Full steam ahead: Steamship adoption and trade flows during the first golden age of globalization

From 1870 to 1910, shipping to and from the US transitioned from an industry dominated by sail-powered ships to one where steam accounted for virtually 100% of shipping. I study the effects of the steamship on US port-level trade flows and their composition, leveraging cross-port differences in the speed and extent of steamship usage over time. In order to conduct this analysis, I digitize port-level trade flows disaggregated by product and port-level tables of shipping volume broken down by sail versus steam. I find that ports which increased their proportion of steam in shipping volumes increased trade by diversifying their trade flows. This diversification occurred along two dimensions: trading partner countries and products. In other words, ports which adopted steam saw more trade, driven principally by products and countries which were not initially dominant in that port’s trade in 1870. The results in this paper therefore suggest that one way in which trade diversification can occur is via the lowering of transport costs.