Immigration and Development: German-Speaking Agricultural Settlers in the Kingdom of Hungary

Historical German migration to Central Europe made a persistent impact on local economic development. After prolonged warfare between the Habsburg and Ottoman Empires, German speaking agricultural settlers helped repopulate newly conquered parts of Hungary during the 18th century. Exploiting spatial variation across more than 5,000 towns and villages in areas affected by German immigration, and instrumenting immigrants’ settlement locations with exogenously determined migration routes, we find that geographical proximity to 18th-century German settlements increased farm productivity until the early 20th century. This effect is persistent over time and robust to controlling for initial conditions, geography, religion, and other potential confounding factors. Consistent with historical accounts, we show empirically that areas of German settlement had higher land productivity because of stronger specialization in crop farming and viniculture and more intensive farming. Even a century after immigration, we find limited diffusion of agricultural knowledge from German settlement areas.