Working Paper: CEPR ID: DP14652
Authors: Mauro Rota; Jacob Weisdorf
Abstract: We provide a first-ever long-run index of wages of stable rural workers in early-modern Tuscany. These wages speak to two longstanding debates. The first concerns whether Italy’s early-modern downturn was an urban phenomenon only or an all-embracing one. Our data lend support to the former, since we do not detect any downturn in our early-modern rural wages. The second debate concerns whether high-waged workers prompted the Industrial Revolution. Earlier studies in this debate have been criticised for comparing urban wages when early factories emerged in rural areas. By comparing rural wages, we find that English labour cost only 10 per cent more than their Italian counterparts in 1650, but a staggering 150 per cent more in 1800. The revised timing of the divergence between England and Italy, and its overlap with England’s early mechanisation, raise a significant identification problem. Did high wages encourage mechanisation, or did mechanisation boost wages?
Keywords: stable employment; economic growth; industrial revolution; great divergence; living standards; prices; wages; wage premia
JEL Codes: J3; J4; J8; I3; N33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Urban economic policies (R28) | Rural wage stability (J31) |
| Rising wages (J39) | Productivity (O49) |
| High wages (J31) | Mechanization (L64) |
| Mechanization (L64) | High wages (J31) |