History Term 1 Slides

EC104
The World Economy: History & Theory
Terms 1 & 2
2023-2024
University of Warwick — Department of Economics

Claudia Rei
(module leader)
Introduction to EC104
■ Goals for this hour:
■ Meet your teaching team
■ The World Economy: History and Theory, meaning?
■ Goals and topics covered
■ Module assessment and organisation
■ Get familiar with moodle page
■ Some tips
■ What we expect from you
2
■ Lectures: 20 in each term, block of 2h on Fridays each term week
— Meet your lecturers!
Claudia in term 1 James in term 2
c.rei@warwick.ac.uk j.fenske@warwick.ac.uk
3
■ Seminar classes: 9 on alternate weeks starting week 3 of T1 (& w1 of T2)
— Meet your 4 class tutors!
Claudia Cecilia Jose Junxi
c.rei@warwick.ac.uk cecilia.lanata-briones@warwick.ac.uk j.corpuz.1@warwick.ac.uk junxi.liu.1@warwick.ac.uk
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■ EC104 – The World Economy: History and Theory
■ Economic History
→ looking at history through the lens of economics
→ understanding economic incentives behind past events
→ understanding the economic implications of historical events
■ NOT History of Economic Thought

→ how economic science has evolved through time
→ study of the emergence of economics concepts and theories
→ looking into the work of influential economists in history
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■ Goals of EC104
■ Understand how the world economy evolved up to today:
→ learn quite a bit about key events in history – read a lot!
■ Other modules teach you how to be an economist (tools)

■ EC104 shows you what economists do (using the tools)
■ Read, understand, and interpret academic work

■ Learn from different materials:
→ book chapters, research papers in economics
■ Develop analytical, writing, and verbal skills

■ Ultimately: learn and think like an economist
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■ Topics covered
■ Term 1 (Claudia)
weeks 1-2 1. Pre-Modern Growth: pre-1500
weeks 3-4 2. Early Modern Period: 1500-1750
weeks 5-6 3. The British Industrial Revolution: 1750-1850
weeks 7-8 4. Living Standards: 1750-1850
weeks 9-10 5. The World Economy: 1850-1900
■ Term 2 (James)
weeks 1-2 6. Globalisation and Colonisation: 1870-1914
weeks 3-4 7. The Interwar Period: 1914-1945
weeks 5-6 8. Post-war Recovery and Decolonisation: 1945-1979
weeks 7-8 9. Economic Reform: 1979-2001
weeks 9-10 10. The Contemporary World Economy: 2001-present
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Term 2
2 REQUIRED books
Background for topics

covered in lectures
Base for seminar discussions
Online via library, Amazon, etc.

____________
READ THEM!
Term 1 8
■ Module assessment
■ Two essay assignments (submitted on tabula)
→ 1st at the end of term 1 (in groups of 2 or 3) 20%
→ 2nd at the end of term 2 (individually) 20%
■ Class participation 10%
■ Final exam in term 3 50%
→ random essay groups will be released by week 4 of term 1:

– not all students are used to writing essays
– not all students are native English speakers
– natural way to foster good study skills (summaries, notes, discussion, …)
– hopefully, long-lasting effects though year 1 and beyond
– free rising is unfortunate but a life lesson; if egregious let Claudia know
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■ Module organisation
■ Lectures (large)
→ 2h a week in terms 1 and 2
→ each topic has allocated chapters from required readings
→ you have two weeks to do the readings for each topic (~30p/week)
– required readings are the background, not the focus, of lectures
– you are not in high school anymore!
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■ Lectures (large)
→ 2h a week in terms 1 and 2
→ each topic has allocated chapters from required readings
→ you have two weeks to do the readings for each topic (~30p/week)
– required readings are the background, not the focus, of lectures
– you are not in high school anymore!
→ lecture slides mostly based on other sources

– book chapters or research papers (read only if you want to know more)
– all sources are referenced on slides (learn how to cite, it will earn you marks!)
– need to consult any of these sources? The library is your friend!
Short demonstration on how to find sources through the library
11
■ Seminar (small) classes starting in week 3 of term 1
→ 1h every 2 weeks in terms 1 and 2
→ questions for discussion from required readings and lectures
→ all questions available from NOW (week 1 of term 1)
– sketch an answer beforehand – easy participation, speak up!
→ student attendance is required AND participation is assessed

– take it seriously, attendance is NOT participation
– showing up and saying nothing = zero in participation grade
– sending email answers to your tutor after class is not valid participation
→ your seminar tutor wants you to do well

– office hours, feedback on assignments, participation
→ goal: help you keep up with the material – a lot of reading! 12

■ Resources available to you on Moodle page
■ Info on advice and feedback hours: lecturers and tutors
■ Info on required readings week by week
■ Info on essay assignment questions, readings & requirements
■ Lecture slides and recordings (ex-post)
■ Seminar class questions and allocated readings
■ Sign up for a study group, if you wish (not the essay group)
■ Advice section (FAQs): how to study, essay and exam advice
■ Forum: use it if you have questions on the material email is
inefficient!
→ Goal: help you navigate the module
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■ Some tips: sample of FAQ section on moodle
■ How do I study for this module?
■ How important is it to do the required readings?
■ Can I just use the lecture notes to study?
■ How is participation marked?
■ How do I cite academic papers properly in an essay?
■ How do I avoid committing plagiarism?
■ It’s week 5 and I am overwhelmed with the readings. Tips?
■ Can I use website sources for the essay assignments? NO!!
(e.g., wikipedia, investopedia, blogs, news websites (BBC, NYT, …), youtube, …) 14
■ Some tips: Google and ChatGPT when to
■ Do it to clarify concepts, events, timing, acronyms, …
✓
→ missions, fallow land, the Enlightenment, …
→ Berlin conference, the scramble for Africa, …
→ ECSC, OECD, EPU, …
■ Grammar…
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■ Some tips: Google and ChatGPT when to or NOT to
■ Do it to clarify concepts, events, timing, acronyms, …
✓
→ missions, fallow land, the Enlightenment, …
→ Berlin conference, the scramble for Africa, …
→ ECSC, OECD, EPU, …
■ Grammar…
■ NEVER: to interpret concepts, look for answers to essays
→ ChatGPT generates trivialities and writes badly (!)
✕ – stuff you knew before you had EC104, no proper citations

→ Google provides multiple sources: some reputed, most not
→ BBC documentaries, Wikipedia, youtube videos, etc.
(you will lose marks!)
– maybe good starting points but not credible sources to cite

→ an example… 16
In sum:
Your essays should show careful reasoning and interpretation of readings

Shortcuts show laziness and ignorance
Why go out of your way to get a BAD mark?
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■ Some tips for the future (past EC104): google scholar
■ Core journals in economics
→ American Economic Review
→ Econometrica
→ Quarterly Journal of Economics All available online
→ Review of Economic Studies through the library
→ Journal of Economic Literature
→ Journal of Political Economy Do not pay fees!!
■ Economic History (field) journals

→ Journal of Economic History
→ Explorations in Economic History
→ Economic History Review
→ European Review of Economic History 18
■ Some tips: how to approach research papers (from lectures)
■ Identify the research question/puzzle

■ Identify the method
→ empirical/theoretical model?
→ type of analysis?
→ is there data? What type? What source?
■ Results
→ what is the answer to the question posed?
→ is it a credible answer? Are you satisfied? Alternative story?
Advice: take (your own) notes, make summaries, sign up for a study group
BUT when submitting individual work use your own words!
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■ What we expect from YOU
■ Do the required readings for each topic (2 weeks per topic)
■ Come to lectures! Binging on recordings yields poor results
■ Go to seminar classes (we take attendance) and participate
■ Do not fall in the plagiarism trap – use resources available!
___________
Not doing the readings, not going to lectures and/or seminars?
– You WILL fall behind and find it very hard to prepare for the exam (50%)
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___________
Not participating in seminar classes?
– You WILL get a zero in your participation mark (10%)
21
___________
Using Google, ChatGPT unwisely? Copy-pasting directly from sources?
– You WILL likely fail your essay assignments (min. passing grade 40%)
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___________
Using Google, ChatGPT unwisely? Copy-pasting directly from sources?
→ students doing any of these will do badly, and may fail EC104
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Rolf the Campus cat
Instagram and Twitter
@rolfatwarwick
EC104
Topic 1: Pre-Modern Growth: pre-1500

Overview of World Economic History
Claudia Rei
Overview of World Ec. History
■ Goals for this lecture
■ Some definitions
■ Measurement and data
■ Understanding world economic history
2
■ Some definitions
“World economic performance was much better in the second millennium
than in the first. (…)
→ How do (macro)economists measure economic performance?

i.e. GDP
in levels GDPpc = Value of production in a year or output
Population
in rates GDPpc1 – GDPpc0

GDPpc0
→ Modern economic growth is sustained growth of GDPpc (>0 rate)
3
Economic performance presently (levels)
Rank Country GDP per capita (2021 US$)
1 Luxembourg $133,363
4 Qatar $102,018
11 United States $69,287
19 Germany $58,290
26 United Kingdom $50,860
39 Japan $42,251
40 Spain $40,602
57 Malaysia $28,989
65 Argentina $23,649
77 China $19,338 World (83)
86 Botswana $16,304 $18,607
108 Indonesia $13,027
127 Morocco $8,852
131 India $7,242
147 Nigeria $5,408
153 Myanmar $4,430
190 Democratic Republic of Congo $1,179
192 (last) Burundi $774
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Source: World Bank (https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?most_recent_value_desc=true)
Economic performance presently (rates)
Rank Country Annual GDPpc growth (%)
103 Luxembourg 3.5 (2021)
88 Qatar 4.3 (2021)
59 United States 5.8 (2021)
127 Germany 2.6 (2021)
43 United Kingdom 7.1 (2021)
2021
129 Japan 2.1 (2021) World (91)
67 Spain 5.4 (2021) 5.0%
131 Malaysia 1.9 (2021)
28 Argentina 9.4 (2021)
35 China 8.0 (2021)
25 Botswana 9.6 (2021)
117 Indonesia 3.0 (2021)
50 Morocco 6.8 (2021)
38 India 7.8 (2021)
149 Nigeria 1.2 (2021)
197 (2nd to last) Myanmar –18.5 (2021)
121 Democratic Republic of the Congo 2.8 (2021)
176 Burundi –0.9 (2021)
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Source: World Bank (https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?most_recent_value_desc=true)
Economic performance presently (rates)
Rank Country Annual GDPpc growth (%)
103 Luxembourg –3.4 (2020) 3.5 (2021)
88 Qatar –5.3 (2020) 4.3 (2021)
59 United States –4.3 (2020) 5.8 (2021)
127 Germany –4.6 (2020) 2.6 (2021)
43 United Kingdom –9.6 (2020) 7.1 (2021)
2021
129 Japan –4.2 (2020) 2.1 (2021) World (91)
67 Spain –11.3 (2020) 5.4 (2021) 5.0%
131 Malaysia –6.9 (2020) 1.9 (2021)
28 Argentina –10.8 (2020) 9.4 (2021)
35 China 2.0 (2020) 8.0 (2021)
2020
25 Botswana –10.6 (2020) 9.6 (2021) World (106)
117 Indonesia –3.1 (2020) 3.0 (2021) –4.3%
50 Morocco –7.4 (2020) 6.8 (2021)
38 India –7.5 (2020) 7.8 (2021)
149 Nigeria –4.3 (2020) 1.2 (2021)
197 (2nd to last) Myanmar 2.5 (2020) –18.5 (2021)
121 Democratic Republic of the Congo –1.4 (2020) 2.8 (2021)
176 Burundi –2.7 (2020) –0.9 (2021)
6
Source: World Bank (https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG?most_recent_value_desc=true)
■ Some definitions – clarifications
§ GDP per capita (level) is an indicator of economic development
§ not a perfect measure of economic development
§ not the only measure of economic development
§ + correlation w/ other economic indicators (we will see some shortly)
§ GDP growth (rate) is an indicator of economic growth
→ these two indicators proxy different things

→ not necessarily related at present
→ how about historically?
7
Economic performance in the past two millennia
Modern economic growth
Pre-modern growth
8
■ Understanding World Economic History
than in the first. Between 1000 and 1998 population rose 22-fold and per
capita income 13-fold. In the previous millennium, population rose by a
sixth and per capita GDP fell slightly. (…)
9
sixth and per capita GDP fell slightly. The second millennium comprised
two distinct epochs. From 1000 to 1820 the upward movement in per
capita income was a slow crawl… since 1820 world development has been
much more dynamic.” (Maddison 2001)
→ Does it make sense to view World Economic History this way? DATA
— population and output
10
11
let’s look at some
correlates
12
sixth and per capita GDP fell slightly. The second millennium comprised two
distinct epochs. From 1000 to 1820 the upward movement in per capita
income was a slow crawl… since 1820 world development has been much
more dynamic.” (Maddison 2001)
→ Does it make sense to view World Economic History this way? DATA
— population and output
MORE DATA
— wages and poverty
— health indicators
— broad standard of living measures
13
Source: Allen’s database on historical wages and prices
14
https://www.nuffield.ox.ac.uk/people/sites/allen-research-pages/
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16
17
18
19
20
21
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Different regions performed differently
Convergence among the rich and Divergence with the poor (Pritchett 1997)
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■ Why was the 19th century different?
■ Trade was different
■ Previous periods of increased trade (Findlay and O’Rourke 2007):
→ pre-15th c.: empires in Phoenicia, Persia, Greece, Rome, Ottoman
empire, Italian City States
→ 15th c.: great “discoveries” by Portugal and Spain
→ 16th 17th 18th c.: empires in Portugal, Spain, Neth., Britain, France
→ 19th c.: transport revolution and British liberalism
→ 20th c.: global trade liberalization
■ Debate about the start of globalisation
commodity trade + movement of K and L

24
■ Trade alone was insufficient for globalisation
■ O’Rourke and Williamson (2002): need price convergence
meaning?
25
■ Did 1492(?) and 1498(?) show price convergence?
26
■ Did 1492(?) and 1498(?) show price convergence?

→ very little, most trade in non-competing goods (examples?)
→ consumed by very few
→ trade in luxuries reflects arbitrage opportunities
→ vast majority of the population remained poor
→ little impact on growth or SoL (if existent, very slow)
■ Integration of markets needs more than trade

→ movement of K and L to the frontier
27
■ 19th century transport revolution
O’Rourke and Williamson (2002: 36) 28

■ Non-competing goods: less arbitrage in the 19th c.
O’Rourke and Williamson (2002: 33) 29

■ REFLECT: by now you should be able to define/discuss
How economists measure economic growth
Modern economic growth
The different periods of growth and their characteristics
19th century globalization and its characteristics
Note: you will learn far more detail on post-1870 material in Term 2, just you wait!
30
References
Findlay, R. and K.H. O’Rourke. Power and Plenty: trade, war and the world economy in the second millennium.
Princeton: Princeton University Press, 2007.
Fouquet, R., and P. J. G. Pearson (2012) “The long run demand for lighting: elasticities and rebound effects in
different phases of economic development,” Economics of Energy and Environmental Policy 1 (1): 83–100.
Harley, K. (1988) “Ocean freight rates and productivity 1740-1913: the primacy of mechanical invention” Journal
of Economic History 48 (4): 851-876.
Hasell, J. and M. Roser (2013) "Famines" OurWorldInData.org. Retrieved from:
'https://ourworldindata.org/famines' [Online Resource]
Maddison, A. The world economy: a millennial perspective. Development Centre Studies, OECD Publishing, Paris,
2001.
O’Rourke, K. and J. Williamson (2002) “When Did Globalization Begin?” European Review of Economic History 6
(1): 23-50.
Pinker, S. The Better Angels of Of Our Nature: a History of Violence and Humanity, Penguin Books, 2011.
Pritchett, L. (1997) “Divergence, Big Time” Journal of Economic Perspectives 11 (3): 3-17.
Riley, J. C. (2005) “Estimates of Regional and Global Life Expectancy, 1800-2001,” Population and Development
Review 31 (3): 537-543.
Roser, M. and E. Ortiz-Ospina (2016) "Literacy" OurWorldInData.org. Retrieved from:
'https://ourworldindata.org/literacy' [Online Resource]
Roser, M., H. Ritchie and B. Dadonaite (2013) "Child and Infant Mortality” OurWorldInData.org. Retrieved from:
'https://ourworldindata.org/child-mortality' [Online Resource]
World Bank (2021) “GDP per capita, PPP” “GDP per capita growth” worldbank.org Retrieved from
“https://data.worldbank.org/indicator/” [Online Resource]
31
EC104

Determinants of Growth
Claudia Rei
■ Goals today
■ Sources of growth in and out of the production function
■ Institutions
■ Geography
■ Demography
2
■ Understanding ec. growth from a macro perspective
𝑌 = 𝐴𝐾 a 𝐿b 𝑅!"a−b
Cobb-Douglas
production function
3
■ Understanding ec. growth from a macro perspective
𝑌 = 𝐴𝐾 a 𝐿b 𝑅!"a−b
Sources of growth (Szirmai 2005):

■ Proximate sources (directly measurable or inferred)
■ K, L, and R accumulation
■ Technological change A (we’ll deal with this one in Topic 3)
■ Deep determinants
■ Institutions
■ Geography
■ Demography
4
■ Growth accounting (minor transformations to the Cobb-Douglas)
𝑌 = 𝐴𝐾 a 𝐿!"a
levels
𝑙𝑛𝑌 = 𝑙𝑛𝐴 + a𝑙𝑛𝐾 + (1 − a)𝑙𝑛𝐿
∂𝑙𝑛𝑌 ∂𝑙𝑛𝐴 ∂𝑙𝑛𝐾 ∂𝑙𝑛𝐿

= +a + (1 − a)
∂𝑡 ∂𝑡 ∂𝑡 ∂𝑡
rates
𝑌̇ 𝐴̇ 𝐾̇ 𝐿̇
= + a + (1 − a)
𝑌 𝐴 𝐾 𝐿
Disaggregated contributions to output growth (proximate sources):
Growth of Y = Residual growth + Growth of K + Growth of L

(TFP) 5
■ Understanding differences in economic growth
Across countries today:
■ Rich countries have higher returns on their K stock on average
■ Rich countries have larger stocks of human capital (≠L)
■ Rich countries have more resources to invest in technology
Over time:
■ Deep determinants at work!
■ Institutions facilitate or hinder economic growth
■ Geography is a permanent feature affecting long-run dev.
6
■ Institutions as deep determinants of ec. growth
“… humanly devised constraints that shape human interactions.” (North 1990)
■ Formal
■ legal system: civil vs common law, …
■ political system: parliament vs president, democracy vs autocracy, …
■ economic system: capitalism vs socialism, feudalism vs serfdom, …
■ education system: private / public / sate schools, …
■ health system: private, public (e.g., NHS), …
■ Informal
■ culture: morals, customs, norms, trust, …
“… rules of thumb that aid in decision making.” (Nunn 2012)
7
■ Geography as a deep determinant of ec. growth
■ precedes development of institutions and influences them

■ can favor or hinder economic development
→ Classical growth models, no wedges: A, K, L, R alone influence Y
→ Institutions: frictions to classical model (i.e., history is always more complicated!)

→ Geography: may explain (very) long-run growth differences
An example:
emergence of settled agriculture 10,000 years ago
8
A theory by Jared Diamond
Diamond (1998: 99) 9

A theory by Jared Diamond (cont.)
Diamond (1998: 177) 10

fitted lines
Correlation!
Olsson and Paik (2020: 103) 11

■ Geography as a deep determinant of ec. growth (cont.)
First and second nature geography (Caruana-Galizia et al 2021):
■ 1st nature: physical geography
■ 2nd nature: man-made geography affected by human action,
including location of economic activity
Latitude and development (Sachs 2003):

■ Tropical soil is fragile and infertile
■ High evaporation and unstable water sources
■ Climate lacks dry season and high prevalence of pests and parasites
■ Ecological conditions favoring infectious diseases (affects the ability to work)
■ High transport costs
12
Some more correlations
wide range of diseases
Andersen et al (2016: 1339) 13

Some more correlations (cont.)
Easterly and Levine (2003: 16) 14



Production function and Growth accounting
Proximate sources and Deep determinants of growth
Importance of Institutions and Geography on growth
First and Second nature geography
Diamond’s theory of growth, other theories of growth

Basic growth (Geo & Inst) correlations
17
■ Demography – the Malthusian model
■ Basic principle: population would outrun food supply

→ Thus, population growth is limited by food growth
■ How it works mathematically (simplified framework):

(1) Mt = a – bwt
(2) Bt = c + dwt What’s the impact of a positive shock
to resources today? ↑ wt
(3) wt = e – fPt
(4) Pt+1 = Pt + Bt – Mt
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■ Demography – the Malthusian model (cont.)
How the Malthusian model works:
■ ↑wt à Bt↑ & Mt↓ by (1) and (2) i.e., Pt+1↑ by (4)
■ but Pt+1↑ brings wt+1↓ by (3)

■ wt+1↓ à Bt+1↓ & Mt+1↑ … reverse! à P is bounded by w (& vv)
Malthusian trap
■ Growing at its natural rate population outruns food supply

→ Vast majority of the population lives at subsistence (0-growth)
→ Regulation mechanisms (keeping P and w bounded):
– positive checks (↑M)
examples?
– and preventive checks (↓B)
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■ Validity of the Malthusian model
■ Explains pre-modern growth of P & w rather well
→ long run stagnation – entire history of humankind until IR!
■ Fails to explain modern economic growth (sustained raises of GDPpc)
■ Assumptions that change with MEG:

We’ll deal → IR gains in L-productivity, ↑ growth rate of resources above Pop
with this later → IR brings sustained growth instead of sporadic growth events
→ in time, + income shocks no longer lead to more children ↓F
Let’s look at the data
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■ Global population trends since the IR
~1750: IR
MEG (↑Y)
estimates
Lee (2003: 168)
■ Rising Y brings F down; but P is rising so M is falling as well

→ Demographic Transition –– from high F&M rates to low F&M rates
preventive checks? – speed of ↓M relative to ↓F matters for population size
positive checks?
– escaping Malthusian trap: variation in timing & duration by country 21
■ Focusing on the fertility transition (only half the story!)
22
■ Focusing on the fertility transition: causes
– Demographers and sociologists point to social/cultural reasons
– Economists have focused on incentives
Becker (1973) introduces a model of HH fertility (Q-Q trade off)

■ parents derive utility in both quantity and quality of children
■ Low-income elasticity for Quantity and high for Quality
■ ↑HH income will ↑Dql but ↓Dqt – latter dominates: fewer kids
■ Why does the ↓Dqt dominate? (Guinnane 2011)
→ rising opportunity cost of child-bearing
→ rising costs of raising children Incentives matter!
→ decline in need for social insurance
→ (…)
23
■ Focusing on the fertility transition: consequences
Madsen et al (2020): could it have contributed to 20th c. growth?
■ ↓F and ↑Y fairly coincident in timing, but is there causality?
■ tested in data collected for 21 advanced countries 1820-2015
■ problem: simultaneous determination of F & Y (endogeneity)

