Trade, growth, and institutional change: British imperialism revisited

The world economy experienced extensive international economic integration in the second half of the nineteenth century. This period was also the era of imperial expansion and massive capital exports from Britain to the rest of the world. One of the destinations for these gigantic capital exports was the British Empire. During this first wave of globalization Britain pioneered and sustained free trade quite successfully–at least in its empire. ^ The purpose of this research is twofold. First, this dissertation seeks to learn whether the impact of free trade in the British Empire on both Britain and her major overseas possessions was beneficial or not. In particular, the first chapter analyzes the impact of colonial exports on colonial growth in the six main British overseas territories that were the greatest recipients of British capital exports: Canada, Australia, New Zealand, India, Egypt and South Africa. The results are inconclusive. In India, we find no relationship between exports and growth. GDP growth seems to be export led in Australia and New Zealand. A positive correlation between GDP growth and export growth was found in Canada, South Africa and Egypt, yet the direction of this relationship and the mechanism of how exports impact GDP are less clear. ^ The second chapter examines whether colonial trade was beneficial for Britain. In essence, the study assesses whether colonial imports contributed to the growth of the British economy. We find that colonial trade via imports was growth enhancing for Britain. ^ Second, this dissertation seeks to learn how British imperialism influenced institutional development in the colonies. More specifically, the third chapter examines whether British capital exports promoted institutional development in places where they were absorbed. In this regard, two questions are addressed: first, whether colonial institutions improved or became worse under British rule, and second, whether the institutional gap between Britain and a given colony under investigation narrowed or widened. ^ The results are striking. First, they indicate that good institutions followed capital exports in the British Empire. Second, they show that colonial institutions in places which absorbed British capital exports were improving at a faster pace than institutions in Britain itself Third, we find that, in some instances, colonial institutions were better than coinciding institutions in Britain.