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Mediterranean Labor Markets in the First Age of Globalization: An Economic History of Real Wages and Market Integration

Author(s):Caruana Galizia, Paul
Reviewer(s):Panza, Laura

Published by EH.Net (September 2015)

Paul Caruana Galizia, Mediterranean Labor Markets in the First Age of Globalization: An Economic History of Real Wages and Market Integration. New York: Palgrave Macmillan, 2015. xv + 197 pp. $105 (hardcover), ISBN: 978-1-137-40108-3.

Reviewed for EH.Net by Laura Panza, Department of Economics, University of Melbourne.

The first wave of globalization witnessed one of the largest migrations in history, intensifying particularly during the second half of the long nineteenth century. During the so called “Age of Mass Migrations,” long-distance worker movements occurred at unprecedented and exceptionally high rates.  Caruana Galizia’s book is set in this context of expanding international labor flows, offering an in-depth account of the Mediterranean, a region that has been relatively neglected by the literature. Specifically, Mediterranean Labor Markets in the First Age of Globalization provides a worthwhile contribution to our understanding of the migration patterns of Mediterranean workers, highlighting both the causes and the consequences that such labor movements had for the region. The book investigates important themes such as the timing and the impact of migration on domestic and destination labor markets; the reasons behind migration and the factors delaying or preventing it; and the degree of integration between the Mediterranean and Atlantic labor markets.

After a short introduction, Chapter 2 sets the theoretical and empirical foundations of the investigation underpinning the narrative, based extensively on various works by Timothy Hatton, Jeffrey Williamson, Kevin O’Rourke and collaborators.[1]  Drawing on the Law of One Price, the empirical analysis aims at assessing the degree of market integration between the Mediterranean and New World, measured as the speed of real wage convergence between the two regions. The approach is thus used to identify the existence of Heckscher-Ohlin type of effects on the Mediterranean labor market. Chapter 3 offers a brief general overview of the first wave globalization and its drivers in order to set the Mediterranean experience within the international context. Overall, most of the account focuses on the relationship between the Mediterranean (Algeria, Cyprus, Egypt, France, Gibraltar, Italy, Malta, Serbia, Spain, Tunisia and Turkey) and the New World, but some (limited) space is also devoted to migration within the Mediterranean itself.

Chapters 4 to 7 define migration patterns and present some empirical evidence. Most Mediterranean migrant workers left for the New World (mainly the Americas) and were young, single male agricultural laborers, with low literacy levels. Migration flows followed an inverted U shape: they remained low during most of the nineteenth century, despite the large wage differentials between the labor-abundant Mediterranean and the labor-scarce New World. They started rising at the turn of the century, when real wages increased in the Mediterranean and poverty constraints were relieved, making the cost of moving affordable. Eventually they tapered off, as wages grew further (and as policy constraints in the New World began to spread).
The Mediterranean was a latecomer in intercontinental migration as the region was less industrialized and had lower real wages than North-Western Europe. Nevertheless, Caruana Galizia (fellow at the Institute of Economic History, School of Business and Economics, Humboldt University of Berlin) argues that migration patterns were driven by the same economic forces. Chapter 4 illustrates that the desire to migrate (measured as real wage gaps between the Mediterranean and the New World) and the means to migrate (measured as real wage levels) were important determinants of gross emigration rates.

The empirical analysis in Chapter 5 is aimed at testing the predictions of the Heckscher-Ohlin model and the validity of the Factor Price Equalization Theorem, according to which factor price convergence is achieved via commodity market integration. The results show that tariff policies mattered for convergence. In fact, the Mediterranean countries with less protectionist policies (formal and informal colonies) converged more rapidly with New World’s wages. On the other hand, the Northern Mediterranean countries (Spain, France and Italy) adhered to the tariff backlash of the 1870s, thus putting a break on convergence.

Chapter 6 illustrates that emigration had a positive impact on the reduction of real wage inequality in domestic markets, as the decline in the labor supply of unskilled workers narrowed the skilled-unskilled wage gap.

Chapter 7 offers more detailed evidence at the country level on the impact of emigration on real wage convergence. The findings, based on error-correction models, confirm that labor market integration was the product of migration. The results also show different degrees of integration across the Mediterranean, with the British colonies (Malta, Gibraltar, Cyprus and Egypt) exhibiting strong integration, the Arab and Eastern Mediterranean (Algeria, Tunisia, Turkey, Serbia) having slower speeds of convergence, while large economies (Spain, Italy, France) were not integrated.

Overall, the book provides a very interesting account of Mediterranean labor markets, highlighting the existence of key differences within the region: while the Eastern Mediterranean was less protectionist and had high enough migration flows to become integrated with the international markets, the Northern Mediterranean did not. Indeed one of the key finding of this book is that despite participating in the Age of Mass Migrations, the region did not fully integrate with the global economy.

While this research contributes in filling an important gap in Mediterranean economic history, it could have elaborated more thoroughly on the implications for the region’s lack of integration with the international labor markets, on its causes and on the consequences of achieving different levels of integration across countries. Moreover, it would have been useful and interesting to place more emphasis and provide some empirical evidence on the patterns and impact of migration within the region.

To conclude, the main merit of the book lies in its focus on a relatively understudied region, the Mediterranean: putting together the data set from primary and secondary sources is a very useful accomplishment (details are found in the Appendix). It is a fine source not only for scholars working on the Mediterranean and the Middle East , but also for anyone interested in understanding more about the dynamics of labor markets during the first era of globalization.

Endnote:

1. See, for example, Timothy Hatton and Jeffrey Williamson (2008) The Age of Mass Migration: Causes and Economic Impact, Oxford: Oxford University Press; Jeffrey Williamson and Şevket Pamuk (2000) The Mediterranean Response to Globalization before 1950, London: Routledge; and Kevin O’Rourke and Jeffrey Williamson (1999) Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy, Cambridge, MA: MIT Press.

Laura Panza is an ARC DECRA Research Fellow at the University of Melbourne (Department of Economics). She works on Middle Eastern economic history and has recently published “Did Muhammad Ali Foster Industrialization in Early Nineteenth-century Egypt?” Economic History Review, February 2015 (co-authored with Jeffrey Williamson).

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Subject(s):Historical Demography, including Migration
International and Domestic Trade and Relations
Labor and Employment History
Geographic Area(s):Europe
Middle East
North America
Time Period(s):19th Century
20th Century: Pre WWII