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Can profitable arbitrage opportunities in the raw cotton market explain Britain’s continued preference for mule spinning?

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In an influential article Saxonhouse and Wright argued that the quality of local cotton was the single most important factor in explaining national preferences for ring or mule spinning. For Britain, they argue that mills using more flexible mule spindles could exploit arbitrage opportunities between different types of cotton in the Liverpool market, reducing the incentives to adopt rings. We use newly assembled price data to show that such cost-reducing arbitrage opportunities were small. We argue instead that the primary determinants of Lancashire’s technological choice were demand factors, but that the availability of good raw cotton did determine technological choice in emerging cotton industries.

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en

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application/pdf

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http://eprints.lse.ac.uk/515/1/wp69.pdf

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