■ econometrics: instrumental variable procedure to isolate causal channel
* IV: only use the variation in F that is uncorrelated with all else that can affect Y
■ result: ↓F brings productivity effects through various channels

■ education, saving, investment and female labor force participation
Note: we will deal with the intuition behind IV and other econometrics
techniques in later lectures
24
Malthusian Economy and Malthusian Trap
Preventive and Positive checks
Demographic transition
Quality-Quantity trade off
25
References
Andersen, T. B., C.J. Dalgaard and P. Selaya (2016) “Climate and the emergence of global income differences,” The
Review of Economic Studies 83 (4): 1334-1363.
Becker, G. S., and H. G. Lewis (1973). “On the Interaction between the Quantity and Quality of Children.” Journal of
political Economy, 81 (2, Part 2): S279-S288.
Caruana-Galizia, P., T. Hashino, and M. Schulze (2021) “Underlying Sources of Growth: First and Second Nature
Geography,” in The Cambridge Economic History of the Modern World, Chapter 14, Volume II, pp. 382-417.
Diamond, J. M. Guns, germs and steel: a short history of everybody for the last 13,000 years. London: Vintage,
1998.
Easterly, W. and R. Levine (2003) “Tropics, germs, and crops: how endowments influence economic development,”
Journal of Monetary Economics, 50: 3-39.
Guinnane, T. W. (2011) “The Historical Fertility Transition: A Guide for Economists,” Journal of Economic Literature
49 (3): 589–614.
Lee, R. (2003) “The Demographic Transition: Three Centuries of Fundamental Change,” Journal of Economic
Perspectives 17, 4: 167-90.
Malthus, T. An Essay on the Principles of Population. 1798.
Madsen, J.B., M.R. Islam, and X. Tang (2020) “Was the post-1870 fertility transition a key contributor to growth in
the West in the twentieth century?” Journal of Economic Growth 25: 431-454.
North, D. C. Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press,
1990.
Nunn, N. (2012) “Culture and the historical process,” Economic History of Developing Regions 27 (S1): 108.126.
Olsson, O. and C. Paik (2020) “A western reversal since the Neolithic? The long-run impact of early agriculture,”
Journal Of Economic History 80 (1): 100-135.
Sachs, J. D. (2003) “Institutions don’t rule: direct effects of geography on per capita income,” NBER Working paper
#9490.
Szirmai, A. (2005) “Growth and stagnation: theories and experiences,” in The Dynamics of Socio-Economic
Development (2nd ed.), Chapter 3, pp. 67-116. Cambridge: Cambridge University Press.
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EC104

The World Economy pre-1500
Claudia Rei
■ Focus on three episodes of non-sustained growth
■ Islamic world
■ China
■ Europe
(…)
Note 1: the required readings may discuss these (& more) regions
and time periods but in lecture I favor different sources.
Note 2: objective is NOT to document growth episodes but to

highlight some literature you may pick up if interested.
This lecture shows you examples of what economists do! 2

■ Islamic world (Findlay and O’Rourke 2007)
■ Death of founder in 632AD, conquests proceed into the 8thc.
■ Extended territory:
→ starting in the Arabian Peninsula
→ extending into Persia, Greece, Rome and the W Mediterranean
■ Measurement? – no national accounting until late 1800s
Where else can we look?
3
Chaney (2016: 36) 4
Origins of authors prior to 1500 CE
Chaney (2016: 36) 5

■ Islamic world (Findlay and O’Rourke 2007)
■ Death of founder in 632AD, conquests proceed into the 8thc.
■ Extended territory:
→ starting in the Arabian Peninsula
→ extending into Persia, Greece, Rome and the W Mediterranean
■ Measurement? – no national accounting until late 1800s
7th-13th c. ■ Production of science and culture under three Caliphates

Golden Age → Rashidun 632-661, Umayyad 661-750, and Abbasid 750-1258
of Islam
■ Vastly understudied history due to lack of data – exceptions!
6
■ Chaney (2013) “Revolt on the Nile…”
■ Link between economic crises and political instability
■ In the context of Islamic Egypt (641-1517):

→ agricultural yields strongly influenced by the Nile
→ floods/droughts affected yields severely – Nile shocks
→ could induce famines – ↑prices, hoarding, social unrest
→ social unrest rose influence of religious leaders (judges)
→ potential for successful coordination revolt against political power
Finding: judges less lik. removed in shocks (controlled popular support)
■ Measurement?
7
The Cairo Nilometer
8
■ Chaney (2013) “Revolt on the Nile…”
■ Link between economic crises and political instability
■ In the context of Islamic Egypt (641-1517):

→ agricultural yields strongly influenced by the Nile
→ floods/droughts affected yields severely – Nile shocks
→ could induce famines – ↑prices, hoarding, social unrest
→ social unrest rose influence of religious leaders (judges)
→ potential for successful coordination revolt against political power
Finding: judges less lik. removed in shocks (controlled popular support)
■ Measurement:
→ data on annual flood levels 622-1469
→ data on month and year of judge changes 641-1437 9
10
Chaney (2013: 2040)
■ Islamic world – other research
■ Chaney (2013 and 2016) test potential channels of causality
■ Michalopoulos et al (2018):
→ investigate the motives behind the spread of Islam
→ proximity to pre-600 trade networks predicts adherence
■ Kuran (2018): Islam and economic performance (JEL – review)
11
■ China (Findlay and O’Rourke 2007)
■ Two periods of pre-industrial growth (efflorescences, not MEG)
→ early Northern Song (960-1127)
→ Late Ming (1405-33): Western voyages commanded by Zheng He
■ Measurement: how do we know there was economic growth?

→ pre-late 1800s, GDPpc estimates based on population/urbanization
→ why are population and urbanization good proxies for pre-MEG?
→ minting of coins (industry), number of public servants (services)
→ look at specific historical events that indicate creation of value
12
■ China (Findlay and O’Rourke 2007)
Narrative evidence
■ Song peak (960-1127)

→ increase in cultivated area, new high-yielding rice variety
→ growth of industry and service sector
■ Late Ming voyages (1405-33)

→ Great naval expeditions mounted before Europeans did it
→ fleet of 200-300 ships and up to 28,000 men (largest until WWI)
→ wide geographic spread
13
Source: education.maritime-museum.org
■ Let’s look at the empirical evidence (aka data) 14

■ China
■ Malthusian world: agricultural sector
Song Voyages
15
Broadberry et al (2018: 965)
■ China
■ Malthusian world: industrial sector
Song Voyages
16
■ China
■ Malthusian world: service sector
Voyages
Song
17
■ China – other research
■ Bai and Kung (2011)
→ documents clash of civilizations lasting more than 2000 years
→ importance of the Sino-nomadic conflict in shaping China
* nomadic economies were heavily dependent on grazing (rainfall)
→ less rainfall brings higher probability of conflict
* drought leads to crop failure – shortage in fodder, thus meat production
* looting of settled ag. neighbors (e.g., Han Chinese) to survive
■ Shiue (2017)
→ relationship between education and fertility in China 13th-20th c.
* Q-Q trade-off present 17th to the 19th c. among educated, not befr or aftr
→ changes in civil service examination affect returns to H-capital
→ fertility choices respond to economic incentives
18
■ Europe (Findlay and O’Rourke 2007)
■ Black death – major event in European history
→ Implications for economic growth? Measurement?
19
Clark (2007: 123) 20

Still in England
starting
point
Clark (2007: 104) 21

Similar pattern outside of England
De Vries (2000: 453) 22

■ Europe (Findlay and O’Rourke 2007)
■ Black death – major event in European history
→ Implications for economic growth? Measurement?
→ another example of a Malthusian economy
BUT… big shock inducing changes in:

→ demographics, specialization patterns, urbanization trends
→ arguably the beginning of the end of the Malthusian trap in WE
→ from zero growth to (very) slow growth: implications G.Div. (Topic 2)
Two theories by Voigtländer and Voth in 2013
23
■ Europe
Mortality ■ #1: V&V (2013a) “The Three Horsemen of Riches (…)”
→ 3 horsemen: BD + Europe’s belligerent history + nature of cities
→ how can output grow in a Malthusian system?
→ ↑wages resulting from plague not eaten up by ↑B
→ war and urbanization bring ↑M – new equilibrium
Let’s look at a stylized graphic representation of their 1st model
24
Voigtländer and Voth (2013a: 776) 25

■ Europe
Fertility ■ #2: V&V (2013b)“How the West ‘Invented’ Fertility Restriction”
→ emergence of a new marriage pattern in Europe post BD
→ BD ↓ 30-40% population bringing the Land-Labor ratio ↑
→ Land-abundance favors Land-intensive activities
– animal husbandry vs farming
→ women w/ comparative advantage in animal husbandry (less force)
→ delayed age of marriage and first birth – ↑ preventive check
→ fewer children per woman compared to Asia (lower European F)
→ lower pressure on resources, incomes allowed to rise
Let’s look at a stylized graphic representation of their 2nd model
26
ROW higher F
EMP lower F
Voigtländer and Voth (2013b: 2230) 27

■ REFLECT – by now you should be able to discuss
Evidence of pre-modern growth in the Islamic world
Evidence of pre-modern growth in China
Evidence of pre-modern growth in Europe
Non-sustainable economic growth episodes
Limited economic growth in a Malthusian economy
28
References
Bai, Y. and K.-s. Kung (2011) “Climate Shocks and Sino-Nomadic Conflict,” Review of Economics and
Statistics 93 (3):970-981.
Broadberry, S., H. Guan and D. D. Li (2018) “China, Europe, and the great divergence: a study in
historical national accounting 980–1850,” Journal of Economic History 78 (4): 955-1000.
Chaney, E. (2013) “Revolt on the Nile: economic shocks, religion, and political power,” Econometrica
81 (5): 2033-2053.
Chaney, E. (2016) “Religion and the Rise and Fall of Islamic Science,” Manuscript.
Clark, G. (2007) “The long march of history: Farm wages, population, and economic growth,
England 1209–1869,” Economic History Review 60 (1): 97-135.
Clark, G. A Farewell to Alms: a brief economic history of the world. Princeton University Press, 2008.
De Vries, J. (2000) “Dutch Economic Growth in Comparative Historical Perspective, 1500-2000,” De
Economist 148 (4): 443-467.
Findlay, R. and K. O’Rourke. Power and Plenty: trade, war, and the world economy in the second
millennium. Princeton University Press, 2007.
Kuran, T. (2018) “Islam and Economic Performance: Historical and Contemporary Links,” Journal of
Economic Literature 56 (4): 1292-1354.
Michalopoulos, S., A. Naghavi and G. Prarolo (2018). “Trade and Geography in the Spread of Islam.
The Economic Journal” 128 (616): 3210-3241.
Shiue, C. H. (2017) “Human capital and fertility in Chinese clans before modern growth,” Journal of
Economic Growth 22 (4): 351-396.
Voigtländer, N and H.-J. (2013a) “The Three Horsemen of Riches: Plague, War and Urbanization in
Early Modern Europe,” Review of Economic Studies 80: 774-811.
Voigtländer, N and H.-J. (2013b) “How the West 'Invented' Fertility Restriction,” American Economic
Review 103 (6): 2227-64.
29
EC104
Topic 2: Early Modern Period: 1500-1750

The Great Divergence
Claudia Rei
■ Focus today:
■ Defining the divergence
■ Timing and measurement
■ 2 examples of potential reasons behind the divergence

→ Demographics
→ Government institutions
→…
2
■ The Great Divergence – WHAT
■ Differential economic performance China vs Europe:
→ China more developed than Europe ~1000 (Song peak)
→ Chinese inventions: paper, gunpowder, printing, compass, …
→ and yet, Europe industrialized first
→ clear gap by 1800 – China considerably behind
3
■ The Great Divergence – WHEN
■ One view: LATE
→ divergence as a product of the 19th century industrialization
→ likely the result of European coal advantage (IR), colonial policy,
shocks (Opium Wars 1840s, Taiping and Nian rebellions 1851-1868)
→ emphasis on resource advantages/constraints, among others
Key authors: Pomerantz (2000), Frank (1998), Wong (2000),

Goldstone (2002), Parthasarathi (1998), Clark (2007)
4
■ The Great Divergence – WHEN
■ Another view: EARLIER
→ (NW) Europe ahead of Asia (China) before 1800
→ likely a result of institutional differences
→ emphasis on: commerce, consumption, urbanization,
agricultural productivity, …
Key authors: Maddison (1998), Broadberry and Gupta (2006),

Allen (2001, 2011), Li and van Zanden (2012)
5
■ The Great Divergence – MEASUREMENT
■ Assessing the opposing views – data (aka evidence)
→ no national income series going that far back
→ proxies:
■ estimates of city size, urbanization rates
■ reconstruction of wages and income
→ both sides of the debate use wage measures (though different)
Let’s look at the comparison
6
clear
clear
Late
Broadberry and Gupta (2006: 17 and 19) 7
always
clear
always
clear
Broadberry and Gupta (2006: 17 and 19)
Early
8
■ Grain wages (late) vs Silver wages (early)
→ everybody eats – good for cross-country comparisons
→ BUT LDCs have lower food prices
& manufactures and luxury goods are expensive in LDCs
→ biased comparisons (CA and TT)

→ coverage of all goods only guaranteed in comparisons in currency
→ allows for unbiased cross-country comparisons
→ STILL, both are nominal wages
→ problem: if prices raise faster than wages, SOL worsen
→ only Purchasing Power Parity (PPP) will give a sense of affordability
9
■ Real wages or Welfare ratios – PPP adjusted (Allen 2009)
→ real wages tell us how much the nominal wage can afford
→ Allen (2011) calculates welfare ratios
→ how many baskets of goods a family can buy
→ Bare Bones Basket (BBB) – essentials

→ European Respectability Basket (ERB) – some comfort
→ assumptions: family of 4, women/children consume less than men

→ annual subsistence requires 3.15 baskets (0.15 for rent)
→ “welfare ratio = 1” means family does not live comfortably (ERB)
or lives at subsistence (BBB)
10
Welfare Ratios (ERB)
below this line

people were
NOT living
comfortably
Malthus
was right!!
Allen (2009: 338) 11

Extension: Divergence between the Americas
World Bank
poverty line
Allen et al (2012: 878) 12

■ Extension: Divergence between the Americas
■ The Americas compared with Europe & Asia (Allen et al 2012)
→ consumer basket representing subsistence diet
→ “free” (not-forced labor) wages:
* slave & white labor not substitutes but authors address the issue briefly
→ clear divide of welfare ratios between North and South America

* North America surpassed London post-1750 (slow advance but Europe fell)
* South America not all that different from Spain
* future US was already ahead of Latin America in 17th and 18th centuries
→ authors argue integrated labor markets as reason for divergence
13
The great divergence
Timing and measurement of the divergence
Cross-country comparisons
– within Europe
– between Europe and Asia
– between Europe and the Americas
– within the Americas
14
■ The Great Divergence – WHY
■ different fertility patterns
■ different government institutions
Not exhaustive list, just two potential reasons among others
15
■ Demographics – fertility
→ European marriage pattern: delayed FAFM, not all women marry
→ Asia: universal marriage (women), lower FAFM
Broadberry (2013: 29)

16
■ Demographics – fertility
→ European marriage pattern: delayed FAFM, not all women marry
→ Asia: universal marriage (women), lower FAFM
→ Implications:
type of check?
– FChina > FEurope
– relatively higher pressure on resources in Asia (regulation through M)
– demographics did not change in Asia in this period
– Europe’s did (regulation through F), especially England’s
type of check?
17
no more
F positively related to wages
Data from Wrigley and Schofield (1981) 18

■ Never married population shares older
cohorts
Hajnal line
separating WE
(NWE) form RoW
Hajnal (1965: 102, 103, 104) 19

■ Why fertility patterns matter? (Allen 2009)
→ higher wages resulting from preventive checks
→ high wages meant relatively high labor costs for industry
→ technology in England was L-saving, spurring the IR
→ Asia in different demographic path (Malthusian for longer)
■ Middle-class advantage (de la Croix et al 2019)

→ higher reproductive success
* more survival & less childlessness than upper- or lower-income brackets
→ more likely to invest in human capital of offspring (apprenticeships)
→ generalized Q-Q trade-off: contribution to pre-IR prosperity in ENG
20
■ A theory of government formation (Olson 1993)
→ Consider a world of anarchy with roving bandits
→ Roving bandits steal all they find, maximum individual tax rate t
→ No incentive to produce beyond subsistence (no growth)
→ Security would be preferable but no cooperation (free-rider problem)
→ Eventually an enterprising bandit monopolizes theft

→ This bandit becomes stationary – regular taxation (why rove?)
→ Allow for regular production to maximize T tax revenue for govt
→ Tax policy comparison: t*(R) > t*(S) but T*(S) > T*(R)
→ Would you prefer the roving or the stationary bandit state?
A theory, not The theory, not the only theory. Allen et al (2023) section 3 provides a nice lit review! 21
→ Why is the stationary bandit better than the roving bandit?
– lower taxes encourage greater production (some saving/growth)
– higher output means greater revenue than full taxation
– stationary bandit provides protection (public good) for price t(S)

– bandit’s self-interest to become stationary (citizens benefit too)
Is this the best the society can do?

What’s wrong with an autocrat?
22
→ Two main arguments for democracy
(1) Production
* society itself acts as the autocrat
* MB = MC of taxation implies a lower (net) tax rate: t*(D) < t*(S)
(2) Competition
* Leaders have an incentive to sacrifice tax revenue to win elections
* Compete others down to min possible tax revenue to win election
* T*(D) < T*(S)
Graphically
23
tax less, produce more, more growth,

challengeable government facilitates institutional change
highest tax revenue not much growth

T*(S) no leadership challenge, little institutional change
T*(D)
t*(D) t*(S) t*(R) 24

■ Using Olson’s theory to explain the divergence
→ historical China fits Olson’s “stationary bandit” argument
– stable autocratic regime with a central bureaucracy
– little challenge from aristocracy, church, judiciary, military, …
→ historical Europe fits Olson’s “democracy” argument
– decentralized governments, powerful aristocracies/merchants/churches
– governments with limited power (historical seeds of democracy)
→ England had relatively fast transition to “democratic” society
– English Glorious Revolution in 1688
careful!!
→ timing of GR suggests it may have contributed to the divergence
25
■ Glorious Revolution in 1688
“… a Parliament with a central role alongside the Crown and a judiciary
independent of the Crown.” (North and Weingast 1989:804)
Brief (and simplified!) history:

→ Charles I (1625-49) ruled w/o parliament for 11 years (royal finances – FL)
→ 1642-1651 English civil war
→ Charles I executed in 1649, 1649-1660 interregnum, 1653-8 Cromwell
→ 1660 restoration of the monarchy w/ Charles II, followed by James II
→ financial problems & tensions w/ parliament subsist
→ 1688 William & Mary on the throne at request of parliament (James II ousted)
26
Implications – how can we measure the impact of all this?
→ functioning credit markets
– voluntary loans, government debt, lower interest rates
– rising state capacity: crown able to raise funds to immediate wars
27
North and Weingast (1989: 824)
Implications:
→ functioning credit markets
→ Glorious Revolution did more than restore the crown’s finances
→ division of powers: legislative, executive, judiciary
→ credible threat for similar problems in the future
→ constraints on executive brought by independent judiciary
Back to Olson (1993):

– More “democratic” institutions are more conductive to growth
– Constrains on power, but more revenue i.e., more state capacity
– Rise of the modern state
28
Potential reasons behind the divergence
How fertility patterns can contribute to the divergence
How institutional change can contribute to the divergence
Historical evidence on reasons behind the divergence
29
References
Allen, R.C. (2001) “The Great divergence in European wages and prices from the Middle Ages to the First World War,” Explorations in
Economic History 38: 411-447.
Allen, R.C. (2009) “How prosperous were the Romans? Evidence from Diocletian’s edict (AD301)” in A. Bowman and A. Wilson (eds.)
Quantifying the Roman economy: methods and problems, pp. 327-345. Oxford University Press, 2009.
Allen, R.C. (2011) “Why the industrial revolution was British: commerce induced invention, and the scientific revolution,” Economic History
Review 59: 2-31.
Allen, R.C., T. Murphy, and E.B. Schneider (2012) “Colonial Origins of the Divergence in the Americas: a Labor Market Approach,” Journal
Allen, R.C., M.C. Bertazzini, and L. Heldring (2023) “The Economic Origins of Government,” American Economic Review 113 (10): 2507-45.
Broadberry, S. (2013) “Accounting for the Great Divergence,” Economic History Working Paper no. 184, LSE.
Broadberry, S. and B. Gupta (2006) “The early modern great divergence: wages, prices and economic development in Europe and Asia,
1500–1800,” Economic History Review 59 (1): 2-31.
Clark, G. (2007) “The long march of history: Farm wages, population, and economic growth, England 1209–1869,” Economic History
Review 60 (1): 97-135.
Clark, G. A Farewell to Alms: a brief economic history of the world. Princeton University Press, 2008.
De la Croix, D., E.B. Schneider, and J. Weisdorf (2019) “Childlessness, celibacy and net fertility in pre-industrial England: the middle-class
evolutionary advantage,” Journal of Economic Growth 24: 223-256.
Goldstone, J. A. (2002) “Efflorescences and Economic Growth in World History: Rethinking the ‘Rise of the West’ and the Industrial
Revolution,” Journal of World History 13 (2): 323-389.
Hajnal, J. “European marriage patterns in historical perspective,” in D.V. Glass and D.E.C Eversley (eds.) Population in History, pp. 101-
143. London: Arnold, 1965.
Li, B. and J.L. van Zanden (2012) “Before the great divergence? Comparing the Yangzi delta and the Netherlands at the beginning of the
nineteenth century,” Journal of Economic History 72 (4): 956-989.
Maddison, A. (1998) Chinese economic performance in the long run. OECD: Development Centre Studies, 1998.
North, D. and B. Weingast (1989) “Constitutions and commitment: the evolution of institutions governing public choice in seventeenth-
century England,” Journal of Economic History 49 (4): 803-832.
Olson, M. (1993) “Dictatorship, democracy, and development,” American Political Science Review 87 (3): 567-576.
Parthasarathi, P. The transition to a colonial economy: weavers, merchants and kings in south India, 1720– 1800. Cambridge University
Press, 2001.
Pomerantz, K. The Great Divergence: China, Europe, and the making of the modern world economy. Princeton University Press, 2000.
Weir, D. “Life under pressure: France and England, 167—1870,” Journal of Economic History 44 (1): 27-47.
Wrigley, E.A. and R. Schofield. The population history of England, 1541-1871: a reconstruction. Cambridge Studies in Population Economy
and Society in Past Time. Cambridge University Press, 1981.
30
EC104

