Greasing the Wheels of Trade

Abstract

How much does a nation spend on resources to 'grease the wheels of trade'? To examine this question the Dutch economy is used as an exemplary case as the Netherlands are known as a nation of traders. This image was derived in the seventeenth century from successes in long distance trade, shipping and financial innovations. Despite its historical background in trading the potential to 'truck and barter' has never been adequately measured. In this paper we present a first attempt in measuring and describing the Dutch transaction sector. Measurement by means of occupational data points out that approximately 25 percent of Dutch workers are employed in transaction jobs, and 29 percent if one includes transport and distribution tasks. From a historical perspective this may seem large, but we make the case that traditional sector categories underestimate the true trading character of an economy. Furthermore, we find that in enhancing transactions cities or agglomerations remain important, suggesting that face-to-face trade remains an important element of modern transactions. In contrast to the history of immigrants in the Netherlands, the main immigrant groups of today do not fulfill a brokerage function in bringing about trade between different cultures.

Keywords: Transaction costs, trade, geography

JEL Classification: D23, R1, F14, L81, J4