Working Paper: NBER ID: w8955
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: No keywords provided
JEL Codes: F1; N1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased international trade (F10) | changes in wage-rent ratio (J39) |
| industrial revolution (O14) | changes in wage-rent ratio (J39) |
| increased international trade (F10) | decoupling of wage-rent ratios from land endowments (J69) |
| trade (F19) | factor prices (F16) |
| 19th century economic changes (N13) | changes in wage-rent ratio (J39) |
| long-term decline in wage-rent ratio (D33) | rising inequality (D31) |
| reversal in wage-rent ratios (D33) | decline in inequality (F62) |