Market integration in Quebec, 1795-1889

In writing about other things related to my research on pre-confederation economic history in Canada, I discovered datasets that allowed me to study prices across regional markets for butter from 1795 to 1889. The results I found were surprising because I expected the direction to run in the opposite direction, especially after confederation because of the expansion of road networks, literacy, international trade and railways. Yet, the markets of Montreal and Quebec are widely divergent with prices in Montreal being systematically higher than in Quebec.

MarketInter

Why would prices be higher in Montreal systematically leading individual farmers to make use of arbitrage possibilities? Exports markets are not an answer since the quantity of butter exported per capita exhibits a downward trend and there are more imports of butter than exports of butter. Clearly, something is preventing market integration, especially after confederation. Notice that from the end of the Anglo-American war of 1812-1815, the trend is downwards (meaning less divergence between markets) and the uptick begins in the early years of confederation.

For economic historians, there is something happening there that is worthy of studying and could yield possibly interesting nudgets about Quebec’s poor economic performance in the early days of Confederation.

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