Merchant Networks in Big Cities

In the 18th century, every second merchant ship sailing from Britain to the Baltic did not carry any exports. This was caused by trade imbalances that were driven by high demand for grains and other raw materials in Britain. Trip level data show that merchant ships based in larger British cities were more likely to make non-empty trips and carried more varieties. This paper argues that wider and denser networks of merchants in large cities, which facilitated information flows and improved the efficiency of matching, allowed them to outperform merchants from other British ports. Furthermore, ships that were based in smaller ports did not improve their performance when they departed from larger cities. This finding and additional tests provide evidence against competing explanations.