Saturday, 14 April 2018

Virtual Issue of the European Review of Economic History on Protectionism

Nikolaus Wolf is a professor at Humboldt
University in Berlin and an editor of the
European Review of  Economic History 
Protectionism is back on the political agenda and with it the question, how do trade and other forces of global markets affect our well-being? Trade theory suggests that specialization along comparative advantages is welfare increasing under a very broad set of assumptions. However, it also suggests that the gains from trade can be very unequally distributed, with a few big winners and a large number of losers. For the most important questions theory alone provides insufficient guidance due to the underlying contingencies: it all depends on institutions, on trade partners, sectors involved, expectations about the future and the like. Therefore, times of crisis direct us back to empirical evidence and notably back to historical episodes that were characterized by large shocks. Already during the late 19th century, the world experienced a period of rapid globalization followed by painful deglobalization. Was the “first globalization” accompanied by efforts to provide social protection for potential losers? What evidence do we have for the effects of tariffs on growth? How did the liberal era of free trade end and why was it so difficult to return to it?
In this virtual issue, we reproduce several papers that have been published in the European Review of Economic History over the last years, all of which address the historical experience of the first globalization, its end and attempts to reintegrate markets after 1945. Michael Huberman and Wayne Lewchuk (2003) discuss in their paper “European economic integration and the labour compact, 1850–1913” how indeed national governments faced with the pressures from globalization before 1914 responded with labor market regulations and social insurance. They show that workers supported free trade as long as they were protected against external risks. But growing pressure from global markets challenged the free trade regime. In his paper “Why Chamberlain failed and Bismarck succeeded: The political economy of tariffs in British and German elections”, Adam Klug (2001) compares the outcomes of three critical elections in European history, the 1877 and 1878 elections in the German Empire and the 1906 election in Britain. While free trade prevailed in Britain, the 1878 election resulted in a protectionist majority that not only shifted the political climate in the German Empire but also triggered protectionist responses abroad. Based on a specific factors model and new data, which allows comparing the two countries, Klug argues that not only economic interests, but also the political system and religious affiliations mattered for election outcomes. Similarly, Sibylle Lehmann and Oliver Volckart (2010)analyse the case of Sweden, roughly a decade later. In their paper “The political economy of agricultural protection: Sweden 1887” they ask to what extent the shift to protectionism in two elections in summer and autumn 1887 can be explained by changing economic interests. Using state-of-the-art techniques they conclude that the outcome of the election can only partially be rationalized and that non-economic factors and indeed “quirks of fate” (Lewin 1988) can sometimes be decisive.
James Foreman-Peck and Andrew Hughes Hallett and Yue Ma (2007) broaden the perspective and consider the experience of the Great Depression after 1929 in their paper “Trade wars and the Slump”. They analyze why international coordination failed and highlight the interplay between domestic and international politics, where domestic issues dominated. They argue that the largest players at the time, the USA and the UK, would have gained little from international cooperation in contrast to France and Germany. Hence, the return to free trade after 1914 was impeded by the unequal gains from international cooperation and large internal conflicts. The massive influence of the USA after 1945 brought free trade policies back on the agenda. This can be read as a warning for today that a slide to protectionism might be hard to reverse.
William Hynes, David S. Jacks and Kevin H- O’Rourke (2012) describe the deglobalization after 1914 in their paper “Commodity market disintegration in the interwar period”. First, they show that the First World War led to a fragmentation of markets, not at least to increased transportation costs. Second, they highlight that after a short period of reintegration in the early 1920s the great depression triggered a further and deeper fragmentation, this time largely due to protectionist policies including the break-up of the international monetary system. It took until the 1970s to reach again the 1913 level of commodity market integration.
Several papers contributed to the debate on tariffs and growth, by addressing the question whether protectionism can have beneficial effects on growth or not. In his paper “New results on the tariff – growth paradox” David S. Jacks (2006) reconsiders the evidence from Bairoch (1972) and O’Rourke (2000) on a positive correlation between economic growth and tariff levels during the late 19th century. First, Jacks finds that indeed tariffs seem to be positively related to growth even after controlling for several confounding factors but also that openness is positively related to growth. To solve this seeming contradiction, he points out that tariffs affect exports and imports differently and suggests that in a non-reciprocal trade environment tariffs might indeed have growth promoting effects. This is related to a large recent literature on institutional factors and the political economy of protectionism. Wolfgang Krause and Douglas J. Puffert (2000) provide an insightful case study on the German Empire before 1914 entitled “Chemicals, strategy, and tariffs: Tariff policy and the soda industry in Imperial Germany”. A key question here is whether protectionist tariffs in the chemical industries can explain the rise of the German chemical industry before 1914. They conclude that increased tariffs in the 1880s played some role for the success of this particular industry, but that other factors, notably independent technological change, were decisive.
A final set of papers analyses the political economy of agricultural policies, an area that was largely exempt from the market liberalization in the Western Economies after 1945. Mark Spoerer (2015) analyses the common agricultural policies (CAP) of the European Economic Community and asks to what extent they can be interpreted as part of the general expansion of the welfare state. In “Agricultural protection and support in the European Economic Community, 1962–92: rent-seeking or welfare policy?” he concludes that “the combined benefits from subsidies, import protection and political prices gave much more benefits to European agriculture than any welfare policy could have done”. Eva Fernandez (2016) puts this into a wider perspective using a global panel of countries for 1920 – 1970 in her paper “Politics, coalitions, and support of farmers, 1920–1975”. She highlights the role of the political system and shows how in continental Europe after 1945 proportional election systems and coalition governments helped to strengthen the political influence of farmers.
This small selection of papers published over the last years in the European Review of Economic History stresses how trade and welfare policies have always been related. It also shows that while the wider economic benefits from protectionism are uncertain at best, domestic policy considerations often trumped international cooperation already 100 years ago.

