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The Three Horsemen of Riches: Plague, War, and Urbanization in Early Modern Europe

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  • Hans-Joachim Voth

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How did Europe escape the "Iron Law of Wages?" We construct a simple Malthusian model with two sectors and multiple steady states, and use it to explain why European per capita incomes and urbanization rates increased during the period 1350--1700. Productivity growth can only explain a small fraction of the rise in output per capita. Population dynamics--changes of the birth and death schedules--were far more important determinants of steady states. We show how a major shock to population can trigger a transition to a new steady state with higher per-capita income. The Black Death was such a shock, raising wages substantially. Because of Engel's Law, demand for urban products increased, and urban centers grew in size. European cities were unhealthy, and rising urbanization pushed up aggregate death rates. This effect was reinforced by diseases spread through war, financed by higher tax revenues. In addition, rising trade also spread diseases. In this way higher wages themselves reduced population pressure. We show in a calibration exercise that our model can account for the sustained rise in European urbanization as well as permanently higher per capita incomes in 1700, without technological change. Wars contributed importantly to the "Rise of Europe", even if they had negative short-run effects. We thus trace Europe's precocious rise to economic riches to interactions of the plague shock with the belligerent political environment and the nature of cities. Copyright 2013, Oxford University Press.

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  • Hans-Joachim Voth, 2013. "The Three Horsemen of Riches: Plague, War, and Urbanization in Early Modern Europe," Review of Economic Studies, Oxford University Press, vol. 80(2), pages 774-811.
  • Handle: RePEc:oup:restud:v:80:y:2013:i:2:p:774-811
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    More about this item

    JEL classification:

    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • N13 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: Pre-1913
    • N33 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: Pre-1913
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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