Working Paper: CEPR ID: DP3394
Authors: Kevin H. O'Rourke; Jeffrey G. Williamson
Abstract: A recent endogenous growth literature has focused on the transition from a Malthusian world where real wages were linked to factor endowments, to one where modern growth has broken that link. In this Paper we present evidence on another, related phenomenon: the dramatic reversal in distributional trends ? from a steep secular fall to a steep secular rise in wage-land rent ratios ? which occurred some time early in the 19th century. What explains this reversal? While it may seem logical to locate the causes in the Industrial Revolutionary forces emphasized by endogenous growth theorists, we provide evidence that something else mattered just as much: the opening up of the European economy to international trade.
Keywords: distribution; growth; Malthus; trade
JEL Codes: F10; N10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| opening of the European economy to international trade (F15) | wage-rent ratios (J31) |
| industrialization (O14) | wage-rent ratios (J31) |
| international trade and industrialization (F10) | wage-rent ratios (J31) |
| structural break in wage-rent ratios (D33) | wage-rent ratios (J31) |
| integration of global markets (F02) | wage-rent ratios (J31) |
| international trade (F19) | decoupling of commodity prices from domestic factor endowments (F16) |
| industrialization and trade (O14) | reversal of declining wage-rent ratios (D33) |