Saturday, 17 March 2018

ESTER Research Design Course, Cracow

Bartosz Ogórek is an Assistant Professor
at the Pedagogical University in Cracow
In November 2017 ESTER Research Design Course took place in Cracow, Poland. The event was organized by the Pedagogical University of Cracow (Bartosz Ogórek) together with Radboud University Nijmegen (Bram Hoonhout) and WEAST initiative (Mikołaj Malinowski). The main aim of the course is to help PhD students in setting up a high quality and well-designed plan for their dissertation in economic or social history. This goal was achieved by in-depth discussions of the papers prepared by the participants among them and under the guidance of a team of leading senior commentators. Cracow meeting provided a platform for communication for a group of 38 PhD candidates from both Eastern and Western Europe and 13 senior commentators. It is worth noting that for the first time in the ESTER RDC meetings students from Central and Eastern Europe constituted a significant group. Therfore, the programme can largely enhance the communication and cooperation between the scholars in the field based in different parts of Europe. Apart from the scientific programme participants and commentator took part in the social events and explored the city of Cracow.

Friday, 23 February 2018

The Gains from Import Variety in Two Globalisations: Evidence from Germany

Abstract of the new EHES working paper by Wolf-Fabian Hungerland

Wolf-Fabian Hungerland is a Doctoral Student
 at Humboldt University in Berlin
Globalisation is nothing new. Until the outbreak of World War I economies around the world found themselves in a process of integration that invites comparisons to today; just consider Germany’s globalisation experience (Figure 1). On the one hand, growing trade has been tending to expand the consumption opportunities for all. On the other hand, rising populism, both now and then, is—at least in part—fuelled by scepticism if not outright hostility to the international division of labour (Ferguson, 2016). This begs two questions: What are the gains from all that integration in these two episodes of globalisation? And what can we
learn about the structure of demand more generally?

Figure 1: German Imports, 1895-1913 and 1995-2013

One of the more tractable ways of getting hold of the benefits of economic integration to consumers is the idea that the expanding variety of a good yields gains from trade because consumers value variety (Krugman, 1980). That is, in a monopolistically competitive world, consumers prefer to have some choice over different versions of the same good. I operationalise this idea using a standard assumption in the analysis of international trade: Every country makes things slightly different from those made by other countries (Armington, 1969). That is, suppliers differentiate within the products they produce.

