The "great divergence" in incomes between Europe and the rest of the world occurred relatively recently. Why was it that Western Europe, once a backward outpost on the fringes of the Eurasian continent, able to dominate in terms of income and technology the previously successful Eastern economies? Several mechanisms have been identifed to account for the rise of Europe. This paper formalizes one important mechanism, the intellectual origins of which can be traced back to Hume and Weber and which was fully, though informally, articulated by E.L. Jones. This mechanism emphasizes the contrast between the European states-system and the Eastern empires. Political competition for a mobile tax-base in a states-system forces rulers to expropriate less from their subjects and to supply relatively more "public services". By effectively limiting the "exit" options of the ruled, an empire rewards its ruler with a captive tax-base that can be subjected to relatively higher levels of expropriation without a similar rise in "public services" provided. The states-system thus encourages higher levels of capital accumulation, while the empire stifles it. The successes of the Eastern empires in their consolidation phase are due to the competition they initially faced from neighboring states. Since Europe escaped such consolidation, the process of accumulation there never faced the impediments its Eastern counterparts did. The paper, thus, also provides a structural explanation for the emergence of institutions in Europe that led to relatively secure property rights.
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Paper provided by Florida International University, Department of Economics in its series Working Papers with number
0509.
Find related papers by JEL classification: O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity P5 - Economic Systems - - Comparative Economic Systems
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