Accounting for the great divergence

This paper “accounts” for the Great Divergence between Europe and Asia in two ways. In the sense of measurement: (1) the traditional view, in which the Great Divergence had late medieval origins and was already well under way during the early modern period, is confirmed (2) However, revisionists are correct to point to regional variation within both continents (3) There was a Little Divergence within Europe, with a reversal of fortunes between the North Sea Area and Mediterranean Europe. (4) There was a Little Divergence within Asia, with Japan overtaking China and India. However, Japan started at a lower level of per capita income than the North Sea Area and grew at a slower rate, so continued to fall behind until after the Meiji Restoration of 1868. Any explanation needs to be able to account for the Little Divergences within Europe and Asia as well as the Great Divergence between the two continents. The divergences arose from the differential impact of shocks hitting economies with different structural features. The structural factors include: (1) The large share of pastoral farming in agriculture which helped to put the North Sea Area on the path to high-value-added, capital-intensive, non-human-energy intensive production. (2) Late marriage in the North Sea Area, which lowered fertility and encouraged human capital formation (3) Labour supply, with an industrious revolution helping to explain the Little Divergences within both Asia and Europe (4) Institutions, with the role of the state helping to explain the success of the North Sea Area. The two key shocks were (1) The Black Death, which led to a permanent per capita income gain in the North Sea Area, but not in the rest of Eurasia (2) The new trade routes which opened up from Europe to Asia and the Americas around 1500

British economic growth and the business cycle, 1700-1870 : annual estimates

This paper provides the first annual GDP series for Great Britain over the period 1700-1870. The series is constructed in real terms from the output side, using volume indicators and value added weights. Sectoral estimates are provided for agriculture, industry and services, and for a number of sub-sectors. Estimates of nominal GDP are also provided, based on a benchmark for 1841 and projected back to 1700 and forward to 1870 using the real output series and sectoral price indices. The new data are used to provide a consistent account of economic growth and the business cycle. The results are broadly consistent with the long run path of real output suggested by Crafts and Harley, although growth rates for sub-periods differ, largely as a result of changes in the growth of agriculture. Nominal GDP increased more rapidly than suggested by Lindert and Williamson during the eighteenth century, and more slowly than suggested by Deane and Cole during the first half of the nineteenth century, as a result of differences in the price indices. We also refine the business cycle chronologies of Ashton and Gayer, Rostow and Schwartz

Africa's growth prospects in a European mirror : a historical perspective

Drawing on recent quantitative research on Europe reaching back to the medieval period, and noting a relationship between the quality of institutions and economic growth, this paper offers a reassessment of Africa’s growth prospects. Periods of positive growth driven by trade, followed by growth reversals which wiped out the gains of the previous boom, characterized pre-modern Europe as well as twentieth century Africa. Since per capita incomes in much of sub-Saharan Africa are currently at the level of medieval Europe, which did not make the breakthrough to modern economic growth until the nineteenth century, we caution against too optimistic a reading of Africa’s recent growth experience. Without the institutional changes necessary to facilitate structural change, growth reversals continue to pose a serious threat to African prosperity. Only if growth continues after a downturn in Africa’s terms of trade can we be sure that the corner has been turned

Recent developments in the theory of very long run growth: a historical appraisal

This paper offers a historical appraisal of recent developments in the theory of very long run growth, focusing on three main areas: (1) linkages between wages, population and human capital (2) interactions between institutions, markets and technology and (3) sustaining the process of economic growth once it has started. Historians as well as economists have recently begun to break away from the traditional practice of using different methods to analyse the world before and after the industrial revolution. However, tensions remain between the theoretical and historical literatures, particularly over the unit of analysis (the world or particular countries) and the role of historical contingency

The historical roots of India’s service-led development: a sectoral analysis of Anglo-Indian productivity differences, 1870-2000

Overall labour productivity in India was already only around 15 per cent of the UK level between the early 1870s and the late 1920s. Between 1929 and 1950 India fell further behind and remained at around 10 per cent of the UK level until the 1970s. India has been catching-up since the 1970s, but by the end of the twentieth century was still further behind than in the late nineteenth century. Agriculture has played an important role in India’s relative decline to 1950 and subsequent delay in catching up, since comparative India/UK labour productivity in this sector has declined continuously and agriculture still accounts for around two-thirds of employment in India. Comparative India/UK labour productivity in industry has fluctuated around a level of around 15 per cent. The only sector to exhibit trend improvement in comparative India/UK labour productivity over the long run is services, rising from around 15 per cent to around 30%. India’s recent emergence as a dynamic service-led economy appears to have long historical roots

Anonymity, efficiency wages and technological progress

Although the industrial revolution is often characterized as the culmination of a process of commercialisation, the precise nature of such a link remains unclear. This paper provides an analysis of one such link: the role of commercialisation in raising wages as impersonal labour market transactions replace personalized customary relations. In the presence of an aggregate capital externality, we show that the resulting shift in relative factor prices will, under certain conditions, lead to higher capital-intensity in the production technology and hence, a faster rate of technological progress. We provide historical evidence using European data to show that England was among the most urbanized and the highest wage countries at the onset of the industrial revolution. The model highlights the effects of changes in the availability of information, typical of a modernising country, on efficiency wages and technological progress

British economic growth : 1270 - 1870

We provide annual estimates of GDP for England between 1270 and 1700 and for Great Britain between 1700 and 1870, constructed from the output side. The GDP data are combined with population estimates to calculate GDP per capita. We find English per capita income growth of 0.20 per cent per annum between 1270 and 1700, although growth was episodic, with the strongest growth during the Black Death crisis of the fourteenth century and in the second half of the seventeenth century. For the period 1700-1870, we find British per capita income growth of 0.48 per cent, broadly in line with the widely accepted Crafts/Harley estimates. This modest trend growth in per capita income since 1270 suggests that, working back from the present, living standards in the late medieval period were well above “bare bones subsistence”. This can be reconciled with modest levels of kilocalorie consumption per head because of the very large share of pastoral production in agriculture