The Imperial Roots of Global Trade

It is well established in trade literature that historical and cultural ties explain bilateral trade flows between countries. Building on this argument further, Gunes Gokmen, Wessel N. Vermeulen and Pierre-Louis Ve`zina study whether the rise and fall of empires throughout history explains the current world trade. Using data on empires over the last 5000 years, the authors construct a measure of imperial capital between countries. The measure is essentially an indicator of the strength of common past between countries today. In the words of the authors, imperial capital:

…can be thought of as norms, institutions, and networks that emerged during empires to facilitate trade and that may outlive empires. Throughout history, many empires were essentially about facilitating trade.

The authors show that historical legacy of empires still influences present-day international trade via the accumulation of imperial capital.