'Mind the Gap!': Transport Costs and Price Convergence in the 19th Century Atlantic Economy.

This paper challenges the widely held view that sharply falling real transport costs closed the transatlantic gap in grain prices in the second half of the 19th century. Several new results emerge from an analysis of a new data set of weekly wheat prices and freight costs from New York to UK markets. Firstly, there was a decline in the transatlantic price gap but it was not sharp and the gap remained substantial. Secondly, the fall in the transatlantic price differential had more to do with improved market and marketing efficiency than with falling transport costs. Thirdly, spurious price convergence (or divergence) can appear if quality differences associated with allegedly homogeneous commodities like wheat are not controlled for.