Trade, convergence, and globalisation: The dynamics of the international income distribution, 1950ヨ1998

This paper investigates the evidence for convergence in per capita incomes across 115 economies during the period 1950–1998 and examines the impact that international trade had on this process. Drawing on trade-conditioning within a distribution dynamics framework, that explicitly models frequency distributions of the cross sections of economies over time, this study suggests that trade patterns in the Golden Age were conducive to the formation of middle and high income groups or clubs of economies, but similar trade patterns (dominated by the rich economies) do not seem to explain the perpetuation of these group formations in the post-Golden Age period. If foreign trade is a key aspect of globalisation, why does it matter in accounting for the observed dynamics of the international income distribution during the Golden Age, but not during the decades since the first oilshock? Further, the evidence from the ergodic (long-run equilibrium) distribution suggests that in 0014-4983/$ see front matter 2005 Elsevier Inc. All rights reserved. doi:10.1016/j.eeh.2005.10.006 q We gratefully acknowledge the financial support of this research by the Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD). Earlier versions of this paper have been presented at Earlier versions of this paper have been presented at the BETA-Worksop in Historical Economics (Strasbourg, 2005); the Fifth World Congress of Cliometrics (Venice, 2004); The Berlin Colloquium—A Quantitative Economic History Workshop (Berlin, 2004); European Science Foundation—Social Sciences Exploratory Workshop: Transition meets Development: Understanding Large-Scale Institutional Change (Stockholm, 2003); Institute for International Integration Studies, Trinity College Dublin (2003), and the joint Economics and Economic History Seminar at the University of Edinburgh (2003). We thank the participants, the editor of this journal and an anonymous referee for their helpful comments. * Corresponding author. Fax: +44 0 20 7955 7730. E-mail address: [email protected] (M.-S. Schulze). Explorations in Economic History 44 (2007) 100–113 www.elsevier.com/locate/eeh Explorations in Economic History the long term the established trade patterns favoured the growth of the rich at the expense of the poor economies across the world. 2005 Elsevier Inc. All rights reserved.