Pre-Industrial Plagues
Claudia Rei
■ Focus on the other side of demography – Mortality
■ Plagues: mass mortality brought by infectious diseases
■ Objectives today
→ characterise these recurring events in the Malthusian world
→ understand their economic impact at the time and in the long run
→ long term implications on economic growth patterns
→ EH research on other long-run implications of plagues

→ understand the Columbian Exchange through a plague lens
(Note: we will use the word ‘plague’ to denote major lethal epidemics)
2
■ Major pre-industrial plagues (Alfani and Murphy 2017)
■ 160-180: Antonine plague
→ Smallpox, Roman empire, 10-30% death rate
■ 249-270: Plague of Cyprian

→ Haemorrhagic fever, Roman empire, 15-25% death rate
■ 540-541: Justinian plague

→ Yersinia pestis, Europe and Mediterranean, 25-50% death rate
■ *1347-1352: Black Death, recurring in 17th century, …

→ Yersinia pestis, *Europe & Medit. (35-60%), Middle East, Central Asia, …
■ 1492-1650: mass disease due to the Columbian Exchange

→ Smallpox, typhus, measles, influenza, syphilis etc., Americas (80-90%),
Europe (2-5%) and Asia (unknown death rate)
3
■ 1347-1352 Black Death (Alfani and Murphy 2017)
■ Killed about 50m Europeans, 1/3 to 2/3 Europe’s population
→ 2nd deadliest (1917-9 influenza 1st), but first in mortality rate
■ Onset of the Black Death

→ plague was endemic in the wild rodent population of the Himalaya
→ Mongol expansion in the area sparked outbreak
→ 1331 epidemic in Hebei province in Northeast China
→ 1346 reached Caffa (Crimea) in the Black Sea
→ 1347 reached Byzantium, Southern Italy and Southern France
→ 1348 all of Europe and around the Mediterranean
4
■ Subsequent waves (Alfani and Murphy 2017)
■ Second wave: 17th century plagues in Europe
→ 1623-32: started in North spread through south, east and west
→ 1647-57: started in Eastern Spain and spread east
■ Third wave: late 19th century starting in Asia

→ 1894 in Hong Kong and 1896 in India
→ led to small outbreaks in Europe (1900 Glasgow, 1920 Paris) and
the Americas (1900-4 San Francisco)
→ ongoing: 2010-2015 WHO reported 3,248 cases… and counting
– 96% in Africa, 3% in the Americas, 1% in Asia
5
■ Impact on wages (Pamuk and Shatzmiller 2014) theory
■ Major shock leads to re-balance of resources in the economy
→ fall in population brings output down by less than population
→ higher output per capita on impact
→ higher land-labour ratio changes relative factor prices

– real wages rise sharply after the shock
– land rents and interest rates fall relative to wages
→ higher per capita income and wealth changes demand patterns

– prices of agricultural goods decline relative to manufactures (L-intensity)
– demand shifts from basic to higher income elasticity goods
– rise in land intensive activities (e.g., cattle raising)
6
■ Impact on wages (Pamuk and Shatzmiller 2014)
■ So, are plagues “good” for the economy?
→ better outcomes for those who survive
– more competition for scarce labour is better for workers, land tenants, …
■ BUT in a Malthusian world there is no sustainable growth

→ as ↑P, ↑Y at slower pace, so ↓Y/P to pre-plague levels
→ slow recovery to pre-plague (P, Y, and w) levels
– depended on plague’s magnitude and on initial conditions
■ Black Death might have been a big enough shock to change

growth pattern in Europe
7
■ Plagues as asymmetric shocks – Justinian Plague
■ Across regions: Europe vs Mediterranean
→ plague began in 6th century and recurred until the mid-8th c.
→ heavy loss of population, slow recovery starting post-8th c.
→ greater losses in Middle East than Europe
→ historical evidence is scarce, but suggests important changes

– urbanization rate in Iraq exceeded 20% in the 8th c. (↑ ag. productivity)
– rising wages of urban unskilled in 9th c. Egypt, Iraq, and Syria (↑Y/P)
– expanded demand suggested by higher variety of imports (↑ trade)
→ evidence consistent with an episode of economic growth
Justinian Plague as potential factor behind the Golden Age of Islam

(Pamuk and Shatzmiller 2014) 8
■ Plagues as asymmetric shocks – Black Death
■ Across continents: Europe vs Asia
→ Europe strongly affected by the plague
→ observed changes in agriculture and pc income in Europe only
→ large surge in land-labour ratio – no serfdom (North and Thomas 1971)
→ + pattern of military conflict and urbanization (Voigtländer and Voth 2013b)
→ Northwest Europe keeps wage gains longer
→ Asia less exposed to the plague, lower immediate or long-run gains

– emergence of a wage gap between Europe and Asia
→ + European Marriage Pattern (Hajnal 1965, Voigtländer and Voth 2013a)
Contribution to the debate on the timing of the Great Divergence

(Pamuk 2007, Broadberry 2013, Clark 2007) 9
■ Plagues as asymmetric shocks – Black Death
■ Within Europe (and Mediterranean): northwest vs rest
→ different initial conditions set countries on different paths
– Spain: BD interrupted phase of quick growth (Álvarez Nogal and Prados
de la Escosura 2013)
– Egypt: rural depopulation damaged irrigation system (Borsch 2015)
→ different plague intensities in early 17th century

– Southern Europe more affected than North
– Italy particularly badly hit (Alfani 2013) at the time it faced increased
commercial competition from north (Alfani and Percoco 2019)
→ emergence of a gap between northwest and the rest of Europe
Among other factors pre-IR plagues helped shape the Little Divergence
10
Episodes of pre-industrial plagues
Short- and long-term economic effects of plagues
Plague recovery in the Malthusian world
Connections with the Great and Little Divergence
11
■ Plague and persecution
■ Two examples from research in Economic History:
→ persecution of minorities (Jedwab et al 2019)

– role of black death in likelihood of contemporaneous persecution of Jews
→ long-term cultural persistence (Voigtländer and Voth 2012)

– role of black death in shaping long-term attitudes towards minorities
(two more insights on what economists do!)
12
■ Short-term attitudes towards Jews (Jedwab et al 2019)
■ Jewish persecutions during the Black Death
→ authors compile data on:
– virulence and spread of Black Death in Western Europe
– Jewish communities and persecutions across Western Europe
§ 124 cities had Jewish communities and M data exists for 1347-52 period
→ two countervailing effects:

– scapegoating of Jews (not new: same in Anderson et al (2017) weather shocks)
§ if Jews blamed, persecution more likely the more severe the plague – kill
– complementarity/substitutability (money lenders & access to markets)
§ severity of plague may increase the importance of the minority – protect
13
■ Short-term attitudes towards Jews (Jedwab et al 2019)
■ Inverse-U relationship between M and pogrom likelihood
→ for lower levels of M scapegoating effect dominates
→ for higher M levels specialized economic services are more valuable
14
Jedwab et al (2019: 354)
■ Long-term persistence of cultural traits (V&V 2012)
■ Historical roots of Anti-Semitic attitudes in Germany
→ connecting historical and recent events:
– historical: 1348-50 plague era pogroms
§ attacks on Jews following conspiracy theorists blaming them for black death
– recent: 1920s-1940s anti-Semitic attitudes in Germany (WWII context)

§ Nazi party vote share, deportations, attacks on synagogues, letters to papers
→ historical and more recent data all at county level:

– data on >1,400 towns and cities
– ~400 with Jewish communities in the interwar period
– 325 with medieval Jewish settlement and Black Death pogroms
15
outcome variable
explanatory variable
Voigtländer and Voth (2012: 1355) Voigtländer and Voth (2012: 1349) 16
→ were places with historical pogroms more Anti-Semitic in 20th c.?
Yes
Voigtländer and Voth (2012: 1369) 17

→ on average historic Anti-Semitic attitudes persist
→ true for any outcome in otherwise similar cities
→ BUT less persistence in places where discrimination cost was high

– in Hanseatic league cities Jews were important traders, less persecution
– inter-ethnic complementarities: Jews were important merchants
– trading cities needed merchants for their local economic activity
– link between trade openness and religious tolerance
– more religious tolerance less persecution
18
■ Columbian Exchange
■ Exchange between Old and New World (Nunn and Qian 2010a)
Think of elements of
the Columbian → native species of plants and animals (examples)
Exchange in your life – impact on food production, prices, diets, population stocks, …
19
■ Increased variety of goods (Hersh and Voth 2022)
■ Challenging notion of stagnant SoL in a Malthusian economy
→ indeed population was bounded by resources (food)
→ indeed real wages stagnated before the industrial revolution, BUT:
– traditional wage indices use staple foods (bread, beer, …) & fixed shares
– no account for increasing variety, thus mismeasurement quite likely
– coffee, tea, sugar, chocolate, potatoes, tobacco, … transformed habits
→ GOAL: measure the contribution of trade post-1500 to SoL

– England 1600-1800 (increasingly affordable goods widely consumed)
→ RESULTS: for coffee, tea, sugar suggest 10% gain (lower bound)
– comparison: internet’s gain estimated at 2% (Golsbee and Klenow 2006)
20
■ Columbian Exchange
→ native species of plants and animals (examples)
– impact on food production, prices, diets, population stocks, …
→ beyond Europe/Americas, indirect effects on Africa and Asia too!

– Nunn and Qian (2010b), Chen and Kung (2016)
→ population …
– impact on voluntary and coercive migration, …
→ disease: germs and viruses

– pre-1492 New World population isolated from Eastern hemisphere
– no immunity to a variety of Old-World infectious diseases
21
■ Columbian Exchange through a plague lens
→ infectious diseases transferred to New World
– smallpox, measles, whooping cough, chicken pox, bubonic plague,
typhus, malaria, diphtheria, cholera, scarlet fever
→ estimates of impact vary widely

– from near extinction to 80%, a typical society lost 90% of its population
→ way beyond the largest impact of plagues in the Old-World!

→ very few diseases transferred the other way – syphilis
– Columbus crew returned from Hispaniola in 1493, military campaign in
Naples 1495; in Hungary and Russia 1497, Africa Middle East and India
1498, China 1505, Australia 1515, Japan 1569 – global epidemic
22
Effects of pre-industrial plagues beyond economics
Connections of plagues and long-term cultural persistence
Columbian exchange and its impacts in the world economy
23
References
Alfani, G. (2013), “Plague in Seventeenth Century Europe and the Decline of Italy: An Epidemiological Hypothesis”, European Review of
Economic History 17(3): 408–430.
Alfani, G., T. E. Murphy (2017) “Plague and Lethal Epidemics in the Pre-Industrial World,” Journal of Economic History 77 (1): 314-343.
Alfani, G. and M. Percoco (2019), “Plague and Long-Term Development: the Lasting Effects of the 1629-30 Epidemic on the Italian
Cities”, Economic History Review 72(4): 1175–1201.
Álvarez Nogal, C. and L. Prados de la Escosura (2013), “The Rise and Fall of Spain (1270–1850)”, Economic History Review 66(1): 1–37.
Anderson, R.W., N. Johnson, and M. Koyama (2017) “Jewish persecution and weather shocks,”Economic Journal 127 (602): 924-958.
Borsch, S (2015), “Plague, Depopulation and Irrigation Decay in Medieval Egypt”, In M.H. Green (ed.), Pandemic Disease in the Medieval
World. Rethinking the Black Death, Kalamazoo and Bradford: Arc Medieval Press, 125-56.
Broadberry, S. (2013), “Accounting for the Great Divergence”, LSE Economic History Working Papers No. 184.
Chen, S. and J. K. Kung (2016) “Of maize and men: the effect of a New World crop on population and economic growth in China,” Journal
of Economic Growth 21 (1): 71–99.
Clark, G. (2007), A Farewell to the Alms: A Brief Economic History of the World, Princeton: Princeton University Press.
Goolsbee, A. and P.J. Klenow (2006) “Valuing consumer products by the time spent using them: an application to the internet,” American
Economic Review 96 (2): 108-113.
Hajnal, J. “European marriage patterns in historical perspective,” in D.V. Glass and D.E.C Eversley (eds.) Population in History, pp. 101-
143. London: Arnold, 1965.
Hersh, J, and H.J. Voth (2022) “Sweet Diversity: Colonial goods and the welfare gains from global trade after 1942,” Explorations in
Economic History 86: 101468.
Jedwab, R., N.D. Johnson and M. Koyama (2019) “Negative shocks and mass persecutions: evidence from the Black Death,” Journal of
Economic Growth 24: 345-395.
North, D. and R. Thomas (1971) “The Rise and Fall of the Manorial System: A Theoretical Model,” Journal of Economic History 31 (4): 777-
803.
Nunn, N. and N. Qian (2010a) “The Columbian Exchange: A History of Disease, Food and Ideas,” Journal of Economic Perspectives 24 (2):
163-188.
Nunn, N. and N. Qian (2011b) “The Potato’s Contribution to Population and Urbanization: Evidence from a Historical
Experiment,” Quarterly Journal of Economics 126 (2): 593–650.
Pamuk, S. (2007) “The Black Death and the origins of the ‘Great Divergence’ actoss Europe, 1300-1600,” European Review of Economic
History 11: 289-317.
Pamuk, S. and M. Shatzmiller (2014) “Plagues, Wages, and Economic Change in the Islamic Middle East, 700-1500,” Journal of Economic
History 74 (1): 196-229.
Voigtländer, N. and H-J. Voth (2012) “Persecution Perpetuated: The Medieval Origins of Anti-Semitic Violence in Nazi Germany,” Quarterly
Journal of Economics 127 (3): 1339-1392.
Voigtländer, N. and H.-J. Voth (2013a) “The Three Horsemen of Riches: Plague, War and Urbanization in Early Modern Europe,” Review of
Economic Studies 80: 774-811.
Voigtländer, N and H.-J. Voth (2013b) “How the West 'Invented' Fertility Restriction,” American Economic Review 103 (6): 2227-64.
24
EC104

Europe and Africa
Claudia Rei
Early Modern Period
■ Historical period just before the IR:1500-1750
■ Europe establishes trade connections with distant territories
■ Technological prominence
→ shipping technology
→ military technology
■ Implications for long term economic growth in different regions
■ This lecture: Europe and Africa
■ Next lecture: Asia and the Americas
Another lecture on what economists do! 2

merchant capitalism
MEG
Age of discovery
Early Modern Period

Broadberry and Fouquet (2015: 230)
3
Early Modern Period: Europe
■ Role of trade and institutions in the European “Miracle”
■ “The rise of Europe…” Acemoglu, Johnson, Robinson (2005)
→ growth measurement
4
Trade and Empire: Europe
Acemoglu et al. (2005: 547) 5

→ growth measurement
→ Geography: Europe does better than Asia, & WE better than EE
→ within WE, Atlantic traders grow more – Trade

→ AT yields opportunities for Smithian growth (specialization)
→ BUT not all Atlantic traders grow the same
– AT can explain why Italy fell behind, but not why Portugal did
→ s-r growth can be explained by trade, in the l-r you need more
6
→ Institutions
– help or hinder economic growth
– could enhance or hamper the potential of Atlantic Trade
→ measurement of institutional quality

– Polity IV index measuring constraints on executive (1 to 7)
– lower values: no limitation to executive’s actions
– higher values: strong accountability groups constrain executive
– past coding is not trivial, lots of historical research
7
→ Institutions could explain why PT/SP fell behind ENG/NL (all ATs)
– English and Dutch had less absolutist institutions (↑constraints)
– + correlation between Polity IV index (inst. qual.) & urbanization
– even after controlling for potential confounders (cond. correlation)

* port cities
* Roman heritage
* religion
* wars
* (…)
8
■ “Princes and Merchants…” De Long and Shleifer (1993)
→ contrast growth under “Princes” and “Merchants” in pre-IR Europe
– “Princes”: absolutist regimes – legal order is an instrument of control
– “Merchants”: limited authority – merchant ruled, societies of estates
* guildmasters, landowners, burghers, merchants – groups w/ long-standing rights
* some cities won charters of liberties limiting princely authority
(De Long and Shleifer 1993: 679)

9
→ contrast growth under “Princes” and “Merchants” in pre-IR Europe
– “Princes”: absolutist regimes – legal order is an instrument of control
– “Merchants”: limited authority – merchant ruled, societies of estates
* guildmasters, landowners, burghers, merchants – groups w/ long-standing rights
* some cities won charters of liberties limiting princely authority
→ hypotheses
– absolutist rulers extract rents, limited authority governments cannot
– private enterprise generates value and economic growth
→ measurement
10
De Long and Shleifer (1993: 678) 11
De Long and Shleifer (1993: 683)
12
Trade and Empire: Europe
De Long and Shleifer (1993: 687) 13

→ + conditional correlation between institutional quality and growth
BUT unclear direction of causality
– absolutist regimes retard economic growth?
– OR big cities retard absolutist regimes?
→ STILL
– channel between urbanization and economic growth (not new)
– connection with political regime (not new)
– historical evidence in favor
14
■ REFLECT: by now you should be able to discuss
Pre-industrial link between urbanization and growth
Proxies for institutional quality
Differential economic growth in early modern Europe
Importance of institutional quality for economic growth
15
Early Modern Period: Africa
■ Slave trade: profound implication of European expansion
■ Integral part of (triangular) transatlantic trade
16
Morgan (2000: 13)
■ Slave trade: profound implication of European expansion
■ Integral part of (triangular) transatlantic trade
■ Portuguese traders arrived Africa in the 1430s
■ Slaves not the major source of trade at first
■ Demographic collapse in the Americas post-1492, ↑ L demand

→ Esposito (2022): role of malaria in the diffusion of slavery in US
■ Post-1500 several other European countries got involved

→ extensive area of research in economic history
→ today we’ll look at studies focusing on Africa
17
■ Role of slave trade on Africa’s long-run development
■ Nunn (2008) “Long-term effects of Africa’s slave trades”
→ Q: Is Africa less developed today because of historical slave trade?
→ data to estimate this relationship:

– present: country level GDPpc
– historical: Nunn constructs a dataset on slave exports from historical
shipping records & documents reporting slaves’ ethnic groups
→ why look at slaves’ ethnicity and not just country of origin?

– Africa’s map today very different from back then, but ethnicities remain
– Task:
* get all historical slave exports by ethnicity
* aggregate slave exports by ethnicity to the country level
18
19
Nunn (2008: 149)
Dots: relationship between X and Y
Fitted line: predicted relationship

Y
OLS estimator minimizes the

distance of dots to the fitted line
and gives us correlation

X
20
Nunn (2008: 153)
→ the more historical slave exports, the lower current development
– unclear if this relationship is causal
§ 1) more exported slaves could have caused more long-term damage
OR
§ 2) already less developed countries got more exploited upon European arrival
(in which case slave trade worsened, but is not the cause of current development)
– reverse causality problem – correlation is not causation!
→ getting around this problem (instrumental variable – Z):

!exclusion restriction! – find variable Z correlated w/ X & Y but NOT w/ anything else causing Y
^
– estimate predicted slave exports (X) based on that variable (1st stage)
^
– estimate the relationship of interest based on prediction X (2nd stage)
21
→ what is the “magic” (instrumental) variable in this case?

– distance of each African country to the locations demanding slaves
§ think how the IV satisfies the exclusion restriction in the previous slide
§ isolates the direction of causality in the original relationship
(“cleans” the original relationship of the reverse causality problem)
→ the IV result (second stage) confirms the OLS result

– negative relationship is statistically significant and causal
– Yes, historical slave trade had a causal effect Africa’s underdevelopment
– Nunn argues potential causality channels in the 2008 paper
– but Nunn and Wantchekon (2011) test a specific channel
22
■ Nunn and Wantchekon (2011) “Slave trade… mistrust”
→ Q: did the slave trade create a persistent culture of mistrust?
→ Culture of trust is conductive to trade, progress, and growth

– celebrate contracts, generate value, …
→ Culture of mistrust is not – why mistrust?

