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

In an influential article Saxonhouse and Wright argued that the quality of local cottonwas the single most important factor in explaining national preferences for ring ormule spinning. For Britain, they argue that mills using more flexible mule spindlescould exploit arbitrage opportunities between different types of cotton in theLiverpool market, reducing the incentives to adopt rings. We use newly assembledprice data to show that such cost-reducing arbitrage opportunities were small. Weargue instead that the primary determinants of Lancashire’s technological choice weredemand factors, but that the availability of good raw cotton did determinetechnological choice in emerging cotton industries.[...]