The Three Horsemen of Riches: Plague, War and Urbanization in Early Modern Europe

Review of Economic Studies (2013), Forthcoming

41 Pages Posted: 12 Nov 2007 Last revised: 13 May 2013

Nico Voigtländer

University of California, Los Angeles (UCLA) - Anderson School of Management; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Hans-Joachim Voth

University of Zurich - UBS International Center of Economics in Society; Centre for Economic Policy Research (CEPR)

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Date Written: June 20, 2012

Abstract

How did Europe escape the "Iron Law of Wages?" We construct a simple Malthusian model with two sectors and multiple steady states, and use it to explain why European per capita incomes and urbanization rates increased during the period 1350-1700. Productivity growth can only explain a small fraction of the rise in output per capita. Population dynamics – changes of the birth and death schedules -- were far more important determinants of steady states. We show how a major shock to population can trigger a transition to a new steady state with higher per-capita income. The Black Death was such a shock, raising wages substantially. Because of Engel’s Law, demand for urban products increased, and urban centers grew in size. European cities were unhealthy, and rising urbanization pushed up aggregate death rates. This effect was reinforced by diseases spread through war, financed by higher tax revenues. In addition, rising trade also spread diseases. In this way higher wages themselves reduced population pressure. We show in a calibration exercise that our model can account for the sustained 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 thus trace Europe’s precocious rise to economic riches to interactions of the plague shock with the belligerent political environment and the nature of cities.

Keywords: Malthus to Solow, Long-run Growth, Great Divergence, Epidemics, Demographic Regime

JEL Classification: E27, N13, N33, O14, O41

Suggested Citation

Voigtländer, Nico and Voth, Hans-Joachim, The Three Horsemen of Riches: Plague, War and Urbanization in Early Modern Europe (June 20, 2012). Review of Economic Studies (2013), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1029347 or http://dx.doi.org/10.2139/ssrn.1029347

Nico Voigtländer

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
+1-310-794 6382 (Phone)

HOME PAGE: http://www.anderson.ucla.edu/faculty/nico.v/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Hans-Joachim Voth (Contact Author)

University of Zurich - UBS International Center of Economics in Society ( email )

Raemistrasse 71
Zuerich, 8006
Switzerland

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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