Trade networks and colonial trade spillovers

Abstract

This paper provides new empirical evidence regarding the formation of international trade networks. Established trade relations may open the gate to new trade opportunities, as they allow meeting new trade partners over time. We test this prediction and its implications for aggregate trade patterns by using the experience of ancient trade linkages between former colonies and their former colonizers (colonial trade linkages). We first show, using aggregate trade data, that former colonies have more trade with former colonizer's neighbors (colonial trade spillovers). We then show that the past export and import experience of former colonies with the colonizer have an impact on the propensity to trade similar products with third countries. In particular, the trade spillover effect is negatively related to geographical distance between third countries and the colonizer, and positively affected by their degree of economic integration.

Export competition between China and Latin America and the Caribbean in the United States market

“…Although purely agnostic, this relationship was long viewed as so statistically robust that Krugman (1997) referred to it as an example of “ social physics ” and Frankel and Rose (2002) as one of the most robust findings in econometrics. Gravity models have since been adopted widely to describe global trade flows and quantify the determinants of trade, including among others: WTO membership (Dutt et al., 2013; Grant & Boys, 2012; Rose, 2004; Subramanian & Wei, 2007), free trade agreements (Baier et al., 2014; Baier & Bergstrand, 2007, 2009b; Dai et al., 2014; Egger et al., 2011), currency unions (Barro & Tenreyro, 2007; Rose & Honohan, 2001; Rose & Van Wincoop, 2001), colonial links (Berthou & Ehrhart, 2017; Head et al., 2010), and non‐tariff barriers (Disdier et al., 2015; Disdier & Head, 2008).…”

The Chinese Export Displacement Effect Revisited: The Case of the East African Community

“…The gravity model of trade is a very useful tool for describing global trade fl ows and for quantifying the determinants of trade, including WTO membership (Rose, 2004;Subramanian and Wei, 2007;Grant and Boys, 2011;Dutt et al, 2013), free trade agreements (Egger et al, 2011;Baier et al, 2014;Dai et al, 2014), currency unions (Rose and Honohan, 2001;Rose and van Wincoop, 2001;Barro and Tenreyro, 2007), colonial links (Head et al, 2010;Berthou and Ehrhart, 2017), and non-tariff barriers (Disdier et al, 2015), etc. There are also quite a few studies that use the gravity equation to estimate the displacement effect of Chinese exports on other countries' exports.…”

Reverberations of Empire: How the Colonial Past Shapes the Present

“…Generally speaking, such flows between ex-colonies and former colonial powers have diminished slowly over time, but ex-colonies still trade disproportionately with their former colonial power (Head et al 2010). Trade even spills over from former colonies to the former colonies’ neighbors due to embedded colonial flows (Berthou 2017). The same goes for migration.…”