Price Convergence and Market Efficiency in Early Modern Scotland

Abstract

This article examines Scottish commodity market integration from 1630 to 1815. The Scottish economy developed rapidly in this period, with expansion driven by specialisation in agricultural production and the development of markets. We test for price convergence and market efficiency using grain prices from Scotland's fiars courts records. Our results suggest that in the long run price convergence increased across the seventeenth and eighteenth centuries but experienced temporary declines in times of famine and war. The civil war and Cromwellian occupation of the Scottish Lowlands in the 1640s and 1650s, famine in the 1690s, the American War of Independence, and the Napoleonic Wars all caused declines in price convergence. Using a dynamic factor model, we find that market efficiency increased substantially in Scottish markets from the late seventeenth century. This analysis shows that price changes followed distinct regional trends in the east and west of the country in the late seventeenth century but had become strongly integrated at a national level by the eighteenth century.