FACTOR PRICE CONVERGENCE IN THE LATE NINETEENTH CENTURY
KEVIN H. O’ROURKE, ALAN M. TAYLOR, AND JEFFREY G. WILLIAMSON
We examine a dramatic historical episode of factor price convergence in the late nineteenth
century. Our focus is convergence between Old World and New, and the analysis centers on land
and labor. Wage-rental ratios boomed in the Old World and collapsed in the New, moving the
resource-rich, labor-scarce New World closer to the resource-scarce, labor-abundant Old World.
We use econometrics and simulations to identify pro-convergence forces which include
commodity price convergence, factor accumulation, and factor-saving biases. The results
confirm that open-economy characteristics and international market integration are important
sources of convergence.
: N10, N70, F02, F10, F43.
First Submission: October 1994; Revised: July 1995.
A number of scholars have helped us construct the international data base on land
values used in this paper. These have our grateful thanks: Juan Carmona, Roberto Cortés Conde,
Antoni Estevadeordal, Giovanni Federico, Barry Howarth, Peter Lindert, Ian McLean, David
Pope, Leandro Prados, Graeme Snooks, and Vera Zamagni. We are grateful for the research
assistance of Kimiko Cautero and Boris Simkovich. In addition, we acknowledge the helpful
comments of Cormac Ó Gráda, Don Davis and participants at the European Historical
Economics Society Conference on Market Integration (Lerici, Italy, April 1993), the NBER
Workshop on Macroeconomic History (April 1993) and the Harvard Workshop in Economic
History (April 1993). We also gratefully acknowledge the financial support of the National
Science Foundation SES-9021951 and SBR-9223002.