Diskussionsbeiträge des Fachbereichs Wirtschaftswissenschaft ; 2005/20 : Volkswirtschaftliche Reihe
border effects, grain prices, Habsburg empire, market integration, nationalism, Pre-1914 Europe
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This paper explores the pre-First World War Austro-Hungarian economy as a prominent
case where growing conflict between various ethnic and national groups within an
empire might have contributed to the emergence of internal borders and even its
eventual dissolution. To this end we adopt an Engel-and-Rogers–type approach to
examine on an annual basis the extent of co-movements in grain prices across a sample
of ten regional capital cities in the empire and over the period 1877-1910. There are two
key findings. First, the political borders that emerged from 1918 onwards became
visible in the price dynamics of grain markets already 20 years before the Great War.
Second, this effect of a “border before a border” can be explained by the extent of
language heterogeneity across the various parts of the Habsburg Empire. These results
raise several important questions about both the forces that shaped pre-war market
integration as well as the economic costs of breaking up the Habsburg customs union
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