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Sailing away from Malthus: intercontinental trade and European economic growth, 1500–1800

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  • Nuno Palma

    () (Departments of Economic History and Economics, London School of Economics and Political Science, and Centre for Globalisation Research, School of Business and Management, Queen Mary, University of London)

Abstract

What was the contribution of intercontinental trade to the development of the European early modern economies? Previous attempts to answer this question have focused on static measures of the weight of trade in the aggregate economy at a given point in time, or on the comparison of the income of specific imperial nations just before and after the loss of their overseas empire. These static accounting approaches are inappropriate if dynamic and spillover effects are at work, as seems likely. In this paper, I use a panel dataset of 10 countries in a dynamic model that allows for spillover effects, multiple channels of causality, persistence, and country-specific fixed effects. Using this dynamic model, simulations suggest that in the counterfactual absence of intercontinental trade, rates of early modern economic growth and urbanization would have been moderately to substantially lower. For the four main long-distance traders, by 1800, the real wage was, depending on the country, 6.1–22.7 % higher, and urbanization was 4.0–11.7 percentage points higher, than they would have otherwise been. For some countries, the effect was quite pronounced: in The Netherlands between 1600 and 1750, for instance, intercontinental trade was responsible for most of the observed increase in real wages and for a large share of the observed increase in urbanization. At the same time, countries which did not engage in long-distance trade would have had real wage increases in the order of 5.4–17.8 % and urbanization increases of 2.2–3.2 percentage points, should they have done so at the same level as the four main traders. Intercontinental trade appears to have played an important role for all nations that engaged in it, with the exception of France. These conclusions stand in contrast to the earlier literature that uses a partial equilibrium and static accounting approach.

Suggested Citation

  • Nuno Palma, 2016. "Sailing away from Malthus: intercontinental trade and European economic growth, 1500–1800," Cliometrica, Journal of Historical Economics and Econometric History, Association Française de Cliométrie (AFC), vol. 10(2), pages 129-149, may.
  • Handle: RePEc:afc:cliome:v:10:y:2016:i:2:p:129-149
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    File URL: http://dx.doi.org/10.1007/s11698-015-0126-1
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    References listed on IDEAS

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    1. Allen,Robert C., 2009. "The British Industrial Revolution in Global Perspective," Cambridge Books, Cambridge University Press, number 9780521687850, April.
    2. Ronald Findlay & Kevin H. O'Rourke, 2007. "Power and Plenty: Trade, War and the World Economy in the Second Millennium (Preface)," Trinity Economics Papers tep0107, Trinity College Dublin, Department of Economics.
    3. Jonathan Hersh & Joachim Voth, 2009. "Sweet diversity: Colonial goods and the rise of European living standards after 1492," Economics Working Papers 1163, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2011.
    4. Robert C. Allen, 2003. "Progress and poverty in early modern Europe," Economic History Review, Economic History Society, vol. 56(3), pages 403-443, August.
    5. Nathan Nunn & Nancy Qian, 2011. "The Potato's Contribution to Population and Urbanization: Evidence From A Historical Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 126(2), pages 593-650.
    6. Romer, Paul, 1993. "Idea gaps and object gaps in economic development," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 543-573, December.
    7. Costa, Leonor Freire & Palma, Nuno & Reis, Jaime, 2013. "The great escape? The contribution of the empire to Portugal’s economic growth, 1500-1800," IFCS - Working Papers in Economic History.WH wp13-07, Universidad Carlos III de Madrid. Instituto Figuerola.
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    Cited by:

    1. Nuno Palma, 2017. "Harbingers of Modernity: Monetary Injections and European Economics Growth 1492-1790," The School of Economics Discussion Paper Series 1711, Economics, The University of Manchester.

    More about this item

    Keywords

    Early modern economic growth Malthusian model Intercontinental trade Economics of empires;

    JEL classification:

    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N70 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - General, International, or Comparative
    • N74 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Europe: 1913-
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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