Can Globalisation Benefit All? Research Project

What Drives Specialisation? A Century of Global Export Patterns

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Principal Investigator: Dr Isabella Weber

Isabella Weber is an Assistant Professor of Economics and the Research Leader for China of the Political Economy Research Institute at the University of Massachusetts Amherst. Previously she was a Lecturer at Goldsmiths, London. She holds a Ph.D. in Development Studies from the University of Cambridge and a Ph.D. in Economics from the New School of Social Research. Isabella is the author of How China Escaped Shock Therapy: The Market Reform Debate and has written on the economics of China’s rise, neoliberalism and neoliberals in China, the US-China trade imbalance and theories of money.

Co-Investigator: Dr Gregor Semieniuk (University of Massachusetts Amherst)

Researchers: Tom Westland (University of Cambridge) and Junshang Liang (University of Massachusetts Amherst)

Project Summary

Economists have increasingly turned to the study of persistence: the origins of the large variance in economic performance across countries are sought in the distant past. This literature mostly focuses on non-economic factors such as culture, geography, institutions or even genetics as the key factors that drive long-term differences in economic outcomes. Our project shifts the attention to a core economic factor instead: the long-term path dependence in export patterns and the persistence in underlying productive capabilities.

 

Development economists have long argued that poor countries specialize in basic commodities, while rich countries diversify and export both complex and simple commodities. Exports reveal economies’ productive capabilities: in order to gain international competitiveness in making a certain product, countries have to rely on a specific set of skills, technology, infrastructure etc. Complexity economics suggests that there are complementarities across past and future productive capabilities. Theoretically, this implies persistence. We examine to what extent this holds empirically across a century and across vastly different institutional settings: the period of High Imperialism and neoliberal globalization.

 

We test whether what countries exported in the previous globalization of the late 19th century matters for where they find themselves on the development ladder today. To this end, we have assembled a new database of global commodity exports from 1897-1906. To the best of our knowledge, this is the most ambitious census of world exports for the previous globalization to date in terms of disaggregation to the commodity level. We exploit the fact that the previous globalization coincides with the high point of colonial statistics and use primary sources in five languages. We translate commodity classifications in primary sources into the Standard International Trade Classification. As a result, we can measure the same proxies for productive capabilities (diversification, complexicty and sophistication) for both the historical reference period (1897-1906) and the contemporary one (1998-2007).

 

We find a strong and statistically highly significant relation for all our proxies of productive capabilities across the two globalizations. The great impact of history on today’s productive capabilities is robust to controlling for variables usually considered as important drivers of export diversification. We show that countries’ export baskets under the previous globalization predict more than half of the variance of today’s real GDP per capita. There are two significant and robust exceptions: First, former European overseas colonies that ranked low then, have fallen even further behind in the current period. Second, countries that have discovered oil show downward path-defiance. This confirms the resource curse hypothesis.

 

Our findings contribute to three literatures: First, long-term persistence in productive capabilities is a possible mechanism for non-convergence. Second, we confirm the long-lasting implications of colonialization for development. Third, we add a historical perspective to the export diversification literature.

 

For a more detailed account of our findings, please take a look at our working paper and blogpost.

Results

Working Paper

What You Exported Matters: Persistence in Productive Capabilities Across Two Eras of Globalisation

Isabella M. Weber, Gregor Semieniuk, Tom Westland, Junshang Liang | February 11, 2021

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