Globalization and Industrial Policy: Evidence from the Austro-Hungarian Monarchy (IP-KuK)

• Applicant: Professorin Claudia Steinwender, Ph.D.
• Subject Area: Economic Policy, Applied Economics ; Economic and Social History
• Term: since 2025
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 564732427

Industrial policy (IP) has made a significant comeback on government agendas worldwide. While there is growing evidence on successful industrialization episodes characterized by state intervention, the economic mechanisms and efficiency of various industrial policies remain debated. This project investigates the impact of export-led growth policies in the Austro-Hungarian Monarchy (AHM) during 1870-1910. This historical setting offers unique advantages for studying industrial policy in a middle-income country, providing an environment to isolate the effects of specific interventions due to limited communication channels and simpler technological choices than in contemporary settings. The project encompasses three complementary investigations: (i) a study of export promotion through international exhibitions, (ii) an analysis of targeted export-contingent input tariff policies in a key industry, and (iii) a comprehensive review of industrial policy implementation. For export promotion, we examine how the 1900 Paris Exhibition affected firm-level export performance and innovation outcomes. For input tariff policies, we analyze how reduced input costs through "milling traffic" policy affected technology adoption and location choices in the Hungarian milling industry during 1885-1900. Additionally, we examine how the AHM's ethnic and cultural heterogeneity shaped policy effectiveness. The research collects new data and employs quasi-experimental econometric methods aimed at causal inference. For the Paris Exhibition analysis, the identification strategy exploits the government's selection process and pre-determined innovation potential measures from the 1896 Budapest Millennial Exhibition. The milling industry study uses spatial variation in transport access to identify treatment intensity of the tariff policy. This project aims to inform contemporary debates on industrial policy by drawing lessons from historical events and leveraging novel data sources. The unique historical setting allows isolation of specific policy effects that are difficult to identify in modern contexts. The project will digitize novel firm-level data from previously unexplored archival sources - exhibition catalogs, company directories, patent records, and trade statistics - using machine learning algorithms to create comprehensive panel datasets covering 1880-1914. Gábor Békés is an associate professor at CEU, Vienna, working on international economics, firm behavior and data science. Claudia Steinwender is a professor at LMU, Munich working on trade, innovation economics and economic history. Békés's research on technology adoption and diversity, and experience in firm-level data collection complement Steinwender's work on information frictions in historical trade and industrial policy. They published in top journals including American Economic Review, Management Science and Economic Policy.

• DFG Programme: Research Grants
• International Connection: Austria
• Cooperation Partner: Professor Gabor Bekes, Ph.D.