Transport Costs and Trade Volumes: Evidence from the Trans-Atlantic Iron Trade, 1870–1913

We use newly compiled evidence on inter- and intra-continental shipping costs to investigate the relationship between transportation and trade for trans-Atlantic iron markets from 1870–1913. Although we find a surprisingly weak connection linking ocean freight rates to British exports, after controlling for endogeneity and measuring all costs associated with inter-continental pig iron shipments and the intra-continental assembly of raw materials, the importance of transportation strongly asserts itself. The cost to transport pig iron across the Atlantic, and the cost to transport iron ore and coking coal within North America, were important determinants of the volume of British exports.