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Debt, deficits, and crowding out: England, 1727 1840

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Author Info
CLARK, GREGORY

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Abstract

By the 1820s, as a result of the protracted struggle with France, the market value of the British Government debt was twice British GDP. It has been argued that this debt represented a huge institutional failure by the government, significantly slowing growth in the Industrial Revolution period by crowding out private investment. This article constructs measures of private rates of return in the years 1725 1839 and shows these imply that neither the government deficits nor the mounting debt are associated with much higher private rates of return on capital. The reason the government could issue so much debt without raising rates of return is unclear. One possibility is that crowding out was occurring, but population growth in 1770 1839 was reducing rental income as a fraction of GDP, creating a demand for other asset income so that we do not observe tightness in capital markets.

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File URL: http://journals.cambridge.org/abstract_S1361491601000156
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Publisher Info
Article provided by Cambridge University Press in its journal European Review of Economic History.

Volume (Year): 5 (2001)
Issue (Month): 03 (December)
Pages: 403-436
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Handle: RePEc:cup:ereveh:v:5:y:2001:i:03:p:403-436_00

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  1. David R Stead, . "Fixed Rent Contracts in English Agriculture, 1750-1850: A Conjecture," Discussion Papers 05/01, Department of Economics, University of York. [Downloadable!]
  2. Peter Temin & Joachim Voth, 2004. "Credit Rationing and Crowding Out During the Industrial Revolution: Evidence from Hoare's Bank, 1702-1862," Economics Working Papers 859, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2005. [Downloadable!]
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  3. Mikael Priks, 2005. "Optimal Rent Extraction in Pre-Industrial England and France – Default Risk and Monitoring Costs," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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This page was last updated on 2009-11-17.


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