Working Paper: CEPR ID: DP8023
Authors: Bozhong Li; Jan Luiten van Zanden
Abstract: The debate about the long-term economic development of China compared with Europe has taken a new turn with the publication of Kenneth Pomeranz? book on ?The Great Divergence?, in which he maintains that before the Industrial Revolution the most advanced parts of China (in particular the Yangzi Delta) was in terms of real incomes on par with the richest regions in Western Europe (Great Britain, the Netherlands). His tentative results were very different from the estimates produced by Maddison (2001) who concluded that there was already a large gap in real per capita GDP between these two extreme parts of Eurasia. Using the method of historical national accounting, this paper tests these ideas on the basis of a detailed comparison of the structure and level of GDP in part of the Yangzi Delta and the Netherlands in the 1820s, also taking into account differences of purchasing power of the two currencies involved. The results are that Dutch GDP per capita was already almost twice the level in the Yangzi Delta, which is more or less consistent with Maddison?s point of view. The level of agricultural productivity in this part of China was, however, at about the same level as in the Netherlands (and England), but large productivity gaps existed in industry and services (with the exception of government services). We also attempt to explain the patterns found, and conclude that differences in factor costs may have been behind the observed differences in labour productivity.
Keywords: economic development; real incomes; labour productivity
JEL Codes: N3; O1; O4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Dutch GDP per capita (Q33) | Yangzi Delta GDP per capita (F62) |
| Differences in factor costs (F16) | Labor productivity disparities (O49) |
| Labor productivity disparities (O49) | Productivity gaps in industry and services (L89) |
| Structure of labor productivity in the Netherlands (J21) | Economic growth in the Netherlands (O52) |
| Structural differences (F12) | Divergent economic paths of the Netherlands and Yangzi Delta (N93) |
| Agricultural productivity in Yangzi Delta (O49) | Labor productivity in Yangzi Delta (O49) |