Globalization and Inequality - Trinity College Dublin

costs; by mass migration from the Old World to the New; and by large transfers of capital from the
Old World to the New. How did each of these separate dimensions of globalization influence
income distribution within and between countries?
Take the evidence on factor prices first, and begin with the within-country evidence. We
have abundant evidence on late 19 th century relative factor prices, compiled by O’Rourke, Taylor
and Williamson (1996), and Jeffrey Williamson, in a series of papers summarized in Williamson
(1998, 2000). These papers present data on w/r, the ratio of the unskilled, urban wage to the
returns to agricultural land. This was the key relative factor price in an era when agriculture was still
an important component of the economy, and in which inter-continental trade was largely dominated
by the exchange of resource- and land-intensive products for labour-intensive products such as
manufactured goods. The metaphor which motivated Heckscher and Ohlin in the first place was one
of the land-abundant New World exchanging food for European manufactured goods, and their
logic suggests that in times of globalization, w/r should have converged internationally. In landabundant
New World economies, where w/r was high, it should have declined; and in land-scarce
European economies, where w/r was low, it should have increased. Moreover, in absolute terms
low European wages should have caught up with high New World wages; while low New World
land prices should have caught up with high European land prices. By and large, these predictions
hold good for the late 19 th century.
Between 1870 and 1910, real land price increases in Australia (over 400%) and the US
(over 250%) were enormous, far greater than the biggest real land price increase in this sample of
European countries (Denmark, where land prices increased by 45% between 1870-73 and 1910-
13). Moreover, in three European countries -- Britain, France and Sweden -- land prices fell, in
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