Trade and Structural Change Over Two Centuries

This chapter examines the causal relationship between world trade and structural transformation from 1800 to the present. It first provides an overview of the growth of world trade since 1800 before discussing the link between openness and globalization, with a focus on long-term changes in export/GDP ratios at current prices for different time-invariant samples of countries. It then considers the effect of structural transformation on world openness based on a constant market share analysis. It shows that the current level of globalization is unprecedented and that the rise in openness—and thus the potential for trade-fostered economic growth—took place primarily in 1830–1870 and in 1972–2007. The chapter also finds that the movements in openness were largely driven by the residual changes in trade costs and, in more recent times, the development of international supply chains.