Trains, Trade, and Transformation: A Spatial Theory of 19th C. Protectionism

• In Event: Historical International Political Economy

Abstract

We study the effect of expanding trade on societal coalitions through its impact on development. We combine a majoritarian political model with a spatial model of international trade to argue that trade-induced structural transformations---specifically the extent to which decreased trade costs bring new workers and higher population density to locations closer to world markets---can lead to the loss of political power by the factors of production most advantaged by increased trade. We study this phenomenon in the late 19th century United States to explain the spatial and temporal distribution of rising protectionist opinion from 1880 to 1900. Employing county-level data, we use changes in the cost of transportation to the nearest major port induced by the expansion of the US railroad network to estimate the economic and political consequences of expanding trade. Our estimates indicate that falling transportation costs increased farm output, land values, and population density but reduced the portion of the population employed in agriculture. We show that reduced transportation costs caused a reduction in county vote shares for the Democratic party, which at this time represented the interests of agriculture including liberal trade policies. Using a new measure of protectionist sentiment developed from local newspapers, we also show that falling transportation costs caused an increase in support for protectionism. Trade's impact on structural transformations associated with development and the mobility it induces can be an important mechanism for its effect on societal coalitions and public policy.

Authors

• Kenneth F. Scheve, Yale University

• Theo Serlin, Stanford University