– initially slaves were captured through state raids and warfare
– dominant ethnicities sold others into slavery
– as trade surged, ↑D slaves and so did ↑ individual insecurity, thus mistrust
– all elements of a culture of mistrust not conductive to development
23
→ Measurement
– trust data from the 2005 Afrobarometer survey (17 SSA countries)
current – 20,000 individual observations (with identified ethnic group)
outcomes
– questions on trust in relatives, neighbors, co-ethnics, local government
historical
treatment – slave exports by ethnic group (Nunn 2008)
→ Estimation strategy OLS:
coefficient of interest
24
b is negative and
statistically significant
Nunn and Wantchekon (2011: 3232) 25

→ OLS: Negative conditional correlation
– consistent with the hypothesis that slavery brought mistrust
– BUT we cannot be sure if this correlation implies causality
– problem: reverse causality and persistence of mistrust
(less trusting ethnicities could have generated more slaves)
– i.e., slave stock per ethnicity is endogenous
→ Solution: IV for # of slaves taken by ethnicity – distance to coast

– think of exclusion restriction here too!
– trade of slaves existed before transatlantic and Indian ocean trades
– but overseas slave trade DID NOT
– distance to coast impacted trust only through overseas slave trade
26
more distant
less slaves
27
Nunn and Wantchekon (2011: 3240)
→ Contribution
– understanding how culture affects individual decisions (micro level data)
– macro level implications on economic growth
→ Finding
– current low levels of trust in Africa traced back to historical slave trade
→ Method
– IV regression (you should understand why OLS is not enough)
28
Evidence of slave trade impact on Africa’s development
One potential channel of causality
OLS, IV, reverse causality, endogeneity, correlation vs causation*
* You are not going to be tested on these in EC104, but it is useful that you understand the basics
of econometrics tools, the bread and butter of empirical research
29
References
Acemoglu, D., S. Johnson and J. Robinson (2005) “The rise of Europe: Atlantic trade, institutional
change, and economic growth,” American Economic Review 95 (3): 546-579.
Broadberry, S. and R. Fouquet (2015) “Seven centuries of European economic growth and decline,”
Journal of Economic Perspectives 29 (4): 227-244.
De Long, B. and A. Shleifer (1993) “Princes and Merchants: European city growth before the
industrial revolution,” Journal of Law and Economics 36: 671-702.
Esposito, E. (2022) “The Side Effects of Immunity: Malaria and African Slavery in the United States,”
American Economic Journal: Applied Economics 14 (3): 290-328.
Morgan, K. Slavery, Atlantic Trade, and the British Economy, 1660-1800. New Studies in Social and
Economic History. Cambridge: Cambridge University Press, 2000.
Nunn, N. (2008) “Long-term effects of Africa’s slave trades,” Quarterly Journal of Economics 123
(1): 139-176.
Nunn, N. and L. Wantchekon (2011) “The slave trade and the origins of mistrust in Africa,” American
Economic Review 101 (7): 3221-3251.
30
EC104

The Americas and Asia
Claudia Rei
Early Modern Period: the Americas
■ Acemoglu et al (2001) “Colonial origins …” – the idea
■ Institutional legacy of European expansion
■ historical institutions resulting from past accidental shocks
■ path dependance: current institutions result from past institutions
■ feasibility of colonial settlement influenced by environment (Geog.)
■ Type of colony depends on type of historical settlement:

■ tropical & resource rich → non-settler colonies (high SM)
* extractive states, no property rights protection, unconstrained executive
* examples: Belgian Congo, Gold Coast
■ non-tropical & no ready resources → settler colonies (low SM)
* non-extractive, strong emphasis on rule of law, constraints on executive
* examples: Australia, Canada, New Zealand, United States

■ Acemoglu et al (2001) “Colonial origins …”
■ The argued channel
(potential) settler mortality ⇒ settlement type ⇒ early institutions
⇒ current institutions ⇒ current economic performance
■ Measurement (data)
→ 17th-19thc. settler mortality: soldiers, bishops, sailors (Curtin 1964)
→ settlements: fraction of population of European descent in 1900
Variable of interest (X) → institutions: current index of avg. expropriation risk, excec. constr.
Outcome (Y) → economic performance: current GDPpc
3
■ Property rights and income
potential problem
reverse causality
higher index means

greater protection of
X property rights
4
Acemoglu et al (2001: 1380)
■ Settler mortality (instrument) and income
potential solution
exogenous variation
Z IV: exogenous to outcome

& unrelated to causes
5
changing
sample
controls
6
■ Treats institutions as a “black box”
→ extractive or non-extractive, aggregate measures of development
■ More recent research shifts focus (micro approach)

■ specific historical institutions (long extinct)
■ exogenous variation in geographic assignment
■ connection with current outcomes at local level
■ discussion of channels of persistence
→ Examples from Africa last time, now Americas and Southeast Asia:
– Valencia Caicedo (2019): missions in South America – colonial legacies
– Dell et al (2018): historical state capacity Vietnam – pre-colonial insts.
7
■ Valencia Caicedo (2019) “The mission…”
■ Historical presence of missions in Latin America
→ Franciscans, Dominicans, Jesuits
→ Jesuit missions: relatively more emphasis on education
– instruction of indigenous populations (reading, writing, crafts)
→ since 1609 settled on frontier lands of PT and SP empire
8
Valencia Caicedo (2019: 509) 9
→ 1767 Jesuit expulsion from Latin America – abrupt stop

→ 1773 extinction of the order, restored in 1814 – no return to LtAm
10
→ 1767 Jesuit expulsion from Latin America – abrupt stop

→ 1773 extinction of the order, restored in 1814 – no return to LtAm
■ Argument
→ persistent transmission of human capital
→ historical intervention linked to present outcomes (municipality lvl)
11
■ Measurement
→ 549 municipalities (5 states) encompassing 10m people today
→ current educational outcomes: literacy, years of schooling
→ other outcomes: current income, poverty, occupational measures
■ Estimation (municipality, state)
→ b captures Jesuit mission effect (presence and distance)

→ g captures geography (lat, long, alt, area, …, distance Franciscan mission)
→ µ captures variation across states (state FE)
12
Valencia Caicedo (2019: 522 and 527) 13

■ No relationship for F missions, or abandoned J missions
■ Channels of transmission
→ occupational specialization
– receiving instruction & training, move out of ag. into artisan class
* areas closer to missions are indeed less agricultural today
→ adoption of new ag. technologies (GE soy seeds – labor-saving)

– greater adoption in areas closer to missions (more prod. ag.)
■ Robust to alternative stories

→ population density, urbanization, migration, …
14
Early Modern Period: Asia
■ Some context before Dell et al (2018) – Vietnam paper
■ Shanahan (2016)
→ 1500-1800: 300 years of relative stability in Southeast Asia
→ Portuguese arrived early 16th c., Spanish mid, Dutch & English late
– EICs expanded European trade interests in the region
15
Shanahan (2016: 286) 16

■ Some context before Dell et al (2018)
■ Shanahan (2016)
→ 1500-1800: 300 years of relative stability in Southeast Asia
→ Portuguese arrived early 16th c., Spanish mid, Dutch & English late
– EICs expanded European trade interests in the region
BUT
– little interaction with majority of population in each country
* many people lived away from main ports where Europeans located
– beyond trade, Europeans had comparatively little interest in local affairs
→ 1500-1800: continuation of local traditional routines
17
■ Dell et al (2018) “Historical state, … Vietnam”
■ Broad Q: how do historical states affect l-r development?
→ Use Vietnam’s case to study this research question
→ Historical pre-colonial institutions (France arrived mid 19th c.):
– Northern Vietnam (Dai Viet) strong centralized state
* village was the fundamental administrative unit
– Southern Vietnam periphery of Khmer empire (Cambodia)
* patron-client state, no village intermediation
→ Exposure to different historical institutions (treatment)

– study with natural control group
18
boundary
of interest
RDD: regression
discontinuity design
19
Dell et al (2018: 2085)
■ Boundary of interest in this study defines the treatment
→ to the east (NV), Dai Viet villages in 1698
→ to the west (SV), villages became Vietnam only in early 19th c.
→ exploit the discontinuous change in exposure to treatment

→ study the differential effect of an institution (treatment)
– assumption: all else varies smoothly across villages on the border
■ Is this assumption reasonable?
20
not statistically
significant & small
Dell et al (2018: 2095)

21
■ Estimation strategy RDD (village level)
outcomes today
historical controls: RD polynomial, bandwidths, distance to HCM
treatment (25 km)
(sharp 0-1)
■ Measurement
→ outcomes: income, human capital, civil society
22
Dell et al (2018: 2100) 23

Dell et al (2018: 2100) 24

■ Persistence through colonial and post-colonial periods
→ even after both regimes are gone, as is the Dai Viet
■ History maters: paper explores transmission mechanisms (…)
■ Persistent historical local norms matter in l-r development

→ impact of historical institutions tested in Vietnam
→ other parts of NE Asia potentially with similar characteristics
25
Early Modern Period: Americas, Asia
Institutional persistence and economic growth
Importance of pre-colonial institutional legacy in Asia
Evidence of how endowments affect institutional emergence
Treatment and control groups, RDD, IV*
* You are not going to be tested on these in EC104 but it is useful that you understand the
basics of econometrics tools, the bread and butter of empirical research
26
References
Acemoglu, D., S. Johnson and J. Robinson (2001) “Colonial origins of comparative development: an
empirical investigation,” American Economic Review 91 (5): 1369-1401.
Curtin, P. D. The image of Africa. Madison WI: university of Wisconsin Press, 1964.
Dell, M., N. Lane and P. Querubin (2018) “The Historical State, Local Collective Action, and Economic
Development in Vietnam,” Econometrica 86 (6): 2083-2121.
Shanahan, M. (2016) “Southeast Asia and Australia/New Zealand,” in A History of the Global
Economy: 1500 to the present, Joerg Baten (ed.). Cambridge: Cambridge University Press.
Valencia Caicedo, F. (2019) “The Mission: economic persistence, human capital transmission and
culture in South America,” Quarterly Journal of Economics 134 (1): 507-556.
27
EC104
Topic 3: The Industrial Revolution: 1750-1850

Industrial Revolution Overview
Claudia Rei
1
■ Goals today
■ Defining the Industrial Revolution
■ Technological change
2
■ Defining the Industrial Revolution – not an easy task!
■ A challenge for you:

■ write up a definition in your own words at the end of this lecture
■ and again, at the end of this topic
■ Coining the term: 1884 Toynbee’s influential lectures (Wilson 2014)

■ not the first use of the term (Mokyr 2011)
■ Findlay and O’Rourke (2007) a good start on the evolving literature:

■ early authors: sudden tech change brought discontinuity in growth
→ Ashton (1948), Hayek (1954), Rostow (1960), Dean and Cole (1967), Landes (1969), …
■ revisions of measurement: not so sudden, gradual but sustained
→ Feinstein (1981), Harley (1982), Crafts (1985), Antràs and Voth (2003), …
■ origins of MEG precede the IR (Harley and Crafts 2000)
3
4
■ If gradual and not the start of MEG, what changed? (Mokyr 2011)
■ Social transactions:
→ emergence of a market economy (formal, competitive, impersonal markets)
■ Industrial organisation:
→ structure and size of firms, factory system, fixed vs circulating capital
■ Technology:
→ technical innovation, but also in the organisation of labour, marketing, ...
■ Economic growth:
→ widened income gap between industrialisers and non-industrialisers
→ rising aggregate economic performance GDP and Y/L – K deepening, ↑L, ↑TFP
Estimates of British GDP growth (annual rates)

1700-60 1760-1800 1800-30 1830-70
Dean and Cole (1967) 0.44 0.52 1.61 1.98
Crafts (1985) 0.30 0.17 0.52 1.98
5
■ Understanding low growth rates early

■ 18th C. British economy composed of two sectors (Mokyr 2011)
→ traditional: slow productivity growth, included traditional industry (e.g., craftsmen)
→ modern: fast growth, modern technology (steam), only some manufactures
■ Initially the modern sector was small, so overall growth rates diluted
Modern sector
expansion
Allen (2009: 179)

6
■ Key industries in the modern sector (Mokyr 1990)

■ Metallurgy: Darby Coke Smelting (1709), Cort Puddling Furnace (1784), Bessemer
Process (1856)
■ Cotton textiles: Flying Shuttle (1735), Spinning Jenny (1764), Water Frame (1769),
Power Loom (1785)
Allen (2009: 211) 7

Allen (2009: 229)
8
■ Various stages of cotton production

■ Every stage can be mechanized – take spinning
Spinning wheel
Source: Encyclopedia Britannica

9
■ Mechanisation brings massive increase in productivity (↑Y/L)

■ 2 forces: less workers produce more; more factories employ more labor
■ Greater saving in production costs reflected in lower prices
Production costs of British cotton (p per lb)

Cost of raw Selling Gross unit Markup
materials price margin (margin/price)
1784 24.0 131.0 107.0 81.7
1812 18.0 30.0 12.0 40.0
1832 7.5 11.5 4.0 34.8
Source: data from Hobsbawm (1999: 54)
10
■ Consider the Cobb-Douglas production function (& transformations)
𝑌 = 𝐴 𝐾 ! 𝐿(#$!)
levels
ln 𝑌 = 𝑙𝑛𝐴 + 𝛼 ln 𝐾 + 1 − 𝛼 ln 𝐿
rates & '( ) & '( + & '( , & '( -

= +𝛼 + 1−𝛼
&* &* &* &*
output growth growth of K growth of L
residual growth
(TFP)
For simplification let’s consider
TFP as technological change
11
■ Now consider the effects of a technological shock today (↑At)
𝑌! = 𝐴! 𝐾! # 𝐿!$%#
and 𝐾! = (1 − 𝛿)𝐾!%$ + 𝐼! , with 𝐼! = 𝑠𝑌!
So ↑ 𝐴! ⇒ ↑ 𝑌! , but ↑ 𝑌! ⇒ ↑ 𝐾! via 𝐼𝑡 and ↑ 𝐾! ⇒ ↑ 𝐾!&$ ⇒ ↑ 𝑌!&$
A has dynamic effects on Y through K
12
■ Technological change (understanding the effect of K on Y via A)
𝑌 = 𝐾 # (𝐴𝐿)$%#
merged for simplicity
' *! (())"#! *!
divide both sides by AL = = ⇔ 𝑦2 = 𝑘4 #
() () (())!
relabeling
take logs 𝑙𝑛 𝑦2 = 𝛼 𝑙𝑛 𝑘4
relabeling
- ./10 2
- ./3 10̇ 2̇
3
take derivatives = 𝛼 ⇔ = 𝛼2 =0
-! -! 10 3
A affects Y/L
in the l-r K stock doesn’t change through K
(i.e., growth rate of K is zero) 13
■ Technological change (understanding the effect of K on Y via A)
𝑌 𝑌
𝑦2 = ⇔ 𝑙𝑛 𝑦2 = 𝑙𝑛 − 𝑙𝑛𝐴 take logs
𝐴𝐿 𝐿
𝑌
𝑑 𝑙𝑛𝑦2 𝑑 𝑙𝑛
= 𝐿 − 𝑑 𝑙𝑛𝐴 take derivatives
𝑑𝑡 𝑑𝑡 𝑑𝑡
relabeling
𝑌̇
𝑦2̇ 𝐿 𝐴̇
since K doesn’t change in equilibrium = − ⇔
(LHS = 0) 𝑦2 𝑌 𝐴
𝐿
𝑌̇
𝐿 𝐴̇ growth of Y/L
⇔ =
𝑌 𝐴 determined by growth of A
𝐿 14
■ Technological change – two views on why it emerged in Britain:
■ #1 Factor prices (Allen 2009)

■ Britain had relatively high wages, cheap capital, very cheap energy
■ Inventions emerged to save on (expensive) labor costs (L-saving tech)
■ Inventions were expensive, only cost effective in Britain
■ Inventions required R&D – enough market size (supply of inventors)
■ Understanding innovation process with isoquant and isocost curves
Solve isoquant for K Solve isocost for K
𝑌 = 𝐾 ! 𝐿(#$!) 𝐶 =𝑟𝐾+𝑤𝐿
𝑌9 = 𝐾 ! 𝐿(#$!) 𝑟 𝐾 = 𝐶̅ − 𝑤 𝐿
#&
𝑌9 !
𝐶̅ 𝑤
𝐾= 𝐾= − 𝐿
𝐿(#$!) 𝑟 𝑟
15
yy intercept isocost slope
■ The Allen (Habakkuk) model
Britain With expensive labour
it only paid to innovate in Britain
(early slides for early introduction of technology in Britain)
Tech. change France
16
Allen (2009: 152)
Relative Factor Prices
Allen (2009: 139, 140) 17

■ Technological change – two views on why it emerged in Britain:
■ #2 Scientific institutions (Mokyr 2009)

■ Britain had a better scientific environment (Enlightenment)
■ Royal Society founded in 1662 – connection between business & science
■ Physical & intellectual property rights matter (GR 1688) – patent office
■ Research based on experimentation and scientific methods
■ IR result of scientific knowledge, skilled craftsmen, and good incentives
18
■ Technological change – reconciling the two views:
■ Crafts (2011)
■ A&M competing views were essentially geography vs institutions
■ Crafts highlights complementarity
■ Combine responsiveness of agents to factor prices with Enlightenment
■ Some macroinventions driven by factor prices

■ Microinventions clearly influenced by skills and incentives
→ terms coined in Mokyr (1990)
19
■ Directed technical change
■ Technology responding to economic incentives

■ induced by variations in input abundance/scarcity
■ Variety of contexts (historical or not):
Origins of industrial ■ high costs of labour induced the development of labour-saving

revolution in Britain technology (Allen 2009 (idea), Otojanov et al 2022 (empirical analysis))
Origins of rising ■ more skilled work in 1970s US led to skill-biased technical change
inequality in 1970s complementing that skill and rising the skill premium (Acemoglu 1998)
Recent literature ■ environmental economics, encouraging innovation in the context of

review climate change (Hémous and Olsen 2021)
■ (…)
20
■ Directed technical change – within the British IR
■ Hanlon (2015) focuses on the American civil war (1861-5)

■ major disruption of cotton supplies to British textile sector
■ shift to alternative suppliers – Indian cotton (similar but not identical)
■ Different variety, more difficult to clean and prepare for spinning

■ sharp rise in patents for machinery tailored to sort these new problems
■ How did cotton prices respond during the American civil war?
■ Indian cotton abundant relative to US cotton: expect PIndian cotton ↓
■ fall offset by directed technical change: shift in demand PIndian cotton ↑
(If you’re interested in the argument/measurement, check out the paper!)
21
The industrial revolution
The importance of technological change to economic growth
Evidence on key sectors of the industrial revolution
The Allen (Habakkuk) model
Factor prices vs Institutions in the British IR
Directed technical change

22
References
Acemoglu, D. (1998): “Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality,” Quarterly
Journal of Economics 113 (4): 1055–1089.
Allen, R. The British Industrial Revolution in Global Perspective. New Approaches to Economic and Social History, Cambridge University
Press, 2009.
Antràs, P. and H.J. Voth (2003) “Factor Prices and Productivity Growth During the British Industrial Revolution,” Explorations in
Ashton, T.S. The Industrial Revolution 1760-1830. Oxford University Press, 1968.
Crafts, N. British Economic Growth during the Industrial Revolution. Oxford University Press, 1985.
Crafts, N. (2011) “Explaining the first industrial revolution: two views,” European Review of Economic History 15: 153-168.
Dean, P. and W.A. Cole. British Economic Growth 1688-1959: trends and structure. 2nd Edition, Cambridge University Press, 1967.
Feinstein, C.H. (1981) “Capital Accumulation and the Industrial Revolution” in The Economic History of Britain since 1700. Volume I,
1700-1860 (ed. R. Floud and D.N. McCloskey), 1st edition Cambridge University Press.
Findlay, R. and K. H. O’Rourke. Power and Plenty: Trade, War, and the World Economy in the Second Millennium. Princeton University
Press, 2007.
Hanlon, W.W. (2015) “Necessity is the Mother of Invention: Input Supplies and Directed Technical Change,” Econometrica 83 (1): 67-
100.
Harley, C.K. (1982) “British industrialization before 1841: evidence of slower growth during the industrial revolution,” Journal of
Economic History 42; 267-89.
Harley, C.K and N. Crafts (2000) “Simulating the the Two Views of the British Industrial Revolution,” Journal of Economic History 60 (3):
819-841.
Hayek, F.A. von. Capitalism and the Historians. University of Chicago Press, 1954.
Hémous, D. and M. Olsen (2021) “Directed Technical Change in Labor and Environmental Economics,” Annual Review of Economics 13:
571-597.
Hobsbawm, E. J. Industry and Empire: from 1750 to the present day, 4th Edition. Penguin books, 1999.
Landes, D. Unbound Prometheus: Technological Change and Industrial Development in Europe from 1750 to the Present. Cambridge
University Press, 1969.
Mokyr, J. The Lever of Riches: technological creativity and economic progress. Oxford University Press, 1990.
Mokyr, J. The Enlightened Economy: an Economic History of Britain 1700-1850. Connecticut: Yale University Press, 2009.
Mokyr, J. (2011) “The Industrial Revolution and the New Economic History,” in The Economics of the Industrial Revolution (ed. J.
Mokyr). Routledge Revivals, 1st edition 1985.
Otojanov, R., R. Fouquet, and B. Granville (2022) “Factor prices and induced technical change in the industrial revolution,” Economic
History Review 76 (2): 389-697.
Rostow, W.W. The Stages of Economic Growth: A Non-Communist Manifesto. Cambridge University Press, 1960.
Wilson, D. C. S. (2014) “Arnold Toynbee and the Industrial Revolution: The Science of History, Political Economy and the Machine Past,”
History and Memory 26 (2): 133-161. 23
EC104

Agriculture and Population
Claudia Rei
■ Goals today
■ Agricultural changes in Britain before and during the IR
→ stages of the agricultural revolution
→ economic implications
■ Population changes in Britain before and during the IR

→ growing population
→ economic implications
2
■ Understanding the Agricultural Revolution (Allen 2009)
AR!!
why not here?
(i.e., ag. output per worker)

3
Allen (2009: 60)
■ Usually analysed in three stages
→ 1500-1730: changes induced by farmers
→ 1740-1800: changes induced by landlords
→ 1800-1850: changes induced by the introduction of machinery
4
■ 1500-1730: changes induced by farmers
→ crop selection
→ introduction of new fodder crops (e.g. clover) for cattle
→ new arable rotations (wheat, barley, turnips, clover)

→ selective breeding of cattle
→ heavier use of manure, better irrigation
Notably increased yields pre-1750
5
■ 1740-1800: changes induced by landlords
→ consolidation of estates, converting land to pasture
– by landlords economising on labour
– by yeomen who remained farmers and bought small neighbouring farms
→ replacement of small peasant cultivation by large scale farming

→ Enclosure Acts 1750: privatised common pastures and open fields
– 1990s literature debated whether enclosures brought notable gains
6
■ 1800-1850: changes induced by the introduction of machinery
→ rakes, harrows, ploughs, scrapers
→ combined with tractors, seeders, rollers (machines)
→ mowers, self-binders, fanning mills, threshing machines
Massively increased yields in 19th c.
7
■ Implications of the Agricultural Revolution
■ Rising agricultural productivity
→ less inputs needed to produce the same amount of food (output)
→ traditional narrative argues release of ag. labour into other sectors
→ Crafts (1980) has a more nuanced argument:

– farmers not readily convertible into factory workers or inventors
– in the short run AR increased land not labour productivity
– absolute number of ag. workers may rise while ag. L-share falls
– structural change
§ declining agricultural L-share was more than a simple labour transfer
8
■ Rising farm output allows population growth (Malthusian world)
> triples
< doubles
Clark (2007: 249) 9

■ Rising farm output allows population growth (Malthusian world)
Domestic growth
of agriculture not
enough to meet
Food imports growing food
from Ireland and demand.
the New World
Clark (2007: 249) 10

■ Rising farm output allows population growth
→ ↑ population beyond absorption capacity of agricultural sector:
– pre-1750: rising proto-industry (Mendels 1972, Clarkson 1985)
§ manual (no non-human powered machines) industrial work at home
§ regionally concentrated (proto-industrial towns)
§ often employed seasonally unemployed ag. labour (outside of harvest)
§ often employed family labour (e.g., spinning, weaving)
– post-1750: population moves into cities in search of new opportunities
§ context of enclosure less land available to small farmers
11
■ Evidence of proto-industry (↓ ag. L-share) pre-1750
structural change
British occupational shares
Source: data from Broadberry et al (2013: 23)
12
The agricultural revolution and its stages
Proto-industry and the agricultural revolution
Structural change and the agricultural revolution
13
■ Britain’s population pre- & during the IR (Mokyr 2009)
■ Population surge started abruptly before 1750 (pre-IR)
■ Breakaway from the Malthusian trap started before MEG

→ weaker M response to wages after 1640 (weaker positive check)
→ F response to wages disappeared after 1740 (stronger preventive check)
■ Intl. migration negligible so focus on F and M only for the DT*

→ both influenced by & influence on economic factors (endogenous)
→ estimates by Wrigley and Schofield (1981, 1997) show pop. surge
post-1750 accounted for by 2/3 F & 1/3 M (Mokyr 2009: 283)
*Mokyr (2009) chapter 13 deals with internal migration (check if interested)

14
■ Fertility
→ in a world of no or ineffective contraception, F controlled by
– propensity to marry (illegitimacy low ~10% in early 1700s)
§ never married women: 11.2% in 1701, ↓6.5% in 1770s, ↑10% in 1806
(Mokyr 2009: 285)
– age of marriage (limited economic opportunities kept FAFM high pre-IR)
15
England’s age of first marriage by decade
Clark (2007: 244)

16
■ Fertility
(Mokyr 2009: 285)
§ farmers needed to wait to inherit land – less farmers less wait
§ artisans faced years of apprenticeship – less artisans less wait
§ factory system helped break down traditional constraints on marriage
* child and female labour contributed to family income
17
■ Fertility
(Mokyr 2009: 285)
early ↑ F § farmers needed to wait to inherit land – less farmers less wait
§ artisans faced years of apprenticeship – less artisans less wait
§ factory system helped break down traditional constraints on marriage
* child and female labour contributed to family income
↓F – breastfeeding (↓ chance of new pregnancy), F control within marriage
§ universal in Britain and prolonged for many months after childbirth
§ possibly responsible for lower marital F and IFM than in continental Europe
18
■ Mortality
→ measurement: life expectancy at birth (sensitive to IMR changes)
– 34.2 y.o. in 1700-50, < Germany or Eastern Europe at ~30
– ~40 in 1820s-50s (Mokyr 2009:291)
– “odd” improvement in war years (1801-21): smallpox vaccination
§ major killer of infants & small children, leaving weak immunity on survivors
§ did not vanish (resistance to vaccination, free riding), but substantially ↓
→ major cause of death was infectious disease

– smallpox, typhoid, cholera, tuberculosis, influenza, pneumonia, diarrhoea
– with exceptions, medical knowledge to fight these was in its infancy
19
■ Mortality
→ notions of public cleanliness and personal hygiene
– increasingly rooted even if causal mechanisms were not understood
– end of 18th C. better educated had learned
§ crowding and filth led to infection (cities)
§ country living and breastfeeding healthier
→ hurdles on public health improvements

– sanitation and sewage required engineering skills
– clinical medicine constrained by knowledge and money
→ unhealthy living environment

– proximity w/ animals (filth, insects, disease spread), air pollution (coal burning)
20
Secular trend in England’s mortality rate
Crude death rate
Fogel (2004: 7)
21
■ Mortality slow to decline and F not low, so ↑ P
→ slow medical advances in 19th C., modest M↓
– developing knowledge of germ theory through 19th c.
– progress on disease prevention (Pasteur) in late 19th, penicillin early 20th
→ changing breastfeeding customs, slowly improving IMR

→ but cities were growing faster than slow medical improvements
– 19th C. British cities were death traps, keeping M high (Williamson 1990)
§ London grew fast, industrial towns (e.g., Liverpool, Manchester) emerged
§ life expectancy in 1850: 31 and 32 respectively, Birmingham 27, London 38
§ national average in 1850 was 41, better in older towns and countryside
– Late 19th C. investments in sanitation brought M↓ (Chapman 2022)
§ in English and Welsh towns with lower interest rates (relative to higher)
22
■ Did ↑P bring ↑Y or vv? (difficult to understand causality here)
→ timing of economic growth does not justify start of P growth
– pre-1830 IR was concentrated in a few sectors including small L-share
– certainly ec. growth facilitated ↑P (Malthusian world would have seen a crash)
→ other direction: population growth causing economic growth?

