The wind of change: Maritime technology, trade and economic development

The 1870-1913 period marked the birth of the first era of trade globalization. How did thistremendous increase in trade affect economic development? This work isolates a causality channel by exploiting the fact that the steamship produced an asymmetric change in trade distancesamong countries. Before the invention of the steamship, trade routes depended on wind patterns.The introduction of the steamship in the shipping industry reduced shipping costs and time in adisproportionate manner across countries and trade routes. Using this source of variation and acompletely novel set of data on shipping times, trade, and development that spans the great majority of the world between 1850 and 1900, I find that 1) the adoption of the steamship was the majorreason for the first wave of trade globalization, 2) only a small number of countries that were characterized by more inclusive institutions benefited from globalization, and 3) globalization exerteda negative effect on both urbanization rates and economic development in most other countries