Trade and Development: Evidence from the Napoleonic Blockade Réka Juhász ∗ London School of Economics, CEP, CfM This version: September, 2014 PRELIMINARY AND INCOMPLETE Abstract This paper uses a natural experiment to assess whether temporary protection from trade with the industrial leader can foster development in infant industries in follower countries. Using a new dataset compiled from primary sources, I show that regions (départements) in the French Empire which became better protected from trade with the British for exogenous reasons during the Napoleonic Wars (1803-15) increased capacity in mechanised cotton spinning to a larger extent than regions which remained more exposed to trade. Temporary protection from trade proved to have long-term effects. First, after the restoration of peace, exports of cotton goods in France grew faster than Britain’s exports of the same. Second, emulation of Britain’s success was not inevitable. As late as 1850, France and Belgium - both part of the French Empire prior to 1815, had larger cotton spinning industries than other Continental European countries. Third, within France, firms in areas that benefited from more protection during the Napoleonic Wars had significantly higher labour productivity in cotton spinning in 1840 than regions which received a smaller shock. ∗
[email protected]. I thank Silvana Tenreyro and Steve Pischke for their continued guidance and support. This paper has also benefited from discussions with Oriana Bandiera, Francesco Caselli, Nick Crafts, Guillaume Daudin, Jeremiah Dittmar, Knick Harley, Ethan Ilzetzki, Gianmarco Ottaviano, Guy Michaels, Gerard Padró i Miquel, Michael Peters, Thomas Sampson, Daniel Sturm and seminar participants at LSE and Warwick and conference participants at the Belgrade Young Economist Conference, the Hungarian Academy of Sciences Summer Meeting and ETSG, 2014.