– more people, more ideas (Kremer 1993), ↑ value human K (Galor and Weil 2000)
– Mokyr: not quite fitting of 18th C. Britain
– real wages do not rise until 1830s (Topic 4)
→ simultaneous breakdown of Malthusian constraints & ec. growth

– not a coincidence but precise mechanism not pinned down yet
23
■ Demographic transition elsewhere: China
■ Different timing and speed
→ Shiue (2017): fertility in imperial China
– data on individuals passing official site examinations in Anhui 1300-1900
* men w/ siblings + educated father & grandfather had lower probability further ed.
* preventive checks in China existed pre-1912, though not generalized
– Q-Q trade-off not modern phenomenon requiring modern western insts.
→ Gu and Kung (2021): still Malthusian through early 20th century

– grain market peak (mid-18th C.) & explosive pop. gr. led to collapse ~1840
* Taiping Rebellion: ~1/6 of the population died post 1851 – positive check
* population resumed growth from a much lower base facilitating grain mkt integr.
– U-shaped perf. of grain markets and population (+ corr. B&w) – Malthus!
24
Fertility pattern in pre and industrialising Britain
Mortality pattern in industrialising Britain
Demographic transition in industrialising Britain
Demographic transition elsewhere
25
References
Allen, R. (2009) The British Industrial Revolution in global perspective. Cambridge: Cambridge University Press.
Broadberry, S., B.M.S. Campbell and B. van Leewen (2013) “When did Britain industrialise? The sectoral distribution of
the labour force and labour productivity in Britain, 1381–1851,” Explorations in Economic History 50: 16-27.
Chapman, J. (2022) “Interest Rates, Sanitation Infrastructure, and Mortality Decline in Nineteenth Century England and
Wales,” Journal of Economic History 82 (1): 175-210.
Clark, G. (2007) A Farewell to Alms. Princeton NJ: Princeton University Press.
Clarkson, L.A. (1985) Proto-Industrialization: The First Phase of Industrialization? London: Macmillan.
Crafts, N.F.R. (1980) “Income elasticities of demand and the release of labour by agriculture during the British industrial
revolution,” Journal of European Economic History 9: 153-168.
Fogel, R. W. (2004)The Escape from Hunger and Premature Death, 1700-2100. Cambridge University Press.
Galor, O. and D.N. Weil (2000) “Population, Technology, and Growth: From Malthusian Stagnation to the Demographic
Transition and Beyond,” American Economic Review 90: 806-828.
Gu, Y. and J.K. Kung (2021) “Malthus goes to China: the effect of ‘positive checks’ on grain market development, 1736-
1910,” Journal of Economic History 81 (4): 1137-1172.
Kremer, M. (1993) “Population Growth and Technological Change: One Million B.C. to 1990,” Quarterly Journal of
Economics 108 (3): 681-716.
Mendels, F. (1972) “Proto-Industrialization: The First Phase of the Industrialization Process” Journal of Economic History
32 (1): 241-261.
Mokyr, J. (2009) The Enlightened Economy: an economic history of Britain 1700-1850. New Haven CT and London: Yale
University Press.
Shiue, C.H. (2017) “Human capital and fertility in Chinese clans before modern growth,” Journal of Economic Growth 22
(4): 351-396.
Williamson, J.G. (1990) Coping with City Growth During the British Industrial Revolution. Cambridge: Cambridge
University Press.
Wrigley, E.A. and R.S. Schofield (1981) The Population History of England, 1541-1871: a reconstruction. Cambridge:
Cambridge University Press.
Wrigley, E.A. and R.S. Schofield (1997) English Population History from Family Reconstitution, 1580-1837. Cambridge:
Cambridge University Press.
26
EC104

Imperialism and Slavery
Claudia Rei
■ Focus today
■ Rise of British imperialism
■ Contribution of empire / slave trade to industrialization?
■ Slavery as a component of Atlantic trade – the rise of Europe
■ Legacies of forced labour in the context of empire
2
■ The rise of British imperialism – some history
■ From minor player in 1700 to global hegemon by 1820
→ Britain gained overseas territories in 18th c. international disputes

– 1713: Treaty of Utrecht Spain ceded Gibraltar and Menorca and France
ceded Newfoundland, Rupert’s Land, Acadia, St. Kitts
– 1763: Treaty of Paris France ceded Canada, Dominica, Grenada, St.
Vincent, Trinidad and Tobago, and Louisiana
3
■ The rise of British imperialism – some history
■ From minor player in 1700 to global hegemon by 1820
→ Britain gained overseas territories in 18th c. international disputes

– 1713: Treaty of Utrecht Spain ceded Gibraltar and Menorca and France
ceded Newfoundland, Rupert’s Land, Acadia, St. Kitts
– 1763: Treaty of Paris France ceded Canada, Dominica, Grenada, St.
Vincent, Trinidad and Tobago, and Louisiana
→ Napoleonic Wars: devastated other empires but benefited Britain’s

– Dutch lost African and Asian territories (except Indonesia) to Britain
– French lost most Asian trade posts to Britain, and Saint-Domingue (Haiti)
– Portuguese lost Brazil
– Spaniards lost all but Cuba, Philippines, and Puerto Rico
– British gained Australia and much of India
4
Wells (1920: 452)
5
■ Could empire have caused British industrialisation?
■ Empire did not bring MEG in other countries
→ recall AJR (2005) on Atlantic trade and “The Rise of Europe…”
■ Timing works in Britain

→ rising of empire coincides with start of modern economic growth
→ colonial debate
– long standing debate since late 1700s
§ Edmund Burke: colonies vital for British success and K accumulation
§ Adam Smith: colonies drain, not much profit and costly to maintain
– 1960s-70s literature on profitability of British West Indies
§ Sheridan (1965): large profits from BWI (8-10% income /year late 18th c.)
§ Thomas (1968): calculations for sugar colonies below 2%, <3.5% (riskless)
6
■ Coelho (1973) “The profitability of imperialism…”
→ do bad investments in BWI mean that Britain lost from empire?
– depends on sugar price in BWI relative to world price of sugar
§ if import price of sugar from BWI < world price, Britain made profits
§ if import price of sugar from BWI > world price, Britain made losses
→ BWI most important colonies (sugar)

– if BWI were not profitable, it is unlikely any other colonies were
→ Coelho furthers Thomas (1968) analysis w/ economic theory

– consumer and producer surplus
7
■ Costs and Benefits of empire
Supply of sugar BWI
BWI loss
World price > P0
BWI price = P0
Britain gain
Demand for sugar Britain
Q’ Q0 Q’’
Coelho (1973: 257) 8
■ Costs and Benefits of empire
Supply of sugar BWI
BWI gain
BWI price = P0
World price < P0

Britain loss
Demand for sugar Britain
Q’ Q0 Q’’
Coelho (1973: 257) 9
→ profit calculation, two possibilities:
– Britain gained from empire (slide 8): world price above BWI price
§ British consumers gain: consume at Q0 rather than Q’
§ BWI producers lose: produce Q0 (for Britain) rather than Q’’ (world demand)
– Britain lost from empire (slide 9): world price below BWI price
§ British consumers lose: consume Q0 rather than intersection of Q’’
§ BWI producers gain: produce Q0 (for Britain) rather than Q’
→ historical evidence: London price higher than Amsterdam’s
10
→ New question: if Britain lost from BWI, why keep it?
– same rationale for tariffs (subsidy to BWI producers in this case)
§ overall loss to the economy (CS loss > PS gain)
§ ultimately a cost paid by consumers
§ BUT cost dispersed among many consumers is individually small
§ small number of producers (concentrated) gain & can lobby the government
– Coelho (1973) provides suggestive evidence of this coalition of ‘winners’
11
■ Dos and Don’ts of essay assignments
ADVICE
12
■ Slave trade integral part of triangular trade
■ British involvement:
→ 1560s: John Hawkins established English slave trade
→ 1607-1655: English acquired presence in the Caribbean
→ 1660: first charter of the Royal African Company (slave trade until 1731)
→ 1713: Treaty of Utrecht gave Britain the Asiento (excl. sale in Sp. Indies)
→ 1807: Slave Trade Act prohibited slave trade in British empire
→ 1833: Slave Abolition Act (except EIC possessions, Ceylon, St Helena)
■ Could Britain’s slave trade (and slavery) have financed the IR?
→ profitability of slavery long lasting debate up to the 1980s
13
■ Williams Thesis Capitalism and Slavery (1944)
The profits obtained provided one of the main streams of that accumulation in
England which financed the Industrial Revolution (p. 52)
The triangular trade made an enormous contribution to Britain’s industrial
development. The profits from this trade fertilized the entire productive system
of the country. (p. 105)
14
The profits obtained provided one of the main streams of that accumulation in
England which financed the Industrial Revolution (p. 52)
The triangular trade made an enormous contribution to Britain’s industrial
development. The profits from this trade fertilized the entire productive system
of the country. (p. 105)
■ Strong thesis: slave trade caused the British IR
■ Weak thesis: slave trade contributed notably to the British IR
→ either way, clear link between British success and slave trade
15
■ Historical evidence
→ importance of slave trade to Bristol and Liverpool economies
→ linkages of specific manufacturing industries with triangular trade
→ examples of investment of plantation profits in England
■ Major critiques to the Williams Thesis

→ profitability of Caribbean colonies (covered)
→ profitability of slave trade
→ investment during the industrial revolution, capital accumulation
16
■ Was the slave trade profitable?
■ Thomas and Bean (1974) “Fishers of Men…”
→ transatlantic leg of British slave trade was highly competitive
→ internal and international competition, + interlopers
→ free entry into the slave trade market drove profits to zero
■ Eltis and Engerman (2000) “The importance of slavery…”

→ sugar colonies were not profitable (in line with previous papers)
→ small weight on British economy (slave trade and Caribbean economy)
■ Inikori (1981) “Market structure and profits…”

→ underestimate of prices and shipped slaves (Thomas and Bean 1974)
→ evidence from voyages of William Davenport to the Barbados
→ estimated return of slave trade close to 50%
17
■ Was the slave trade profitable? (cont.)
■ Problems with Inikori’s evidence (Anderson and Richardson 1983)
→ limited sample of 24 very successful voyages
→ ignored uncertainty of slave trade
– timing of voyages, reliability on inland slave trade routes, …
→ ignored risk of slave trade
– loss of ships, mortality on board
→ ignored demographic composition of slaves (not all adult males)
→ ignored different voyage costs (Barbados 1,000 miles from Jamaica)
■ Wider samples show:
→ wide variability of returns
→ Barbara Solow estimates 8-10% return in 18th c. (Solow 1985)
18
■ Capital accumulation?
■ Engerman (1972) “Slave trade and British capital formation”
→ focus on revenues from slavery relative to British investment
→ 2.8 to 10.8% of investment in key years of the IR
– not so large as to be the, or even a, major contributing factor
■ Williamson (1984) “British growth during the IR”

→ capital accumulation was low in the early IR (pre-1820)
→ savings rate ≈ 10%
– Meiji Japan 14.8%, late 19th c. US 28%, 1977 LDCs on average 20.1%
→ if K accumulation low, contribution of slave trade to the IR couldn’t
have been high
19
■ Slavery as a component of Atlantic trade
■ Inikori (2002) “Africans and the Industrial Revolution…”
→ export economies in the New World depended on slave labour
→ AND Atlantic trade stimulated intra-European trade
→ + slave trade central to the rise of Atlantic trade
– promoted English shipping
§ shipping technology development and ship building both grew
– promoted development of English financial institutions
§ banking, insurance, stock exchange
– brought raw materials essential to British industrialisation
§ rising share of British imports between 1700 and 1850 from Atlantic trade
– Britain’s manufactures connected to overseas markets
§ textiles (woollens, linen, cotton), metals
20
■ Expanding manufactured exports
Shift!
21
■ Legacies of forced labor in the context of empire
■ Spanish America (Dell 2010) – method RDD
→ 1573-1812 mining mita in present day Peru-Bolivia border
– extractive institution using forced labour to mine silver and mercury
– communities forced to send 1/7 of adult males to Potosí & Huancavelica
→ long term persistence (mita vs non-mita):
– mita districts have lower wealth, health and education outcomes today
■ Southeast Asia (de Zwart et al 2022) – method IV

→ 1834-1879 Java cultivation system
– extractive institution forcing the cultivation of cash crops
– crop targets specified by Dutch colonial government (village level)
– substantial share of dedicated land and labour to meet set targets
→ places of higher L-demand people died more
→ abolition of cultivation system ↓M rates 10-30% by late 1870s22
■ Legacies of forced labor in the context of empire
■ Africa (Lowes and Montero 2021) – method RDD
→ 1885-1908 concessions in the Congo Free State (presently DRC)
– private companies used extreme violence to extract local resources
– there was also co-opting of local leaders into the violence
* concessions not exclusive to Belgian colonies, common in major colonial powers
→ long-term persistence (concession vs non-concession areas):

– former concession areas have worse education, wealth, and health today
– village chiefs: fewer pub. goods, less lik. to be elected, more hereditary
– but individuals are more trusting, cohesive, and willing to share income
→ historical institutions and culture at play in present outcomes
23
Why economic historians have linked empire/slavery w/ the IR
Role of empire/slavery in financing British industrialisation
The Williams Thesis theory and evidence
Alternative channels of influence of slavery on the IR
Legacies of forced labour
24
References
Acemoglu, D., S. Johnson and J. Robinson (2005) “The rise of Europe: Atlantic trade, institutional change, and
economic growth,” American Economic Review 95 (3): 546-579.
Anderson, B. L. and D. Richardson (1983) “Market Structure and Profits of the British African Trade in the Late
Eighteenth Century: A Comment,” Journal of Economic History 43 (3): 713-721.
Coelho, P. (1973) “The profitability of imperialism: the British experience in the West Indies 1768-1772,” Explorations in
Economic History 10 (3): 253-280.
Crafts, N.F.R. British economic growth during the industrial revolution. Oxford: Oxford University Press, 1985.
De Zwart, P., D. Gallardo-Albarrán and A. Rijpma (2022) “The Demographic Effects of Colonialism: Forced Labor and
Mortality in Java, 1834-1879,” Journal of Economic History 82 (1): 211-249.
Dell, M. (2010) “The Persistent Effects of Peru’s Mining Mita,” Econometrica 78 (6): 1863-1903.
Eltis, D. and S. L. Engerman (2000) “The Importance of Slavery and the Slave Trade to Industrializing Britain,” Journal
Engerman, S. L. (1972) “The Slave Trade and British Capital Formation in the Eighteenth Century: A Comment on the
Williams Thesis,” Business History Review 46 (4): 430-443.
Inikori, J. (1981), “Market Structure and the Profits of the British African Trade in the Late Eighteenth Century,” Journal
Inikori, J. Africans and the Industrial Revolution in England: a study in international trade and economic development,
Cambridge: Cambridge University Press, 2002.
Lowes, S. and E. Montero (2021) “Concessions, Violence, and Indirect Rule: evidence from the Congo Free State,”
Quarterly Journal of Economics 136 (4): 2047-2091.
Solow, B. (1985) “Caribbean slavery and British growth: the Eric Williams hypothesis,” Journal of Development
Economics 17: 99-115.
Thomas, R. P. (1968) “The Sugar Colonies of the Old Empire: Profit or Loss for Great Britain?” Economic History Review
21 (1): 30-45.
Thomas, R. P. and R. N. Bean (1974) “The Fishers of Men: The Profits of the Slave Trade,” Journal of Economic History
34 (4): 885-914.
Wells, H.G.The Outline of History: being a plain history of life and mankind. London: Cassell, 1920.
Williams, E. Capitalism and Slavery. Chapel Hill, NC, 1944.
Williamson, J. G (1984) “Why Was British Growth So Slow During the Industrial Revolution?” Journal of Economic
History 44 (3): 667-712. 25
EC104

Industrious and Consumer Revolutions
Claudia Rei
■ Goals today
■ Understanding the IR’s impact in individual lives
■ Industrial Revolution from a demand perspective
■ Industrious Revolution
■ Consumer Revolution
2
■ Understanding the IR’s impact in individual lives – an example
■ Edward Bellamy’s music from the novel Looking Backward (1888)
Warning on novels and other non-academic sources!
3
■ Utopian novel with a time travelling character from 1895 into 2000
Q: „Would you like to hear some music?“
4
■ Utopian novel with a time travelling character from 1895 into 2000
Q: „Would you like to hear some music?“
Bellamy's protagonist is stupefied to find his host "merely touched one or two
screws," and immediately the room was "filled with music; filled, not flooded, for,
by some means, the volume of the melody had been perfectly graduated to the
size of the apartment. 'Grand!' I cried. 'Bach must be at the keys of that organ;
but where is the organ?’”
§ Learns that his host has called the orchestra on the telephone:
“…if we [in the nineteenth century] could have devised an arrangement for
providing everybody with music in their homes, perfect in quality, unlimited in
quantity, suited to every mood, and beginning and ceasing at will, we should
have considered the limit of human felicity already attained…"
5
■ How would you listen to music in the 19th century?
§ Cost today, were you to produce music 19th C style?
→ Steinway piano: @£20/h salary ~2,500h (50h/w – 50 weeks & do nothing else!)
→ plus commitment to play it well…
§ Present cost of listening to music
→ possibly cheapest: <1h work portable radio (starting at £3.60 at Amazon)
→ smartphones (multiple functions) start at £100+ that’s 5h+ work
§ POINT: historical statistics understate impact on individual lives
■ Demand-led notions of industrialisation
6
Economists are always ready to acknowledge supply and demand –
production and consumption – as paired forces in the shaping of
the market economies (…) Studies of modern economic growth are
inevitably founded on a decisive ‘supply-side’ advance, which
economic historians have variously located in technological
change, enlarged supplies of capital, energy and raw materials,
and new institutions that allowed these factors of production to
be deployed more effectively. (…) Yet the accumulating evidence
for an earlier increase o per capita income in northeastern
Europe paired with a major refinement of material life casts
serious doubt on the orthodoxy that the [supply led] industrial
revolution was the actual starting point for long-run economic
growth.
(de Vries 2008: 6)
→ de Vries argues for a shift of Demand prior to that of the Supply
7
■ Narrative behind a D-side Industrial Revolution (de Vries 1994)
■ ‘Great Discoveries’ made larger consumer bundles available (to some)
■ Trade w/ Americas brought staple foods: potatoes, tomatoes, maize, …
■ Trade w/ Asia made goods like tea, coffee, silks, china, sugar, available
■ Puzzle
■ Real wages not growing before or during the core decades of the IR
■ Yet evidence from inventory studies show consumption rising from 17th C.
■ Consumption rises because income rises (income = hourly wages x hours worked)
■ Households adjust labor hours (L moves out of the household into market)
→ industrious revolution
→ Before attempting a definition, let's try to understand key ideas

8
■ A Theory on the Allocation of Time (Becker 1965)
■ Household as entity dedicated to consumption (as firms are to production)
■ Use of consumer technology (as production technology) subject to constraints
■ Subject to budget constraint HHs purchase market supplied goods
→ either final consumption or combine L for home produced goods (examples)
■ HH problem:
→ decide on time allocation of L between home and market production
→ the constraint is time – 24h in a day
→ market production is income generating, home production is not (examples)
→ Industrious revolution is a household (D-side) based phenomenon

(LS shifts toward market produced goods and away from home produced goods)
9
■ Industrious Revolution (de Vries 1994)
■ The household problem then and now
→ consumption of home and market produced goods, true before and after IR hits
→ industrious revolution changes relative household shares
EXERCISE
→ think of YOUR consumption of home and market production today
→ then think of those shares if you lived 300 years ago
(examples of goods that you now purchase in the market but would not 300 ago)
10
■ Industrious Revolution (de Vries 1994) implications
■ Consumer demand grew regardless of real wage trends
■ Rising L supply in the labor market
→ structural change: shift away from agriculture (especially subsistence agriculture)
■ Changing patterns of consumption and leisure
■ Specialisation of households in market production
→ produce very few goods at home and purchase everything else on the market
■ Impact on other household decisions
→ fertility, women and children’s L supply (↑opportunity cost), ↓home production
■ Rise in supply of market commodities, market LS, LFP
→ changing opportunity cost of time
→ Empirical evidence?
11
■ Industrious Revolution evidence (Voth 1998)
■ Voth (1998) studies the evolution of L hours in industrial Britain
■ Data from London criminal court records in 1749 and 1803
■ Witnesses asked to recount their entire day
→ collect start and end time of work for every witness
■ More than 2,000 observations of witnesses across >7k court cases
■ Results show changing work patterns
→ daily work duration no different, number of workdays a week changes
→ Reduction in religious holidays (pre-IR 50-60 days, Monday not a holiday later)
(partly explained by protestant reform)
12
Was the rise in L
hours a response to
a rise in demand?
Voth (1998: 39) 13