Based on the estimated elasticities, I calculate the consumer gains from growing import variety for the ’first globalisation’. The welfare calculations are presented in Table 1. The first finding that demand was more elastic in the first globalisation may imply that there are more welfare gains from changes in variety in the second globalisation. However, from 1907 to 1913, the welfare gain due to growing variety amounts to 0.2 percent of GDP to access the wider set of varieties available in 1913 rather than the set available in 1907. A century later it is only half of that, that is, 0.1 percent. These numbers small at first sight, but because we are looking at estimates of the ’incremental’ gains from import variety (Feenstra, 2010), and only seven-year periods, these numbers are plausible. The results are consistent with previous findings based on similar research designs.

I measure these gains by differentiating between how an exactly measured price index would move with and without changes in the variety of a given set of imported goods. This is Feenstra’s (1994) approach, which has been refined, among others, by Broda and Weinstein (2006). To perform such calculations, I need a measure of substitutability of goods between different source countries that indicates how elastic demand is for a given good, and on the aggregate level, how elastic import demand generally is.

Therefore I estimate elasticities of substitution—a key parameter in many studies of international trade and international macroeconomics—for all goods at various levels of aggregation for both episodes of globalisation, using Soderbery’s (2015) limited information maximum likelihood (LIML) estimator.

Figure 2 plots the distributions of the estimated elasticities, one for the first globalisation and two for the second globalisation, whereby one is based on countries defined by actual borders and one where I superimpose 1913-borders on the country set of today.

Figure 2: Distribution of elasticities of substitution

The results show that the elasticity of substitution varies over time, space and product. The median elasticity is 3.8 in the first globalisation, but only 2.5 in the second. To put this difference in perspective: In Krugman’s (1980) model, which I use to evaluate welfare, these elasticities translate to median mark-ups of 35 percent in the first globalisation but about 66 percent today on prices generated in a perfectly competitive market.

The finding that although demand was more elastic in the first globalisation, welfare gains from import variety were higher than can be explained by the composition of imports. In the first globalisation, variety growth was – in relative terms – stronger than in the second globalisation, at least in the period this article focuses on, as trade-weighted measure of variety growth - so-called lambda-ratios – suggest. That is, despite a much smaller set of goods and their varieties, Germany enjoyed twice as much welfare gains from newly imported varieties than it does today. This result is even more striking when considering that the level of protection ahead of World War I was much higher than it is today. This may reflect the fact that today many ’low hanging fruits’ in terms of variety have been harvested, which resonates with Bordo’s (2017) argument that the world economy’s pace of integration is slowing down or pausing, but not reversing.

A comparison between products and industries shows that the structure of demand is not easily approximated by using one single elasticity of substitution. Both the time horizon as well as the set of trade partners matter. Estimation results for good-specific elasticities of substitution suggest that there is substantial heterogeneity in terms of demand elasticity over goods and their varieties. Figure 3 plots the elasticities for the same three-digit industries, estimated for the first and the second globalisation. One prevalent assumption is that the elasticity for a given good is stable over time. The results show that this is not the case. There are industries that commanded a higher elasticity then but a stiffer demand now, and vice versa. Only a minority of industries experienced little change in demand elasticity. The same holds, even more strongly when going down to the product level. Of course, all this applies only to goods that were traded in both episodes of globalisation. 

Figure 3: Industry-specific elasticities of substitution compared

Based on the estimated elasticities, I calculate the consumer gains from growing import variety for the ’first globalisation’. The welfare calculations are presented in Table 1. From 1907 to 1913, the welfare gain due to growing variety amounts to 0.2 percent of GDP to access the wider set of varieties available in 1913 rather than the set available in 1907. A century later it is only half of that, that is, 0.1 percent. The welfare results seem small at first sight, but because we are looking at estimates of the ’incremental’ gains from import variety (Feenstra, 2010), and only seven-year periods, these numbers are plausible. The results are consistent with previous findings based on similar research designs.

