Jan Bakker, Stephan Maurer, Jörn-Steffen Pischke, and Ferdinand Rauch look at the relationships between trade and economic growth around the Mediterranean during the Iron Age:
Economists often point out the benefits of trade, yet empirical evidence for these benefits has been hard to come by and tends to be recent. This column goes back to the first millennium BC to analyse the growth effects of one of the first major trade expansions in human history: the systematic crossing of the open sea in the Mediterranean by the Phoenicians. A strong positive relationship between connectedness and archaeological sites suggests a large role for geography and trade in development even at such an early juncture in history.
The effects of free trade inspire a lot of public debate these days, and policies to restrict trade are gaining in prominence. Economists since Adam Smith and David Ricardo have typically pointed out the benefits of trade. Yet empirical evidence for these benefits has been much harder to come by and is much more recent. In particular, empirical economists have tried to demonstrate that more open economies or more integrated markets see faster growth. The relationship between these two variables is not much disputed; the more difficult question is whether this is due to trade causing growth or richer economies being more open.
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To analyse whether this increased trade also caused growth, we exploit the fact that open sea sailing creates different levels of connectedness for different points on the coast. The shape of the coast and the location of islands determineshow easy it is to reach other points, which might be potential trading partners, within a certain distance. We create such a measure of connectedness for travel via sea. Figure 1 shows the values of this measure on a map and demonstrates how some regions, for example the Aegean but also southern Italy and Sicily, are much better connected than others.
We use this measure of connectedness as a proxy for trading opportunities.
Figure 1 Log connectedness at 500km distance
Note: Darker blue indicates better connected locations.
Measuring growth for an early period of human history is more difficult as we have no standard measure of income, GDP, or even population. We quantify growth by the presence of archaeologic sites for settlements or urbanisations. While this is clearly not a perfect measure, more sites should imply more human presence and activity. We then relate the number of active archaeological sites in a particular period to our measure of connectedness.
We find a large positive relationship between connectedness and archaeological sites. The effect of connections on growth in the Iron Age Mediterranean are up to twice as large as the effects Donaldson and Hornbeck (2016) found for US railroads. Although these results are unlikely to be directly comparable, the magnitudes suggest a large role for geography and trade in development even at such an early juncture in history.