■ Consumer Revolution (McKendrick et al 2018)
■ Consumption side of the Industrious Revolution
■ Because of rising LS for market production, more wages are paid
■ Shift away from home production raises D for market produced goods
■ Specialised households produce very little at home
→ examples of goods once produced at home but no more
■ Marketing efforts from firms further spur consumption

■ More than one breadwinner, more than one say on consumption basket
→ Empirical evidence?
14
Source: various sources in de Vries (2008: 123-176) 15
16
■ Consumer Revolution evidence (McKendrick et al 2018)
■ Probate records show a rise in consumption of market goods
■ Characteristics of goods changed over time
→ more luxury goods consumed even at not so affluent levels (e.g., clocks)
→ common and durable goods replaced by comfortable but breakable (e.g., china)
→ comfortable and fashionable textiles (e.g., cotton and linen) substitute wool
■ New consumption regime different across income levels (de Vries 2008)
→ those who kept servants fared better
→ some domestic comforts just not accessible in households that supplied house L
→ Evidence seems to suggest a rise in consumption of luxuries and

change in tastes from 16th to 18th centuries
17
■ More nuanced view of Industrious and Consumer Revolutions
■ Probate records: little representation of lower income levels
→ the rich leave more goods upon death (those who leave nothing have no probate)
→ few surviving records show that even the poor consume luxuries – caution
■ Casting doubt on Industrious Revolution (Clark and van der Werf 1998)
→ hours worked already high in the Middle Ages
→ women already active in the L market since the 14th century (response to Black Death)
■ Casting doubt on the Consumer Revolution (Allen and Weisdorf 2011)

→ hours worked rose to maintain living standards, not in response to consumerism
→ women and child labour needed to contribute to declining family budgets
→ implication: families had to become industrious in the allocation of time, but did
not become not consumerists
18
Industrious revolution theory and evidence
Consumer revolution theory and evidence
Economic implications of the industrious revolution
19
References
Allen, R. and J. Weisdorf (2011) “Was there an industrious revolution before the industrial
revolution? An empirical exercise for England, c. 1300-1800,” Economic History Review 64 (3):
715-729.
Becker, G.S. (1965) “A Theory of the Allocation of Time,” Economic Journal 75 (299): 493-517.
Bellamy, E. (2000) Looking Forward: from 2000 to 1887, originally published in 1888. Bedford, MA:
Applewood Publishers.
Clark, G. and Y. van der Werf (1998) “Work in Progress? The Industrious Revolution,” Journal of
Clark, G. (2010) “The Consumer Revolution: turning point in human history, or statistical artifact?,”
MPRA Working Paper No. 25467.
De Vries, J. (1994) “The Industrial Revolution and the Industrious Revolution,” Journal of
De Vries, J. The Industrious Revolution: consumer behavior and the household economy, 1650 to
the present. Cambridge: Cambridge University Press, 2008.
McKendrick, N., J. Brewer and J.H. Plumb. The Birth of a Consumer Society: the commercialization
of the eighteenth-century England, 2nd Edition. Edward Everett Publishers, 2018.
Voth, H.J. (1998) “Time and Work in Eighteenth Century London,” Journal of Economic History 58
(1): 29-58. 20
EC104
Topic 4: Living standards: 1750-1850

The British standard of living debate (wages)
Claudia Rei
The SoL Debate – wages
■ Focus today
■ Context of the British SoL debate
■ The different views
■ Measurement: evidence on wages
■ Other evidence (next lecture)
2
■ Context of the British SoL debate – why is it relevant?
■ One of the most heated and long lasting debates in EH
■ Early industrialising Britain 1750-1830
■ Did sustained increases of GDP mean people lived better?
■ Long run, no disagreement; Short run, well…
■ Regional analysis
To think about:
In topic 3 we said Britain was a high wage economy. Does it make sense to discuss SoL then?
3
■ Two views on Standards of Living during the British IR
■ Pessimists
→ Engels (1844), Mill (1848), … , Feinstein (1998), Allen (2009)
“It is questionable if at all the mechanical inventions yet made have
lightened the day’s toil of any human being. They have enabled a
greater proportion to live the same life of drudgery and imprisonment
and an increased number of manufacturers and others to make
fortunes” (Mill 1848)
→ early philosophers focused on difficult life of urban dwellers
→ later research considered concrete measures of SoL
→ SoL of labouring poor declined (or got no better) despite growth
4
■ Two views on Standards of Living during the British IR
■ Optimists
→ Ashton (1949), Hartwell (1959), … , Lindert and Williamson
(1983), Clark (2005)
“Consideration of estimates of national income and wealth, of production
indexes, of wage and price series, of consumption trends and of social
indexes, all … indicate an unambiguous increase in average standard of
life” (Hartwell 1959)
→ living conditions improved for the average worker

→ some workers suffered but most were better off
5
■ Measurement
■ Purchasing power in early industrial Britain
𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝑤𝑎𝑔𝑒𝑠
𝑅𝑒𝑎𝑙 𝑤𝑎𝑔𝑒𝑠 =
𝐶𝑜𝑠𝑡 𝑜𝑓 𝑙𝑖𝑣𝑖𝑛𝑔
→ neither series is readily available for early IR days

→ national accounts produced only from 1870
→ pre-1870 there only are estimates

– understand the estimation process to understand the SoL debate
6
■ Measurement
𝑵𝒐𝒎𝒊𝒏𝒂𝒍 𝒘𝒂𝒈𝒆𝒔
→ nominal wages for various occupations

– Lindert and Williamson (1983) gather information from earlier studies
– L&W (1983) create occupational groups
§ farmers (poorest)
§ blue collar (builders, factory workers, miners)
§ white collar (admin workers, skilled craftsmen)
7
■ Measurement
𝑵𝒐𝒎𝒊𝒏𝒂𝒍 𝒘𝒂𝒈𝒆𝒔
→ revised estimates for nominal wages in Feinstein (1998)

– adds wage earning occupations in missing sectors
§ domestic servants, army, navy, butchers, bakers, candlestick makers, …
§ includes payments in kind and earnings from women and juveniles
– increases occupational coverage to 80%
8
No disagreement on
nominal wage estimations
Feinstein (1998:634)
9
■ Measurement
𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝑤𝑎𝑔𝑒𝑠
𝑪𝒐𝒔𝒕 𝒐𝒇 𝒍𝒊𝒗𝒊𝒏𝒈
→ cost of living estimates to deflate nominal wages – harder task!

– L&W (1983) correct early 20thC. estimates for wholesale prices, regions…
§ regional weights, added goods (rent, cotton, potatoes, …)
– Feinstein (1998) includes a more comprehensive basket of goods
§ bread instead of wheat prices, rent for more counties, time changing weights
Very different cost of living series estimates!

10
debate stemming from
price index estimates
post-1810s
Data from Lindert and Williamson (1983) and Feinstein (1998)

11
big difference in outcome
thus the debate
Feinstein (1998:643)
12
■ Measurement
■ Further iterations in the SoL debate
→ Clark (2001) and Clark (2005)
– new additions
§ sources for farm and building craftsmen wages and some new price data
§ reweights elements in consumption basket
§ new formula for price index calculation
– Clark’s real wage series closer to L&W (1983) – revival of optimist side
→ Allen (2007)
– comparison: Feinstein vs Clark indexes
§ formula for price index calculation makes no difference
§ weight differences in the consumption basket matter
– Allen’s best of both series closer to Feinstein’s – pessimism maintained
13
Two Phases of the Industrial Revolution
wages grow
much slower
than output per
worker early on
Allen (2009:419)
14
■ Overall results of the British SoL debate – wages
■ Implications of stalling wages during economic growth
→ rising inequality
– change of factor shares in the production function (rising K, L declining)
– changing corresponding factor income: K more rewarded than L
§ sounds like Marx
→ counterfactual analysis: w/o population growth
15
Counterfactual outcomes without population growth
Allen (2009:430)
16
■ Overall results of the British SoL debate – wages
■ Implications of stalling wages during economic growth
→ rising inequality
– change of factor shares in the production function (rising K, L declining)
– changing corresponding factor income: K more rewarded than L
§ sounds like Marx
→ counterfactual analysis: w/o population growth

– model simulations show little lag in wages relative to output per worker
– without the burden of expanding population, wages would not stall
§ sounds like Malthus… BUT history more complicated than models
→ ↑L necessary but not sufficient condition for stagnant real wages

– real wages grew in Britain post-1860 in line with population growth
17
■ SoL beyond wages (next lecture)
■ Why should we need measures other than purchasing power?
→ Floud et al (1990): wages fail to incorporate other aspects
– for instance, changes in the length of human life
– difficult to incorporate new occupations
– difficult to ensure wage samples were representative of whole population
→ Further:
– real wage debate could be more conclusive on timing
– alternative measures of SoL should complement wage analysis
18
The context/relevance of the British SoL debate
Measurement of SoL during the British IR
The pessimists’ view and their evidence
The optimists’ view and their evidence
Engels’ pause
19
■ Regional diffusion of British industrialisation
■ Kelly, Mokyr, Ó Gráda (2023)
→ Early wage stagnation masks stark regional differences
Aggregate labor income in English counties (w × L)
20
Kelly et al (2023:71)
Aggregate labor income in English counties (w × L)
Counties scaled
proportionally to L income
but
shaded according to
wage rate
21
Kelly et al (2023:71)
– rising wages in industrializing north (previously relatively poor)
– declining wages in south (previously relatively prosperous)
→ Implications:
– specialisation according to regional comparative advantage
§ poor agricultural potential areas (low wages pre-1750) – manufactures
§ BUT ≠ manufactures followed ≠ wage patterns – prior skill composition
§ low: protoindustrial areas (e.g., nails, low quality textiles) no major tech advances
§ high: precise metal working (e.g., watchmaking, …) transferrable skills, new tech
– direct contradiction of factor price argument (Allen 2009) {T03L1}
– different explanation for the emergence of British industrialisation
(If you’re interested in the argument, check out the paper!) 22
References
Allen, R. (2009) "Engels' pause: Technical change, capital accumulation, and inequality in the British
industrial revolution," Explorations in Economic History 46 (4): 418–435.
Ashton, T. S. The Industrial Revolution 1760-1830. Oxford: Oxford University Press, 1949.
Clark, G. (2007) “The Conditoon of the Working Class in England 1209-2004,” Journal of Political Economy
113 (6): 1307-1340.
Engels, F. The Condition of the Working Class in England in 1844. English Edition. New York and London,
1891.
Feinstein, C. (1998) “Pessimism Perpetuated: real wages and the standard of living in Britain during and
after the industrial revolution,” Journal of Economic History 58 (3): 625-658.
Floud, R., A. Gregory, and K. Wachter. Height, Health and History: Nutritional Status in the United Kingdom,
1750-1980. Cambridge: Cambridge University Press, 1990.
Hartwell, R. M. (1959) “Interpretations of the Industrial Revolution in England: a methodological inquiry,”
Journal of Economic History 19 (2): 229-249.
Kelly, M., J. Mokyr and C. Ó Gráda (2023) "The Mechanics of the Industrial Revolution," Journal of Political
Economy 131 (1): 59-94.
Lindert, P. and J. G. Williamson (1983) “English Workers’ Living Standards During the Industrial Revolution:
a new look,” Economic History review 36 (1): 1-25.
Mill, J. S. Principles of Political Economy with some of their Applications to Social Philosophy. Ashley, ed.
1848.
23
EC104

Standards of living beyond wages
Claudia Rei
SoL beyond wages
■ SoL proxies beyond purchasing power
■ Health indicators (covered some in Topic 3)
■ Anthropometrics
■ Child Labour
■ Literacy and numeracy
2
SoL beyond wages
■ Anthropometrics (Baten 2016)
■ Study of human body measurements
→ height-to-age, weight-to-age, weight-to-height (BMI)
■ EH anthropometric studies use mostly adult height of cohort
■ Indicator of cohort’s general health

→ cumulative measure of biological SoL
■ Average cohort height partly reveals ec. conditions at birth

→ particularly useful when other wellbeing measures are unavailable
→ correlates positively with longevity
→ correlates positively with GDPpc
3
4
Baten (2016:5)
SoL beyond wages
■ Factors affecting individual human stature (not exhaustive!)
→ genetics
→ nutritional intake in early years of life
→ environment in early years of life
■ Factors affecting average cohort stature

→ nutritional intake in early years of life
→ environment in early years of life
■ Genetic deviations from the mean cancel out on average

→ small impact of race after taking into account usual suspects
– lactose tolerance (genetics), food preferences (culture)
– protein availability (income), disease environment (environment) 5
SoL beyond wages
■ Average cohort stature as a proxy for SoL at the time of birth
→ insults to health early in life can have permanent effects
– malnutrition, disease, pollution, lack of sanitation
→ generally poor living conditions – stunted growth
– enough individuals in a cohort do not grow to full potential
■ Surviving historical samples may not mirror population

→ selection issues
– slaves, convicts, voluntary soldiers, military recruits
→ general conscription data better (post-Napoleonic wars)
– every male age 18 measured and examined (selection to the military after)
6
SoL beyond wages
■ Anthropometrics
■ Historical evidence on heights for the SoL debate
→ Floud et al (1990)
– data from 108,000 military recruits admitted into
§ British Army and Royal Marines post-1806
§ Marine Society of London 1770-1870
§ Royal Military Academy at Sandhurst post-1806
§ authors deal with potential problem of truncation (selection into the military)
– measured upon entry at 18, proxy for living conditions around birth
– patterns
7
SoL beyond wages
time of
worsening
heights not
quite matching
pessimists’
optimists
Floud et al (1990:136) 8
SoL beyond wages
■ Anthropometrics
→ Nicholas and Oxley (1993)

– data from English and Irish convicts transported to Australia pre-1840
§ rare example of an anthropometric sample including women
§ 2,926 English-born women and 3,370 Irish-born women
§ 12,528 English-born men and 7,358 Irish-born men
§ relevant comparisons: urban-rural within England AND within Ireland
§ IR not in Ireland at the time, was there an urban penalty?
§ authors deal w /potential concerns of representativeness (selection into crime)
– patterns on growth spurt and on adult heights
9
SoL beyond wages
caution:
small samples
girls living through
< 15 y.o.
the IR had a less
pronounced spurt
lasting longer
__________
comparison today’s
well nourished girls’
growth spurt ~10-13
Nicholas and Oxley (1993:732)

SoL beyond wages
■ Anthropometrics
→ Cinnirella (2008)
– paper’s introduction provides a good summary of SoL debate literature
– revisits and revises Floud et al (1990) data on military recruits
§ focuses on British Army recruits only to avoid different selection issues
§ uses estimator to deal with truncation in all subsamples
§ further contributes to rural-urban and regional comparisons
– patterns
11
SoL beyond wages
unequivocal decline
Cinnirella (2008:339)
SoL beyond wages
generalised deterioration of SoL in the short run
increased differences from 19th c.
Cinnirella (2008:344)
SoL beyond wages
■ Child growth post-1850
■ Gao and Schneider (2021)
→ data from the Indefatigable school ship between 1850 and 1975
– ship’s mission: to train boys for careers in navy or merchant marine
* Originally sons and orphans of sailors and poor children
* w/ time it attracted children from parents with all sorts of occupations & regions
– recording of heights upon entry (10-14) and discharge (15-18)
* allows for longitudinal analysis of growth patterns across cohorts
→ Findings
– secular increase in child heights (consistent with adult evidence)
– BUT growth pattern changed with time
14
SoL beyond wages
z-score shows difference in
growth patterns in the past
relative to modern standard
z-score ~ 0: no difference
12–13-year-olds pre-1900
behind modern standards
because later growth spurt Timing and speed of
than present 12-13-yos growth spurt change!
14-year-olds sightly behind
as growth velocity in potential reasons in paper
reference group falls
15-16-17-year-olds better
than modern standards
since growth velocity in the
past was higher
15
Gao and Schneider (2021: 357)
SoL beyond wages
■ Growth of slave children in America and the Caribbean
■ Understanding historical child growth (Schneider 2017)
→ previously established knowledge (Steckel 1987)
§ – CLAIM: US slaves had extremely low birthweight (imputed)
– notable catch-up growth upon starting working around age ~10
* food intake improved w/ meat and protein (slaves were well fed to work)
– adult heights taller than many European working-class individuals
→ new adaptive framework of childhood growth (biological adaptation)
– pre-natal and post-natal adaptive mechanisms affect growth pattern
– wide mismatch between pre- and post- birth conditions
* fairly good in-utero conditions (mother’s nutrition) – expect normal growth
* appalling conditions in infancy & early childhood – severe stunting, late puberty
* improved diet + prenatally programmed high metabolism – fast catch-up teens
→ § inconsistent w/ fast catch-up & w/ other populations w/ low bw
– rest of the paper gathers historical evidence backing these claims 16
SoL beyond wages
Hypothetical and observed growth patterns for slave boys
notable catch-up
Steckel (1987)
very stunted
Schneider (2017)
17
Schneider (2017: 13)
SoL beyond wages
How adult heights can proxy for SoL
Potential problems of adult heights as a proxy for SoL
Contribution of anthropometrics literature to SoL debate
Usefulness of the rural-urban comparison of heights
Child growth then and now (including New World slaves)
18
SoL beyond wages
■ Child Labour during the British IR
Children always
worked;
but those born in key

IR cohorts started
working younger.
IR brought a large
increase of child
labor in Britain
Humphries (2013:402) 19
SoL beyond wages
Concentration in key industries
Horrell and Humphries (1995:497)

SoL beyond wages
■ Child Labour during the British IR
■ Rising child labour 18th early 19th c. (Basu and Tzannatos 2003)
→ complement to partially mechanised technology
– children specialised in small tedious tasks requiring little force (adult waste)
→ fatherless families (1/3 during IR)

– intermittent wars through 50 years of the 18th c.
→ inadequate earnings
– Engels’ pause, enclosure, rising cost of living
■ Declining child labour post-1830s (Horrell and Humphries 1995)

→ end of Engels’ pause
– rising real wages slowly start rising SoL, slowly declining child labor
21
SoL beyond wages
■ Child Labour and the British SoL debate
■ Pessimists
→ Response to lower earnings (Humphries 2013)
– families forced to send their kids to work
– in poverty, having children not work is a luxury
– given the subsistence level there are two equilibria
§ family income < subsistence, then there will be child labour
§ family income > subsistence, then there will be no child labour
■ Optimists
→ child labour existed before the IR (Hartwell 1971)
– agricultural working conditions just as harsh as factories
→ not substitute to adult labour but complemented family income
– helped the consumer revolution (McKendrick 1982)
22
SoL beyond wages
■ Literacy and Numeracy (Baten 2016)
■ Basic indicators of education (human capital)
→ Literacy
– reported in census regularly conducted in some countries since late 19th
– before, inferred from marriage records (fraction of people able to sign)
→ Numeracy, proxy for numeric skill

– age-heaping: share of people most likely not to report exact age (rounding)
𝑝𝑒𝑟𝑠𝑜𝑛𝑠 𝑟𝑒𝑝𝑜𝑟𝑡𝑖𝑛𝑔 𝑚𝑢𝑙𝑡𝑖𝑝𝑙𝑒 𝑜𝑓 5

𝑤ℎ𝑖𝑝𝑝𝑙𝑒 𝑠𝑐𝑜𝑟𝑒 =
𝑒𝑥𝑝𝑒𝑐𝑡𝑒𝑑 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑎𝑔𝑒𝑠 𝑖𝑛 𝑚𝑢𝑙𝑡𝑖𝑝𝑙𝑒𝑠 𝑜𝑓 5
23
heaping not as strong WS 109
strong heaping WS 125
24
Baten et al (2014:421)
ON
RIS
MPA
R CO
FO
Source: James made this graph with recent Nigerian data 25

SoL beyond wages
■ Literacy and Numeracy (Baten 2016)
■ Basic indicators of education (human capital)
→ Literacy
– reported in census regularly conducted in some countries since late 19th
– before, inferred from marriage records (fraction of people who sign)
→ Numeracy, proxy for numeric skill

– age-heaping: share of people most likely not to report exact age (rounding)
– common in historic populations and poorest countries today
– inferred from marriage records, any surviving contracts
→ Correlates
– both correlate positively in LDCs post-1950 (A’Hearn et al 2009)
– both correlate with stature in historical samples (Baten et al 2014)
26
SoL beyond wages
27
Baten (2016:43)
SoL beyond wages
28
Baten (2016:75)
SoL beyond wages
Contribution of child labour to the British IR
Reasons for rising and falling child labour in industrial Britain
Numeracy as a proxy for SoL
Mortality and life expectancy in industrial Britain

(from Topic 3)
29
References
A’Hern, B., J. Baten and D. Crayen (2009) “Quantifying Quantitative Literacy: Age Heaping and the History of Human Capital,”
Journal of Economic History 69 (3): 783-808.
Basu, K. and Z. Tzannatos (2003) “The global child labor problem: what do we know and what can we do?” World Bank
Economic Review 17: 147-173.
Baten, J. (2016) “Southern, eastern and central Europe” in A History of the Global Economy: 1500 to the present. Joerg
Baten (ed.). Introduction and Chapter 2. Cambridge: Cambridge University Press.
Baten, J., D. Crayen, J. Voth (2014) “Numeracy and the Impact of High Food Prices in Industrializing Britain, 1780-1850,”
Review of Economics and Statistics 96 (3): 418-430.
Cinnirella, F. (2008) “Optimists or pessimists? A reconsideration of nutritional status in Britain 1740-1865,” European Review
Floud, R., A. Gregory, and K. Wachter. Height, Health and History: Nutritional Status in the United Kingdom, 1750-1980.
Cambridge: Cambridge University Press, 1990.
Gao, P. and E.B. Schneider (2021) “The growth pattern of British children, 1850-1975,” Economic History Review 74 (2): 341-
371.
Hartwell, R.M. The Industrial Revolution and Economic Growth. London: Methuen and Co., 1971.
Horrell, S. and J. Humphries (1995) “The exploitation of little children: child labor and the family economy in the industrial
revolution,” Explorations in Economic History 32 (4): 485-516.
Humphries, J. (2013) “Childhood and child labour in the British Industrial Revolution,” Economic History Review 66 (2): 395-
418.
McKendrick, N. “The Consumer Revolution in Eighteenth Century England,” in N. McKendrick, J. Brewer, and J.H. Plumb
(eds.) The Birth of a Consumer Society: the commercialization of eighteenth-century England. Bloomington: Indiana
University Press, 1982.
Nardinelli, C. (1980) “Child Labor and the Factory Acts,” Journal of Economic History 40 (4): 739-755.
Nicholas, S. and D. Oxley (1993) “The living standards of women during the industrial revolution, 1795-1820,” Economic
History Review 46 (4): 723-749.
Oxley, D. (2013) “Weighty Matters: Anthropometrics, Gender and Health Inequality in History” Tawney Lecture 2013,
Economic History Society.
Schneider, E.B. (2017) “Children’s growth in an adaptive framework: explaining the growth patterns of American slaves and
other historical populations,” Economic History Review 70 (1): 3-29.
Steckel, R.H. (1987) “Growth depression and recovery: the remarkable case of American slaves,” Annals of Human Biology
14: 111-132. 30
EC104

