurs has been underestimated, and the forces leading to large market shares of foreign corporations are misunderstood. Local entrepreneurs led the recovery. The large market shares of North American corporations emerged during and after World War I and were associated with the banking crisis of 1920-21.

Immigration and Knowledge Spillovers: Danish-Americans and the Development of the Dairy Industry in the United States

Nina Boberg-Fazlic, Paul Sharp

We exploit the example of Danish migration to the United States during the late nineteenth century to examine the hypothesis of knowledge spillovers through migration. Modern cooperatively-owned butter factories spread around Denmark within a decade after 1882, and by 1890 Denmark had established itself as a world-leading dairy producer characterized by institutional, technological and scientific innovation. We hypothesize that despite being few in number, Danish-Americans helped spread this knowledge to the US and thus played a central role for the growth and modernization of American dairying. Supported by a historical narrative, we test our hypothesis using data taken mainly from the US census. We find that counties with greater concentrations of Danes up to 1880 (before the transformation of Danish agriculture) do not appear to have enjoyed advantages in dairying compared to other parts of the country. Subsequently, however, they both specialized in dairying, and used more modern practices.

We exploit the example of Danish migration to the United States during the late nineteenth century to examine the hypothesis of knowledge spillovers through migration. Modern cooperatively-owned butter factories spread around Denmark within a decade after 1882, and by 1890 Denmark had established itself as a world-leading dairy producer characterized by institutional, technological and scientific innovation. We hypothesize that despite being few in number, Danish-Americans helped spread this knowledge to the US and thus played a central role for the growth and modernization of American dairying. Supported by a historical narrative, we test our hypothesis using data taken mainly from the US census. We find that counties with greater concentrations of Danes up to 1880 (before the transformation of Danish agriculture) do not appear to have enjoyed advantages in dairying compared to other parts of the country. Subsequently, however, they both specialized in dairying, and used more modern practices.