Put differently, despite a much smaller set of goods and their varieties, Germany enjoyed twice as much welfare gains from newly imported varieties than it does today. This result is even more striking when considering that the level of protection ahead of World War I was much higher than it is today. This may reflect the fact that today many ’low hanging fruits’ in terms of variety have been harvested, which resonates with Bordo’s (2017) argument that the world economy’s pace of integration is slowing down or pausing, but not reversing.

Table 1 also reports welfare calculations based on different elasticities of substitution. Column (2) reports the welfare when the period-specific median elasticity, i.e. 3.81 for 1907 to 1913 and 2.47 for 2007 to 2013 is used. The welfare gains would more than halve in both episodes in comparison to the benchmark results on welfare in column (1). Column (3) gives the welfare results when the median elasticities of the respective other period is used. For the 1907-1913 period, welfare is lower by a quarter. For the 2007-2013 period, welfare falls to fifth. Column (4) takes the good-specific elasticities from the respective other period. Welfare turns out to be a fifth of the benchmark results for both episodes. Columns (5) to (7) use various uniform elasticities traditionally used in the literature. Welfare would turn out even lower. The bottom line of these alternative welfare estimates is: Using ad hoc elasticities or a set of good-specific elasticities originating from data other than that the researcher would like to explain can be misleading. This is not only relevant for welfare analysis, but it also applies to analyses that rely on the elasticity of substitution as a parameter to evaluate the effects of changes in trade costs.

The working paper of this article can be downloaded here:


Arkolakis, C., Costinot, A., and Rodríguez-Clare, A. (2012). New Trade Models, Same Old Gains? American Economic Review, 102 (1), 94–130.

Armington, P. (1969). A Theory of Demand for Products Distinguished by Place of Production. International Monetary Fund Staff Papers, 16, 159–178.

Bordo, M. D. (2017). The Second Era of Globalization is Not Yet Over: An Historical Perspective. National Bureau of Economic Research Working Paper Series, Working Paper Nr. 23786.

Broda, C. and Weinstein, D. (2006). Globalization and the Gains From Variety. Quarterly Journal of Economics, 121 (2), 541–585.

Feenstra, R. C. (1994). New Product Varieties and the Measurement of International Prices. American Economic Review, 84 (1), 157–177.

Feenstra, R. C. (2010). Product Variety and the Gains from International Trade. Cambridge, MA: MIT Press.

Ferguson, N. (2016). Populism as a Backlash against Globalization: Historical Perspectives. Horizons, 4 (8), 12–21.

Hausmann, R., Hwang, J., and Rodrik, D. (2007). What You Export Matters. Journal of Economic Growth, 12 (1), 1–25.

Hungerland, W.-F. and Wolf, N. (2018). Globalisation Then and Now: New Evidence From Germany. Institute of Economic History, School of Business and Economics, Humboldt-University of Berlin, mimeo.

Krugman, P. (1980). Scale Economies, Product Differentiation, and the Pattern of Trade. American Economic Review, 70 (5), 950–959.

Ossa, R. (2015). Why Trade Matters After All. Journal of International Economics, 97 , 266–277.

Schott, P. (2004). Across-product versus Within-product Specialization in International Trade. Quarterly Journal of Economics, 119 (2), 647–78.

Soderbery, A. (2015). Estimating Import Supply and Demand Elasticities: Analysis and Implications. Journal of International Economics, 96 (1), 1–17.