Inequality and Living Standards
Claudia Rei
n Focus today
n Importance of inequality
n Measurement
n Concentration of wealth in industrialising Britain
n Social mobility in industrialising Britain
2
n Why do we care?
n Implicit in any description of “fair” social arrangement
→ Outcomes, opportunities…
n Differences in GDPpc across countries – divergence

→ Relatively small ca. 1750-1800, grew ever since
n Within a society, ec. hists. focus on ineq. of wealth & income

→ Q: real GDPpc ↑ Þ effects on income distribution/welfare?
→ A: ↑, provided no one’s real income goes down
→ Over the course of the development transition of a country this

condition may not hold (winners & losers)
3
n The importance of inequality
n If markets are efficient and property rights well specified
→ inequality is irrelevant for SoL – why??
n Markets may fail and access to institutions is unequal

→ inequality is bad – why??
n Alternative channels
→ redistribution (not always efficient)
→ public provision (costly)
4
■ Measurement
Lorenz Curve
Gini index
5
■ In Economic History
n Variety of approaches to measuring inequality
→ historically: difficult to have precise income or wealth distributions
→ more recent literature: health outcomes, social mobility
n Underlying causes gleaned from changes in relative incomes

→ e.g., wages of skilled vs unskilled workers
n Both directions of causality

→ does economic growth lead to inequality?
→ does inequality hurt growth?
6
■ The Kuznets curve
n Simon Kuznets (1901-1985) ec. historian of long run growth
→ pioneer work in the 1940s-60s
→ compiled long macroeconomic time series for a few countries
→ NP ’71
"for his empirically founded interpretation of economic growth which has led to new and
deepened insight into the economic and social structure and process of development"
n Key idea (Kuznets 1955)

→ inequality ↓ in developed countries, 1st half of 20th c. (observed)
→ Kuznets assumed it had risen before it fell (hypothesis, no data)
Kuznets curve: inverted-U shaped of inequality and growth
7
Inequality
assumed
(hypothesis)
observed
(data)
GDPpc or time
8
n Reasons for rise in inequality on early stages of development
→ concentration of gains (savings) at the top end of distribution
→ K-ownership more concentrated across population
→ L-ownership more dispersed (stalling real wages)
n Reasons for falling inequality on later stages of development

→ rising educational levels increase income earning opportunities
→ wider range of income sources
Empirically: variations across different regions (speed of IR, DT)
9
■ Growth might generate K curve but does not have to
n Kuznets observed data 1900-1950 unusual
→ WWI 1914-18, great depression 1930s, WWII 1939-45
– compressed wage structure (Goldin and Margo 1992)
n More robust idea: technological change may cause inequality

→ LS and LD responses to D in skill premiums (Goldin and Katz 2007)
n Many unobserved factors affect both inequality and growth

→ identifying links not easy, difficult to claim causality
n Recently: persistence of high levels of inequality in dev. world

Let’s look at inequality in industrial England
10
Log scale
Starting point in 1670
End point in 1875
conditional on having
a probate
Lindert (1986: 1138) 11

Shares
not pounds
Lindert (1986: 1146) 12

■ Inequality in industrial England (Lindert 1986)
n Study wealth dispersion from 1675 (pre-IR) to 1875 (& 1973)
→ data supports the Kuznets view
→ IR had concentrated benefits
– merchants and persons of landed title benefitted most
→ inequality stayed constant or worsened in late 19th c.
– little change in land concentration
– entrepreneurs did very well
→ massive declines in 20th c.
13
■ Inequality in industrial England
(movable wealth)
Lindert (1986: 1144)
relative importance of land as a revenue generating asset declines over time

supports Kuznets view 14
■ Inequality in pre-industrial Germany (Alfani et al 2022)
n Study inequality in Germany 1300-1850 (pre-industrial?)
→ collect data from various sources
– property tax registers (archival, primary and secondary sources)
– challenge: variety of sovereign territories and tax systems
→ 4 distinct stages on the evolution of inequality:

– 1300-1450: decline (triggered by Black Death – similar to elsewhere in Europe)
– 1450-1600: steady increase (Protestant Reformation, religious wars)
– 1600-1700: second decline (triggered by Thirty Years War – different from Europe)
– 1700-1850: resumed growth
→ analysis does not support the Kuznets curve
15
Importance of inequality in economic history
Gini index and Lorenz curve
Kuznets curve, theory and evidence
16
■ Social mobility in industrial England
n Clark and Cummins (2014)
→ IR brought new occupations and moved people out of agriculture
Q: effect on England’s inter-generational (income) mobility?
→ ideally compare position on income distribution at birth and death

– historical data not that neat
→ approximation: compare intergenerational occupational mobility

– fathers and sons (why?)
– data from England marriage registers since 1837
17
Professional
Intermediate
Skilled
Semi-skilled
Unskilled
Clark and Cummins (2014: 327) 18

→ data problem: son’s occupation at marriage may not be final
→ solution: link fathers and sons across censuses (1851-1881)
19
■ Clark & Cummins (2014) “Inequality and Social Mobility in the IR”
Professional
Intermediate
Skilled
Semi-skilled
Unskilled more mobility

(as expected)

→ Comparison with more recent period
21
Professional
Intermediate
Skilled
Semi-skilled
modestly
Unskilled more mobility

→ Comparison with more recent period
→ Alternative method to measure social mobility – surnames
– passed on from father to son (girls?)
– prevalence in elite groups compared to general population
§ common surnames held by all statuses, same frequency (~1)
§ some rare surnames disproportionally represented in elite (>1)
* if frequency of rare surnames in elite declines over time, mobility is high
23
with time some rare names pulled towards the mean others pulled away (≠↑↓ inequality!!)
yet, these rare names remain much more prevalent in elite groups (>>1) than Clark (~1)
high status in 1710 remains so in 1860
PCC data
Clark and Cummins (2014: 334-5) 24

→ similar patterns for Oxford & Cambridge students
– data 1500-2012
– on average admitted only 0.7% of each cohort of eligible population
– rare names: associated w/ high wealth, or <40pax in 1881 census
wealthy Again, no interpretation on

b how much son’s status inequality going ↑↓
depends on father’s rare
prevalence of high b
b = 0 not at all (max mob) shows little mobility
b = 1 totally (no mob)

→ similar patterns for Oxford & Cambridge students
– data 1500-2012
– on average admitted only 0.7% of each cohort of eligible population
– rare names: associated w/ high wealth, or <40pax in 1881 census
→ Not much mobility in either PCC or Oxbridge data
→ IR does not seem to have changed English patterns of soc. mob.
26
Social mobility
Importance of social mobility when discussing inequality
Measurement of social mobility in economic history
Evidence of social mobility in industrializing Britain
27
References
Alfani, G., V. Gierok, and F. Schaff (2022) “Economic Inequality in Preindustrial

Germany, ca. 1300-1850,” Journal of Economic History 82 (1): 87-125
Clark, G. and N. Cummins (2014) “Inequality and social mobility in the era of the
industrial revolution,” in The Cambridge Economic History of Modern Britain:
Industrialization 1700-1870. Vol. 1, 2nd edition, edited by Roderick Floud, Jane
Humphries and Paul Johnson. Cambridge: Cambridge University Press.
Goldin, C. and L. Katz (2007) “Long-Run Changes in the US Wage Structure:
Narrowing, Widening, Polarizing.” Brookings Papers on Economic Activity 38:
135-168.
Goldin, C. and R. A. Margo (1992) “The Great Compression.” Quarterly Journal of
Economics 57: 1-34.
Kuznets, S. (1955) “Economic Growth and Income Inequality,” American Economic
Review 45 (1): 1-28.
Lindert, P. H. (1986) “Unequal English Wealth since 1670,” Journal of Economic
History 94 (6): 1127-1162.
28
EC104
Topic 5: The World Economy: 1850-1900

The Second Industrial Revolution in the United States
Claudia Rei
The Second Industrial Revolution in the US
■ Focus today
■ Understanding the Second Industrial Revolution
■ Industrialisation in the United States
■ Differences in American indicators
■ The South and the Second Industrial Revolution
■ Importance of Railroads in the United States’ IR
2
■ Necessarily a comparative phenomenon

1st 2nd
■ Timing ~1750 ~1870
■ Speed slow: up to ~1850 fast: up to 1913

■ Geography Britain US, contl. NW Eur.
■ Key industries steam, textiles, iron elect., steel, fuel,

chemicals, cars, …
■ Resources coal oil, natural gas
■ Technology directed technical change
3
■ Understanding the success of the United States
■ Potential sources of growth from the production function
→ Did US affluence result from TFP growth? K deepening? LFP?

→ Did the contribution of these sources vary over time?
4
■ Growth accounting (David 2005)
→ early 19th c. larger contribution of LFP

→ late 19th c. larger contribution of L-productivity (due to K-deepening)
– TFP growth until 1890 was NOT exceptional
→ early 20th c. larger contribution of L-productivity (due to TFP)
5
■ Rising L-productivity in the second half of the 19th century
→ associated with success in manufacturing (De Long 1992)
– K-deepening greater than Britain’s in the 1st IR
– investment in large scale factories and heavy machinery
– K-intensity of production required advances in other areas:
■ management, marketing, research
– division of labour, specialised tasks, assembly line

■ division of firm operations: professional management, R&D, marketing
– use of interchangeable parts
– mass production of standardised goods
American System of Manufacturing

(for examples see Hounshell 1985) 6
■ The Habakkuk Thesis revisited for 2nd IR in the US
■ Rothbarth (1946) and Habakkuk (1962)
→ cheaper capital and resources, relative to labour, + land abundance
→ rapid technological change with intense use of K
→ use of K rose the demand of resources (energy and minerals)
– large investment (↑K) for extraction
→ augmented production function
■ David and Wright (1997) extend Rothbarth-Habakkuk thesis

→ TO DO at home: replicate graph in T03L1S16 to explain rise of 2nd IR in US
→ HINTS: (1) rather than Britain vs France, you’ll have US vs Britain
(2) rather than abundant/scarce K vs L, you’ll have R vs L
→ TO THINK: does endowment dictate success? What else matters?
7
■ Some numbers for the US (LaFeber 1993, ch. 2)
■ Savings rate
■ Foreign investment
■ Trade levels
■ Land settled
■ Key sectors of oil and steel
■ Protectionism (also in O’Rourke 2000)
■ Immigration (Hatton and Williamson 2005) – James in term 2!
8
Compare the Second and First Industrial Revolutions
Directed technical change
Sources of growth in the US industrialisation process
American system of manufacturing
Habakkuk Thesis in the US context
9
■ Beyond industrial success, US was markedly different
■ Health (Costa 2015)
→ life expectancy: Americans vs Europeans; Whites vs Blacks
→ heights: generally high despite the ante-bellum puzzle (pre-CW)
■ Education (Goldin and Katz 2001 and 2016)

→ expansion of the franchise led to rising education demands
→ high return to ed. pre-WWI due to expansion of industry
– ↑D clerical, managerial, and other white-collar workers in office/retail
→ leadership vs Europe in years of schooling
– despite absorbing millions of less educated immigrants and legacy of slavery
→ but big gap to African Americans
■ Legacy of slavery (Sacerdote 2015 and Bellani et al 2022)

→ intergenerational transmission of human capital
– measurement: literacy, schooling, occupation (b-w comparison 1815-1905)
→ persistence of former slave owners in state legislatures post-CW
10
– negatively associated with black outcomes by 1900 (via discriminatory policies)
■ The 2nd IR in the Southern US
■ “The South”
11
Source: Historical Statistics of the United States
■ The 2nd IR in the Southern US
■ “The South”
■ 1861-1865: American Civil War (Williams 2008)

→ Confederacy (South) vs Union (North, part of Midwest, part of West)
→ slave owning states secede to preserve slavery
→ first modern war, involving more than fighting parties
→ innovation in organization and technology:
– use of mass armies, railroads, telegraph, breech-loading, repeating rifles
→ slavery abolished after Confederate loss
→ Confederacy forced back into the United States)
■ End of war and Abolition of slavery did not mean end of discrimination
13
■ The 2nd IR in the Southern US (LaFeber 1993)
■ 1865-77 Reconstruction period
→ big corporations loomed in the North bringing K flows to the South
■ Key industries
→ cotton textiles
– own textile mills developed in 1840s (later than North)
– between 1870 and 1891 cotton fabric production from 4.3 to 9m bales
– new export markets in Asia and Latin America
– South exported more to China than New England by 1900
→ tobacco
– automated cigarette making machine purchased in 1885
– dominant by 1912 in Asian markets
14
■ The 2nd IR in the Southern US (LaFeber 1993)
■ Still…
→ the South was much poorer per capita in 1880 than in 1860
→ by 1900 half of US average
– labor was plentiful but very poor
– double dependence
■ on the North for K
■ on Asia and Latin America for exports
15
■ Railroad sector in US industrialization (Atack 2018)
■ Literature on the importance of railroads in US industrialisation
→ Late 19th century and into the 1950s
“the introduction of the railroad has been historically the most important
single initiator of take-offs” (Rostow 1956)
– RR essential for Am. economic growth (take-off 1843-60) – indispensability
→ Work by Robert Fogel (1964, 1967)

– challenged the established view with measurement (Cliometric revolution)
– counterfactual analysis: US economic growth in the absence of railroads?
– 3% lower, fairly small number, not essential (correlation ≠ causation)
→ Work post-Fogel since late 1960s
– revision of Fogel’s numbers, inclusion sectors beyond ag., land values, …
– emergence of econometrics and rise of computer power
– higher estimates depending on where you look (different, but not essential)
16
1860
Atack (2018:1431) 17
■ After the Civil War
→ 1880s: focus mostly on Great Plains
– steel cheaper since 1883, by late 1880s 80% of track was steel
Square miles of land per mile of railroad
Atack (2018:1429)
→ 1910s-20s: track plateaued at 300k miles operated

→ subsequent abandonments (…)
18
1900
Atack (2018:1433)
■ Productivity and innovation
→ productivity gains:
– falling transportation costs: ↓60% for passengers, ↓90% for freight
– annual TFP growth at 3.5% (net of ↑K, L, R, fuel)
– improvements in comfort, speed, certainty of timely delivery (time zones)
→ other innovations/improvements helping railroad sector:

– telegraph, signaling, iron-steel, wood-coal, bypasses
→ electrification in short distances allowed for suburbanisation

→ diesel in long distances helped market integration
20
■ Transportation and trade
→ alternative modes of transportation in the 19th century
– wagon: slow, expensive, not smooth (unpaved roads up to WWI)
– water: slow but cheap, smooth but not direct
– rail: fast, smooth, direct, increased capacity, falling costs over time
→ trade diversion, new trade opportunities, regional specialisation

– decline in grain production in NE where manufacturing sector grew
– rising agricultural production in MW by 1850-60
– more than ½ of the urbanisation in the MW before the Civil War
21
ACTUAL
shift of population
Donaldson and Hornbeck (2016:847) 22

HYPOTHETICAL
shift of population close
to navigable waterways
Donaldson and Hornbeck (2016:846) 23

Factors setting the US apart from other countries
American Civil War in the context of the industrialising US
Second Industrial Revolution in the Southern US
Importance of the railroad sector in US industrialisation
Counterfactual analysis, correlation vs causation*
* You are not going to be tested on these in EC104 but it is useful that you understand basic tools
used regularly in economics research
24
References
Atack, J. (2018) “Railroads,” in Handbook of Cliometrics, edited by C. Diebolt and M. Haupert, pp. 1-29. Springer-
Verlag.
David, P. (2005) “The tale of two traverses: innovation and accumulation in the first two centuries of US economic
growth,” Working Paper 03-24, Stanford Institute for Policy Research.
David, P. and G. Wright (1997) “Increasing returns and the genesis of American resource abundance,” Industrial
and Corporate Change 6: 203-245.
De Long, B. (1992) “Productivity Growth and Machinery Investment: a long-run look, 1870-1980,” Journal of
Donaldson D and R. Hornbeck (2016) “Railroads and American economic growth: a ‘market access’ approach,”
Quarterly Journal of Economics 131 (2): 799–858.
Fogel R.W. Railroads and American economic growth: essays in econometric history. Baltimore, MD: Johns Hopkins
Press, 1964.
Fogel, R.W. (1967) “The specification problem in economic history,” Journal of Economic History 27 (3): 283–308.
Habakkuk, H. American and British Technology in the Nineteenth Century. Cambridge: Cambridge University Press,
1962.
Hounshell, D. From the American system to Mass Production, 1800-1932: the development of manufacturing
technology in the United States, Johns Hopkins University Press, 1985.
LaFeber, W. (1993) “The Second Industrial Revolution at Home and Abroad,” The Cambridge Economic History of
American Foreign Relations, Volume 2: The American Search for Opportunity 1865-1913, Chapter 2, pp. 20-42.
Cambridge: Cambridge University Press.
Hatton, T. and J. G. Williamson (2005) “Evolving World Migrations Since Columbus,” Global Migration and the World
Economy: two centuries of policy and performance, Chapter 2, pp. 7-30. Cambridge MA: MIT Press.
O’Rourke, K. (2000) “Tariffs and growth in the late nineteenth century,” Economic Journal 110: 456-483.
Rostow, W. W. (1956) “The take-off into self-sustained growth,” Economic Journal 66 (261): 25-48.
Rothbarth, E. (1946) “Causes of superior efficiency of USA industry as compared with British Industry,” Economic
Journal 56: 383-90.
Williams, T. H. (2008) “The American Civil War,” The New Cambridge Modern History, edited by J. P. T. Bury,
Chapter XXIV, pp. 631-658. Cambridge: Cambridge University Press.
25
EC104

2nd Industrial Revolution and Beyond
Claudia Rei
■ Goals for today, while focusing on 1850-1900:
■ 2nd Industrial Revolution – success (NW Europe)
■ 2nd Industrial Revolution – absence (Africa, Asia)
■ 2nd Industrial Revolution – environmental costs

■ Northwest Europe was industrialising at this time
■ By 19thc. broken Malthusian trap in Germany (Pfister 2022)
→ long-standing process: estimates rest on assumptions & (scattered) data
population ↑ population ↓ population ↑
3
Pfister (2022:1088) Pfister (2022:1090)
■ Germany: role of railroad access (Braun and Franke 2022)
→ Data for 1,858 civil parishes in Württemberg 1834-1910 (73 w/ RR)
→ First wave of railway development 1845-1854 (connecting main cities)
→ Outcome variables at the local level:

– population, wages, housing values;
– share of industrial employment, adoption of steam engines, firm size
→ Identification challenge: endogeneity of rail line location

– TO THINK:
• what does it mean for the rail line to be endogenous?
– Let’s look at the results
4
Difference between winner and runner-up parishes
5
Braun and Franke (2022:1203) Braun and Franke (2022:1215)
→ Results
– positive but small (compared to other states) effect on popn. growth
• unsurprising: Würtermberg did not develop heavy industry (no coal)
– uneven effects across parishes with different start levels of industry
• mostly driven by textile and machine-building industries
• exacerbation of existing regional disparities
6
■ Germany: other asymmetries during rapid industrialisation
→ Policy choices in Prussian parliament (Becker and Hornung 2020)
– three-class franchise system: ↑ power to high-tax paying constituencies
• classic interpretation: landed elite chose conservative policies
– B&H (2020) challenge the established view empirically
• data on MP voting behaviour between 1867 and 1903
• rank MP views on 5 liberal-conservative debates
– Results
• constituencies with higher vote inequality favoured more liberal policies
• large industrial regions (new industrial elites) voted for more liberal policies
– TO THINK: endogeneity problems, remedies, …
7
■ Germany: other asymmetries during rapid industrialisation
→ Protestantism and industrialisation (Becker and Woessman 2009)
– Max Weber’s argument: Protestant work ethic conducive to prosperity
• Variety of subsequent theories on economics of Protestantism vs Catholicism
– B&W (2009) bring a theory of human capital (not religion)

• Provide: measurement Weber’s argument & bring channel of causality
• Protestantism encouraged reading of the bible – literacy leads to prosperity
• County-level data late 19th C. Prussia (better than country-level! – WHY?)
• Freedom of religion in 19th C. Prussia: around 2/3 Protestant vs 1/3 Catholic
– Results
• More protestants, more literacy, more prosperity
– TO THINK: endogeneity problems, remedies, …

8
■ Prosperity elsewhere in Western Europe
→ Wage evolution in Sweden (Ericsson and Molinder 2020)
– Did the Swedish working class benefit from modern economic growth?
• Britain: “Engel’s pause” until the 1830s (Allen 2019)
• US: wage & height stagnation before the Civil War (Costa 2015, Zimran 2019)
– Construction workers’ wage data from 1831 to 1900
• county admin. boards: cost estimates of buildings and bridges for the crown
• data include multiple occupations, cities, countryside, and good geo coverage
– Let’s look at some patterns
9
Ericsson and Molinder (2020:826) Ericsson and Molinder (2020:828) Ericsson and Molinder (2020:830)
10
– understanding the patterns (labour unions come later so not a reason)
1840-1900
initial
Ericsson and Molinder (2020:837) Ericsson and Molinder Ericsson and Molinder 11
(2020:840) (2020:843)
■ Back to Germany at a time of rising prosperity
→ Structural change and serfdom decline (Ashraf et al 2022)
– QUESTION FOR YOU: what is structural change?
– Idea: complementarity between K & free L drives emancipation

• In industrial tasks it is hard (costly) to extract effort through punishment
• K-owning elites chose to emancipate and pay wages instead à ↑ returns to K
– Tested empirically:
• Evidence from 19th century Prussia
• County-level data on elite-owned capital (water mills) and emancipation cases
12
13
Ashraf et al (2023:15)
– QUESTION FOR YOU: what is structural change?
– Idea: complementarity between K & free L drives emancipation

