The fetters of inheritance? Equal partition and regional economic development

Did European regions industrialize first because their institutions fostered urbanization? We argue that culture, precisely an agricultural inheritance tradition that would immobilize the rural population, was no obstacle to economic growth (as commonly thought). Instead, equal partition tied excess labor to the land and fostered the establishment of a low-wage low-skill industry there. Using data for the German state of Baden-Württemberg, as well as for the whole of West Germany, we document that these equal partition areas are richer than primogeniture areas today. With a focus on identification, we conduct fuzzy spatial RDD regressions for 1895, the 1950s, and today. We find that inheritance rules caused—in line with our theoretical predictions—higher incomes, population densities, and industrialization levels in equal partition areas. We document that equal partition reduced emigration. Results suggest that more than a third of the overall inter-regional difference in average per capita income in present-day Baden Württemberg—or 598 Euro—can be attributed to equal partition. The reasons for Europe’s uniqueness do not lie in the supremacy of primogeniture, and have to be searched elsewhere.