Global Markets at the Dawn of Modern Growth: Evidence from Four Centuries of Grain Prices
This paper investigates market integration on the eve of the takeoff of modern economic growth in the nineteenth century, and uses the findings to reassess the relationship between markets and growth. To this end, we compile a global city-level dataset of annual grain prices comprising 29,397 observations for 119 cities. The data cover Europe and the Middle East from the sixteenth century, and the Americas and Asia from the eighteenth century to the early twentieth century. We measure market integration along two dimensions, price convergence and price synchronization, and disaggregate trends by domestic versus international integration and across geographic regions. The results indicate that integration gains were already evident in the sixteenth century and were initially concentrated in Northwest Europe, before spreading gradually to other parts of Europe and to North America. In contrast, in Asia, market integration advanced only in the late nineteenth century: international integration rose broadly, while domestic integration improved unevenly and appears to have depended on institutional modernization. Overall, these patterns suggest that the timing and geography of market integration anticipated the takeoff of modern economic growth, supporting the view that integration was a precursor to growth, and not merely a consequence.