Working Paper: CEPR ID: DP7275
Authors: Nico Voigtländer; Hans-Joachim Voth
Abstract: How did Europe overtake China? We construct a simple Malthusian model with two sectors, and use it to explain how European per capita incomes and urbanization rates surged ahead of Chinese ones. Productivity growth can only explain a small fraction of rising living standards. Population dynamics - changes of the birth and death schedules - were far more important drivers of the long-run Malthusian equilibrium. The Black Death raised wages substantially, creating important knock-on effects. Because of Engel?s Law, demand for urban products increased, raising urban wages and attracting migrants from rural areas. European cities were unhealthy, especially compared to Far Eastern ones. Urbanization pushed up aggregate death rates. This effect was reinforced by more frequent wars (fed by city wealth) and disease spread by trade. Thus, higher wages themselves reduced population pressure. We show in a calibration exercise that our model can account for the sharp rise in European urbanization as well as permanently higher per capita incomes in 1700, without technological change. Wars contributed importantly to the rise of Europe, even if they had negative short-run effects. We also examine intra-European growth, using a panel of European states in the period 1300-1700. Estimation results suggest that war frequency can explain a good share of divergent fortunes within Europe as well.
Keywords: demographic regime; epidemics; great divergence; long-run growth; Malthus to Solow
JEL Codes: E27; N13; N33; O14; O41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Black Death (N94) | Wage Increase (J31) |
| Wage Increase (J31) | Increased Demand for Urban Products (R22) |
| Increased Demand for Urban Products (R22) | Higher Urban Wages (R29) |
| Higher Urban Wages (R29) | Attracting Rural Migrants (R23) |
| Urbanization (R11) | Increased Aggregate Death Rates (J11) |
| Increased Aggregate Death Rates (J11) | Reduced Population Pressure (J11) |
| Wars (D74) | Higher Death Rates (I12) |
| Higher Death Rates (I12) | Economic Devastation (N00) |
| Economic Devastation (N00) | Higher Wages (J31) |
| Economic Devastation (N00) | Urbanization (R11) |
| Political Fragmentation and Geographical Conditions (F12) | Economic Outcomes (P47) |