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Sailing away from Malthus: intercontinental trade and European economic growth, 1500-1800

Palma, Nuno (2014) Sailing away from Malthus: intercontinental trade and European economic growth, 1500-1800. Economic History working paper series (210/2014). The London School of Economics and Political Science, London, UK.

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Abstract

What was the contribution of intercontinental trade to the development of the European early modern economies? Previous attempts to answer this question have focused on static measures of the weight of trade in the aggregate economy at a given point in time, or on the comparison of the income of specific imperial nations just before and after the loss of their overseas empire. These static accounting approaches are inappropriate if dynamic and spillover effects are at work, as seems likely. In this paper I use a panel dataset of ten countries in a dynamic model which allows for spillover effects, multiple channels of causality, persistence and country-specific fixed effects. Using this dynamic model, simulations suggest that in the counterfactual absence of intercontinental trade, rates of early modern economic growth and urbanization would have been moderately to substantially lower. For the four main long-distance traders, by 1800 the real wage was, depending on the country, 6.1 to 22.7% higher, and urbanization was 4.0 to 11.7 percentage points higher, than they would have otherwise been. For some countries, the effect was quite pronounced: in the Netherlands between 1600 and 1750, for instance, intercontinental trade was responsible for most of the observed increase in real wages and for a large share of the observed increase in urbanization. At the same time, countries which did not engage in long-distance trade would have had real wage increases in the order of 5.4 to 17.8% and urbanization increases of 2.2 to 3.2 percentage points, should they have done so at the same level as the four main traders. Intercontinental trade appears to have played an important role for all nations which engaged in it, with the exception of France. These conclusions stand in contrast with the earlier literature which uses a partial equilibrium and static accounting approach.

Item Type: Monograph (Working Paper)
Official URL: http://www.lse.ac.uk/economicHistory/home.aspx
Additional Information: © 2014 The Author
Divisions: Economic History
Subjects: D History General and Old World > D History (General)
D History General and Old World > D History (General) > D901 Europe (General)
JEL classification: N - Economic History > N1 - Macroeconomics and Monetary Economics; Growth and Fluctuations > N10 - General, International, or Comparative
N - Economic History > N1 - Macroeconomics and Monetary Economics; Growth and Fluctuations > N13 - Europe: Pre-1913
N - Economic History > N7 - Transport, International and Domestic Trade, Energy, Technology, and Other Services > N70 - General, International, or Comparative
N - Economic History > N7 - Transport, International and Domestic Trade, Energy, Technology, and Other Services > N74 - Europe: 1913-
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output (Income) Convergence
O - Economic Development, Technological Change, and Growth > O5 - Economywide Country Studies > O57 - Comparative Studies of Countries
Sets: Departments > Economic History
Collections > Economists Online
Date Deposited: 05 Dec 2014 09:36
Last Modified: 20 Feb 2019 03:49
URI: http://eprints.lse.ac.uk/id/eprint/60453

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