Economic Nationalism and Economic Integration: The Austro-Hungarian Empire in the Late Nineteenth Century

48 Pages Posted: 27 Oct 2009

See all articles by Max-Stephan Schulze

Max-Stephan Schulze

London School of Economics & Political Science (LSE) - Department of Economic History

Nikolaus Wolf

Centre for Economic Policy Research (CEPR); Humboldt University Berlin - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); London School of Economics - Centre for Economic Performance (CEP)

Date Written: October 2009

Abstract

This paper seeks to reconcile two seemingly contradictory strands in the literature on economic development in the late nineteenth century Habsburg Empire - one emphasizing the centrifugal impact of rising intra-empire of nationalism, the other stressing significant improvements in market integration across the empire. We argue that the process of market integration was systematically asymmetric, shaped by intensifying intra-empire nationality conflicts. While grain markets in Austria-Hungary became overall more integrated over time, they also became systematically biased: regions with a similar ethno-linguistic composition of their population came to display significantly smaller price gaps between each other than regions with different compositions. The emergence and persistence of this differential integration cannot be explained by changes in infrastructure and transport costs, simple geographical features or asymmetric integration with neighbouring regions abroad. Instead, differential integration along ethno-linguistic lines was driven by the formation of ethno-linguistic networks. Finally, the analysis shows that the emerging pre-war regional integration patterns – shaped by nationalist sentiment – effectively anticipated the post-war settlement: the fault lines along which the Habsburg Empire was to break up eventually are evident in the price data about a quarter of a century or so before the outbreak of the First World War.

Keywords: Habsburg Empire, market integration, nationalism, networks, pre-1914 Europe

JEL Classification: F15, J15, N13

Suggested Citation

Schulze, Max-Stephan and Wolf, Nikolaus and Wolf, Nikolaus, Economic Nationalism and Economic Integration: The Austro-Hungarian Empire in the Late Nineteenth Century (October 2009). CESifo Working Paper Series No. 2813, Available at SSRN: https://ssrn.com/abstract=1487996 or http://dx.doi.org/10.2139/ssrn.1487996

Max-Stephan Schulze (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economic History ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Nikolaus Wolf

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Humboldt University Berlin - Department of Economics ( email )

Spandauer Strasse 1
Berlin
Germany

HOME PAGE: http://www.wiwi.hu-berlin.de/professuren/vwl/wg/

CESifo (Center for Economic Studies and Ifo Institute) ( email )

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London School of Economics - Centre for Economic Performance (CEP) ( email )

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