• In industrial tasks it is hard (costly) to extract effort through punishment
• K-owning elites chose to emancipate and pay wages instead à ↑ returns to K
– Tested empirically:
• Evidence from 19th century Prussia
• County-level data on elite-owned capital (water mills) and emancipation cases
– Results
• Higher proto-industry areas industrialised faster (channel) & emancipated more
– TO THINK ABOUT: potential endogeneity concerns, remedies, … 14

■ Eastern Europe, at this time…
■ Other contexts of emancipation (making sense of complementarity)
→ emancipated L should improve (more complementary to K)
→ Emancipation in Russia (Markevich and Zhuravskaya 2020)
– [WARNING: far more encompassing paper than what I cover here!]
– QUESTION FOR YOU: what is serfdom?
– 1861 serf emancipation + land reform 20 years (land rights to communes)
– Province-level data on 46 European provinces of the empire in 19th C.
– Suggestive evidence of improved nutrition of former serfs
15
■ Eastern Europe, at this time…
■ Other contexts of emancipation (making sense of complementarity)
→ Emancipation in Russia (Markevich and Zhuravskaya 2020)
2nd event-study-type picture today!
How is it generated?
Plotted coefficients of regression where:
LHS: draftees’ heights
(treatment)
RHS: 2yr cohort dummies x share of serfs
+ province & cohort FE + controls
16
Markevich and Zhuravskaya (2018:1107)
■ Elsewhere, industrialisation not really happening
■ Context of labor coercion in India
→ Indenture contracts in Assam tea plantations (Gupta and Swamy 2017)
– QUESTION FOR YOU: what is an indenture contract?
– 19th C. migrants brought to Assam on 2 types of contracts

• Standard indenture: walk out would be reported + prosecution and arrest
• Special Act: employer with rights to arrest the worker & enforce the contract
o prevalent in remote areas where desertion and poaching more difficult to detect
– G&S (2017) argue reputational consequences of S.A. for employers

• assembled data on migrant labour to 7 Assam districts between 1883 & 1900
– FINDINGS:
• More difficult to recruit under the Special Act
• BUT during crises (e.g., ↑ food prices) no difference in L demand 17
■ Context of labor coercion in Africa
→ Consequences of 1807 Stave Trade Act (Fenske and Kala 2017)
– HISTORY: 1807 UK abolished slave trade; 1808 US prohibited imports
– QUESTION FOR YOU: does this mean the end of slavery?
– F&K (2017) gather data on African conflicts between 1700 and 1900
• geo-code data and measure proximity to slave ports
• divide Africa in areas affected or not by the 1807 Act
o Slave trade ↓ in West Africa (UK) and ↑ in West-central and Southeast Africa (PT)
– Finding: rise in intra-African conflict post-1807 (reorganization of trade)

• where slave trade ↓, lower local revenues so rising conflict to maintain power
• where slave trade ↑, higher # of slaves produced through violence (captives)
18
■ Context of conflict in China
→ Abandonment of China’s Grand Canal (Cao and Chen 2022)
– HISTORY: world’s longest/oldest artificial waterway ~5th C. BC – 19th C.
1826
19
Cao and Chen (2022:1560) Cao and Chen (2022:1567)
■ Context of conflict in China
→ Abandonment of China’s Grand Canal (Cao and Chen 2022)
– HISTORY: world’s longest/oldest artificial waterway ~5th C. BC – 19th C.
– QUESTION FOR YOU: why would conflict result from abandonment?
– C&C (2022) studies the connection with conflict systematically

• data on 575 counties in 6 provinces (w/ canal or adjacent) from 1650 to 1911
• treatment is canal closure after 1826 (historically, only the start of closure)
– Findings:
• canal counties experienced more frequent rebellions relative to non-canal
20
■ Context of Taiping Rebellion in China (1850-1864)
→ Role of elites in shaping war, politics and history (Bai et al 2023)
– HISTORY:
• deadly civil war profoundly altered China’s development path
• central figure (Zeng Guofan) asked to organise army & quell expanding rebellion
– QUESTION FOR YOU: is it plausible for 1 person to influence history?
– B&J&Y (2023) argue a causality channel via personal network
– Findings:
• individual that quelled the rebellion used his network of acquaintances
• power distribution changed after the war shaping the state
– [paper on network analysis]

21
■ Context of the Great Divergence & the Asian Little Divergence
→ Japan’s economy in the long run (Bassino et al 2019)
– FACT: Japan has been ignored on Asian side of the Great Divergence
– B&B&F&G&T (2019) provide new estimates for the 730-1874 period

• agricultural estimates based on arable land use and land productivity
• industrial and service sector estimates based on urban share and ag. output
– Findings:
• Malthusian 730-1450; periods of growth 1450-1600 and 1721-1868
• MEG after Meiji Restoration in 1868, while China and India fell behind
• modest growth compared to Western Europe; but Little Divergence in Asia
[paper on accounting]
22
■ Environmental costs of industrialisation
■ An obvious cost is pollution (QUESTION FOR YOU: Why?)
→ Historical pollution and mortality relationship (Hanlon 2019)
– Challenge: identifying peaks of historical pollution
• use historical London fog events to infer timing of high pollution exposure
• unlikely that fog events were the result of pollution (key for identification)
23
Hanlon (2019:19) Hanlon (2019:22)
■ An obvious cost is pollution
→ Historical pollution and mortality relationship (Hanlon 2019)
– Challenge: identifying peaks of historical pollution
• use historical London fog events to infer timing of high pollution exposure
• unlikely that fog events were the result of pollution (key for identification)
– Data on London week/age level mortality (w/ cause of death) 1866-1965

• long data span allows for interesting insights (a lot changed in 100 years)
– Findings: too many to detail here

• interesting insights on age (beyond usual suspects)
• impact of pollution on mortality changed as London developed
• changing infectious disease burdens affected the relationship
24
→ Urban environments then & now (Hanlon and Tian 2015)
– 19th C. industrial cities were quite deadly (polluted, overcrowded, …)
• similar challenges industrial cities from developing countries today (pollution)
– Data on urban mortality patterns in 19th C. England and China in 2000

• Y would be mortality
• X would be various measures of urbanity such as city size, density, pollution
• estimate the historical and current relationship to draw comparisons
– Let’s look at the correlations… not an identified (i.e., causality) paper
25
→ Urban environments then & now (Hanlon and Tian 2015)
– larger (& more dense) industrial cities today are healthier; pollution still concerns
26
Hanlon and Tian (2015:573)
■ Some thoughts on biodiversity costs
→ The North American bison slaughter (Feir et al 2022)
27
28
Feir et al (2022:39)
■ Some thoughts on biodiversity costs
→ The North American bison slaughter (Feir et al 2022)
– brought to the brink of extinction in just over a decade in late 19th C.
– immediate consequences to bison-dependent Native Americans
– data on height, gender, age of 15,000+ Native Americans 1889-1903

• compare bison and non-bison reliant nations before and after (DiD)
• study persistence of historical shock on long term outcomes
– Results
• bison-reliant societies lost their height advantage (major reversal)
• persistence to today seen in lower income, employment, child mortality, …
29
■ Some thoughts on biodiversity costs – by no means in the past
→ Vulture collapse in India since 1994 (Frank and Sudarshan 2023)
– QUESTION FOR YOU: why would economists care for vultures?
– IDEA: environment imbalance whose consequences can be measured
– data on all-cause human death rates by district

• compare vulture suitable and non-suitable districts before and after (DiD)
• collapse caused by drug introduced in 1994 to treat livestock (lethal to vultures)
– Results
• highly suitable districts affected by collapse had a ↑4.2% in deaths 2000-2005
• channels: more feral dog prevalence, worse water quality – more disease
• Work highlights the importance of recovery and conservation efforts 30

References
Ashraf, Q.H., F. Cinnirella, O. Galor, B. Gershman, E. Hornung (2022) “Structural Change. Elite Capitalism, and the Emergence of Labor
Emancipation,” R&R at Review of Economic Studies.
Bai, Y., R. Jia, J. Yang (2023) “Web of power: how elite networks shaped war and politics in China,” Quarterly Journal of Economics 138
(2): 1067-1108.
Bassino, J.P., S. Broadberry, K. Fukao, B. Gupta, and M. Takashima (2019) “Japan and the great divergence, 730–1874,” Explorations in
Becker, S.O. and E. Hornung (2020) “The Political Economy of the Prussian Three-Class Franchise,” Journal of Economic History 80 (4):
1143-1188.
Becker, S.O. and L. Woessmann (2009) “Was Weber Wrong? A Human Capital Theory of Protestant Economic History,” Quarterly Journal
of Economics 124 (2): 531-596.
Braun, S.T. and R. Franke (2022) “Railways, Growth and Industrialization in a Developing German Economy, 1829-1910,” Journal of
Cao, Y, S. Chen (2022) “Rebel on the Canal: Disrupted Trade Access and Social Conflict in China, 1650-1911,” American Economic
Review 112 (5): 1555-1590.
Costa, D.L. (2015) “Health and the Economy in the United States from 1750 to the Present,” Journal of Economic Literature 53 (3): 503-
570.
Ericsson, J. and J. Molinder (2020) “Economic Growth and the Development of Real Wages: Swedish Construction Workers’ Wages in
Comparative Perspective, 1831-1900,” Journal of Economic History 80 (3): 813-852.
Feir, D.L, R. Gillezeau, M.E.C. Jones (2022) “The Slaughter of the Bison and Reversal of Fortunes on the Great Plains,” forthcoming in
Review of Economic Studies.
Fenske, J. and N. Kala (2017) “1807: Economic shocks, conflict and the slave trade,” Journal of Development Economics 126:66–76.
Frank, E.G. and A. Sudarshan (2023) “The Social Costs of Keystone Species Collapse: evidence from the decline of vultures in India,”
Manuscript.
Gupta, B. and A. Swamy (2017) “Reputational Consequences of Labor Coercion: Evidence from Assam’s Tea Plantations,” Journal of
Development Economics 127: 431-439.
Hanlon, W.W. (2019) “London Fog: A Century of Pollution and Mortality 1866-1965,” forthcoming in Review of Economic Studies.
Hanlon, W.W. and Y. Tian (2015) “Killer Cities: Past and Present,”American Economic Review, Papers & Proceedings, 105(5): 570-575.
Markevich, A. and E. Zhuravskaya (2018) “The economic consequences of the abolition of serfdom: evidence from the Russian empire,”
American Economic Review 108 (4-5):1074-1117.
Pfister, U. (2022) “Economic Growth in Germany, 1500-1850,” Journal of Economic History 82 (4): 1071-1107.
Zimran, A. (2019) “Sample-selection bias and height trends in the nineteenth-century United States,” Journal of Economic History 79 (1):
99-138.
31
EC104

Inequality and Social Mobility
Claudia Rei
■ Focus today
■ Wealth inequality in the US (legacy of slavery)
■ Intergenerational mobility in the US
■ Intergenerational mobility in the New World beyond the US
■ Intergenerational mobility beyond the New World

■ Land/racial wealth inequality in the US (Miller 2011)
■ Wartime order: allot land to formerly enslaved families
→ “40 acres and a mule”
– to remedy lack of capital of freed families
– never came to fruition post-Civil War
– Large black-white wealth gap after emancipation
* 1/36 in 1880, 1/26 in 1890, 1/23 in 1900, and 1/16 in 1910
* larger wealth than income gap remains presently: 1/5 vs 1/2
→ Explanations:
– discriminatory policies – suffered by all former slaves
– lower initial wealth levels – all slaves started with zero wealth
3
■ Goal: isolate the contribution of zero black wealth
→ Historical accident allowing the identification of the effects
– Cherokee Nation, part of Indian Territory by the Civil War (1861-1865)
4
American Exceptionalism, 1870-1913
5
Source: https://www.nationalgeographic.org/photo/union-confederacy/
■ Goal: isolate the contribution of zero black wealth
→ Historical accident allowing the identification of the effects
– Cherokee Nation, part of Indian Territory by the Civil War (1861-1865)
– CN joined the war on the Confederacy side (South) in 1861
– Upon defeat in 1865, CN negotiated surrender independently from South
* forced to declare former slaves (of African descent) citizens w/ all rights
* native Cherokee rights allowed claiming/improving land in public domain
→ Exogenous variation in “treatment”

– former slaves in CN did not start with zero wealth
→ Data: 1880 CN census & US agricultural census, 1900 US census
6
■ Estimation equation: land acreage and livestock ownership
wealth
difference-in-differences estimator
b3 = (nb-b difference in South) – (nb-b difference in CN)
If b3 > 0 then CN is more equal than rest of the South
7
wealth
Former slaves in CN
likely to own more
land and livestock
than in South
< wealth gap in CN,

thus + coefficient
further estimations
for home ownership
and hhh farmer Miller (2011: 374)
8
■ US B/W intergenerational mobility (Collins and Wanamaker 2022)
Measure of ■ B/W income per capita gap: 28% in 1870, and 64% in 2010
inequality
■ GOAL: quantify the role of social mobility on blacks ec. status
→ DATA:
– historical: on father-son pairs in 1880-1900 and 1910-1930
– modern: OCG surveys 1962 and 1973, NLSY79
→ Results:
– initial income gap did NOT singlehandedly limit pace of convergence
– in all cohorts since 1880, blacks had < mobility (& income) than whites
* persistent disadvantage on blacks to escape lower ranks of income distribution
* 1880-1900 and 1910-30: poorest white children had better chance to move up
than the best-off black children
* warning: a lot of history in between DID matter (countervailing effects)
9
■ Intergenerational mobility in the US (Ferrie 2005)
■ Question: was the US ever exceptional on social mobility?
→ DATA
– 75,000 males linked across censuses between 1850 and 1920
– study of occupational changes in a generation 1950s-1973
– General Social Survey 1977-1990
– National Longitudinal Survey of Youth (NLSY) 1979-1999
→ GOAL
– understand occupational mobility of children relative to their parents
– understand how US s.m. changed over time (19thc vs 20thc)
10
■ Tow types of mobility
→ absolute: movement out of one occupation to another
→ relative: chance son gets different occupation than father
11
status quo
change
Absolute mobility: ~twice as likely
12
Ferrie (2005: 204)
16.8
status quo
maintenance
Relative mobility: odds father and son

have the same occ.
75.5 (F-F and WC-WC)
relative to changing
(F-WC and WC-F)
is about ~4.5 larger
in later period
13
Ferrie (2005: 204)
■ Tow types of mobility
→ absolute: movement out of one occupation to another
– seems to have ↑
→ relative: chance son gets different occupation than father
– seems to have ↓
→ distorted conclusion IF 1880-1900 period was unusually mobile
→ Altham statistic measures the distance between two matrices

– compares mobility (association of father-son occupations) across 2 time periods
– low Altham statistic means closer occupational distributions (same mob)
→ was 1880-1900 unusually mobile relative to other periods?

14
Altham Statistics
i.e. perfect mobility
American Exceptionalism,
1950-73 1870-1913
lower statistic means
closer distributions
1950-73 1977-90
Ferrie (2005: 208)
Cannot reject the same degree of mobility Different degree of mobility from 19thC.
(1880-1900 was not anomalous)
15
Occupations of fathers and sons are never independent, but closer to independence in 19th c.
■ Change in mobility pattern happened between 1920 and 1950
→ Ferrie explores potential explanations for 19thC. US exceptionalism
– internal geographic mobility among others (high in 19th and early 20th c.)
→ US vs UK: was the 19th C. also exceptionally mobile in Britain? NO!

Yes, the US had – 51.3% of farmer sons moved out of farming 1851-1881 in Britain
exceptional mobility – 81.4% of farmer sons moved out of farming 1850-1880 in the US
in the 19th century
■ by 1851 only 5% of British employment was in agriculture
→ But grandfathers matter! More inertia than 2G (Long and Ferrie 2018)
→ US lead in social mobility lost by 1950 (Long and Ferrie 2013)
→ presently similar s.m. patterns in US & UK (Erikson and Goldthorpe 1992)
16
■ Intergenerational mobility beyond the US (Pérez 2019)
■ Ferrie (2005): US was exceptional compared to UK
■ Pérez (2019): could this be a New vs Old World phenomenon?
→ data for two New and two Old World countries:
– 1850-1880 United States (largest receiving country of Europe’s migrants)
– 1869-1895 Argentina (2nd largest – Pérez (2017) sm in 19th c. Argentina)
– 1851-1881 Britain
– 1865-1900 Norway
No, the US did not
have exceptional → Argentina & US had similar mobility, higher than UK & Norway
mobility compared to – casts doubt on Am. exceptionalism: ≠ s in receiving vs sending economies
the 19 c. New World
th
17
■ Intergenerational mobility New World (Antonie et al 2022)
■ Was all of the New World a high social mobility region?
■ Canada: land abundance and westward expansion
→ Census data linking fathers and sons:
– 32,000 employed young men in 1901 linked to parents in 1871
– born in Eastern Canada (NS, NB, QC, ON), UK, Ireland, elsewhere
→ Results: Canada’s mobility between NW (US & ARG) and OW

– considerable regional variation: QC and Maritimes less mobile than ON
Canada shared some
NW features but had – large differences by ethnicity
its own specificities * English/French speakers w/ lower mobility in regions they are in the minority
18
■ 20th century mobility in urban China (Chen et al 2015)
→ socioeconomic status proxied by educational attainment 1930-85
→ U-shaped pattern:
– ↓ educated cohorts post-1949 communist revolution
– ↑ educated cohorts post-1970 reforms
→ also valid for rural samples and other proxies of mobility
■ African mobility since independence (Alesina et al 2021)

→ ed. attainment post-1960 across 27 countries and >2,800 regions
– ≠s in literacy between old and new generations explain ½ the disparities
– substantial rural-urban divide
– wide cross-country and within-country heterogeneity
→ geographic and historical roots of current special disparities
19
■ District level upward mobility over time (Alesina et al 2021)
Nearly 1 to 1 relationship Alesina et al (2021: 15)

i.e. mobility changed little
between 1970 and 1990
(good fit) 20
■ District level upward mobility over time (Alesina et al 2021)
Nearly 1 to 1 relationship Alesina et al (2021: 15) Correlation drops to .67

i.e., mobility changed little i.e., slight increase in mobility
between 1970 and 1990 between 1970 and 1990
(good fit) (and better fit!) 21
Evidence of US inequality in the 19th century
Evidence of exceptional (or not) US social mobility
Social mobility beyond the US
Difference-in-Differences estimator*
* You are not going to be tested on these in EC104 but it is useful that you understand basic tools
used regularly in economics research
22
References
Alesina, A., S. Hohmann, S. Michalopoulos and E. Papaioannou (2021) “Intergenerational Mobility in Africa,”
Econometrica 89 (1): 1-35.
Antonie, L., K. Inwood, C. Minns, and F. Summerfield (2022) “Intergenerational Mobility in a Mid-Atlantic
Economy: Canada, 1871-1901,” Journal of Economic History 82 (4): 1003-1029.
Chen, Y., S. Naidu, T. Yu and N. Yuchtman (2015) “Intergenerational mobility and institutional change in 20th
century China,” Explorations in Economic History 58: 44-73.
Collins, W.J. and M.H. Wanamaker (2022) “African American Intergenerational Economic Mobility since 1880,”
American Economic Journal: Applied Economics 14 (3): 84-117.
Erikson, R. and J.H Goldthorpe (1992) The Constant Flux: A Study of Class Mobility in Industrial Societies, New
York: Oxford University Press.
Ferrie, J. (2005) “History Lessons: The End of American Exceptionalism? Mobility in the United States since
1850.” Journal of Economic Perspectives 19: 199-215.
Long, J. and J, Ferrie (2013) “Intergenerational Occupational Mobility in Great Britain and the United States
since 1850,” American Economic Review 103 (4): 1109-1037.
Long, J. and J, Ferrie (2018) “Grandfathers Matter(ed): Occupational Mobility Across Thre Generations in the US
nad Britain, 1850-1911,” Economic Journal 128 (612): F422-F445.
Miller, M. (2011) “Land and Racial Wealth Inequality,” American Economic Review: Papers & Proceedings 101
(3): 371–376.
Pérez, S. (2017) “The (South) American dream: mobility and economic outcomes of first-and second-generation
immigrants in nineteenth-century Argentina,” Journal of Economic History 77 (4): 971-1006.
Pérez, S. (2019) “Intergenerational Occupational Mobility across Three Continents,” Journal of Economic History
79 (2): 383-416.
23

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EC104

The World Economy: History & Theory

University of Warwick — Department of Economics

Claudia in term 1 James in term 2

Claudia Cecilia Jose Junxi

c.rei@warwick.ac.uk cecilia.lanata-briones@warwick.ac.uk j.corpuz.1@warwick.ac.uk junxi.liu.1@warwick.ac.uk

■ NOT History of Economic Thought

■ Other modules teach you how to be an economist (tools)

■ Read, understand, and interpret academic work

■ Develop analytical, writing, and verbal skills

Background for topics

Base for seminar discussions

Online via library, Amazon, etc.

■ Class participation 10%

■ Final exam in term 3 50%

→ random essay groups will be released by week 4 of term 1:

→ lecture slides mostly based on other sources

Short demonstration on how to find sources through the library

→ student attendance is required AND participation is assessed

→ your seminar tutor wants you to do well

→ goal: help you keep up with the material – a lot of reading! 12

✕ – stuff you knew before you had EC104, no proper citations

– maybe good starting points but not credible sources to cite

Your essays should show careful reasoning and interpretation of readings

■ Economic History (field) journals

■ Identify the research question/puzzle

Instagram and Twitter

Topic 1: Pre-Modern Growth: pre-1500

■ Understanding world economic history

→ How do (macro)economists measure economic performance?

in rates GDPpc1 – GDPpc0

→ Modern economic growth is sustained growth of GDPpc (>0 rate)

§ GDP growth (rate) is an indicator of economic growth

→ these two indicators proxy different things

Modern economic growth

■ Debate about the start of globalisation

commodity trade + movement of K and L

■ Did 1492(?) and 1498(?) show price convergence?

■ Did 1492(?) and 1498(?) show price convergence?

■ Integration of markets needs more than trade

O’Rourke and Williamson (2002: 36) 28

O’Rourke and Williamson (2002: 33) 29

How economists measure economic growth

Modern economic growth

The different periods of growth and their characteristics

19th century globalization and its characteristics

Topic 1: Pre-Modern Growth: pre-1500

Sources of growth (Szirmai 2005):

∂𝑙𝑛𝑌 ∂𝑙𝑛𝐴 ∂𝑙𝑛𝐾 ∂𝑙𝑛𝐿

Disaggregated contributions to output growth (proximate sources):

Growth of Y = Residual growth + Growth of K + Growth of L

“… rules of thumb that aid in decision making.” (Nunn 2012)

■ precedes development of institutions and influences them

→ Classical growth models, no wedges: A, K, L, R alone influence Y

→ Institutions: frictions to classical model (i.e., history is always more complicated!)

Diamond (1998: 99) 9

Diamond (1998: 177) 10

Olsson and Paik (2020: 103) 11

Latitude and development (Sachs 2003):