Wednesday, 10 January 2018

The long-term relationship between economic development and regional inequality: South-West Europe, 1860-2010

Abstract of the new EHES working paper by Alfonso Díez-Minguela, Rafael González-Valb, Julio Martinez-Galarragaa, M. Teresa Sanchisa, and Daniel A. Tirado:

Our paper analyses the long-term relationship between regional inequality and economic development. The literature points that, from a spatial perspective, the convergence process may display a non-linear evolution. In this respect, Williamson (1965) suggested that throughout the economic development process regional inequality exhibited an inverted U-shaped pattern. He observed that in the early stages of modern economic growth industrial activity was concentrated in specific locations while the rest of the regions remained largely agricultural. This in turn increased per-capita income inequality across regions. However, over the long term these disparities eventually disappeared. For a long time the Williamson hypothesis had no sound theoretical backing. However, Barrios and Strobl (2009), following the Lucas (2000) growth model, provided a theoretical foundation for the Williamson hypothesis in line with classic theorizing contributions on regional economic growth.

A small but slowly growing body of empirical works have tested the existence of a Kuznets curve in spatial inequalities. Importantly, due to limitations in the availability of historical data, studies have focused on recent decades. Barrios and Strobl (2009) and Lessmann (2014) confirm the existence of an inverted U-shaped pattern, and the latter also shows that spatial inequalities increase again at high levels of economic development. However, these studies examine the evolution and causes of regional inequality since 1975-80. And three decades can hardly capture deep structural changes. A more suitable way of approaching the topic would therefore be to study the evolution of regional inequality during the whole process of economic development, i.e. examining the long-term dynamics of countries since the early stages of modern economic growth. This would make it possible to account for the transition from agrarian to industrial and service-based economies.
Industrialization processes in Europe began during the nineteenth century when the novel technologies of the first and second industrial revolutions spread across the continent. As economic historians have already documented, the processes of industrialization were characterized by their regional nature (Pollard, 1981). Technological shocks, industrialization and structural change did not arrive in all regions at the same time and therefore not all regions became richer at the same time, and this led to an initial upswing in regional disparities, as suggested by Williamson.
Recent developments in economic history make it possible to study the long-term evolution of regional income inequality. In this paper we have collected figures for regional population and regional gross domestic product (GDP) for France, Italy, Portugal and Spain at the NUTS2 level, on a decadal basis between 1860 and 2010.

The next figure shows the regional per-capita GDP in each country (dark-coloured dots) compared to the average per-capita GDP for South-West Europe as a whole (solid line) for 1860-2010. The grey bars represent all the regions of the four countries taken as a whole. As can be seen, the graphs provide a more complex picture than the country-specific histories that have already been extensively documented in the literature. Indeed there are big differences within countries, and regions can be found in all of them with levels of income both above and below the average for South-West Europe.

Fig. 2. Regional per-capita GDP (1990 $ Geary-Khamis) by country, 1860-2010

In addition, relevant changes to the economic geography of South-West Europe occurred during the period of study. To explore the main geographical patterns in the spatial distribution of income, the next figure shows maps of regional per-capita GDP. The regions are grouped in quintiles for 1900, 1950, 1980 and 2010. Black indicates “very rich”, while the lightest grey indicates “very poor”. By 1950, most of the southern regions of Italy and the vast majority of Spanish and Portuguese regions were at the bottom of the income distribution. In both Spain and Italy there had emerged a clear north-south divide pattern, while in Portugal only Lisbon had respectable income levels. Furthermore, the rich regions were clustered in a gradient centred on the north of France around Paris (Île-de-France) and northern Italy. In short, it seems that a core-periphery pattern already existed in 1950.

Fig. 3. Regional (NUTS2) per-capita income in South-West Europe, 1900-2010

Next, we measure regional inequality using the population-weighted coefficient of variation. This indicator shows that there seems to be a general trend towards increasing regional inequalities in the early stages of modern economic growth. While convergence does at some point begin, the timing of the reversal from divergence to convergence varies across countries. By 1980 the inverted U seems to be complete in all four countries; over the last three decades regional catching-up has come to an end or even reversed. In order to further investigate these issues, we conduct a sound econometric analysis to empirically test the relationship between economic development and regional inequality. In so doing, we combine parametric and semiparametric techniques.
The next graph summarizes our findings. It shows a clear bell-shaped curve, supporting the idea of an inverted U-shaped relationship between spatial inequality (y-axis) and development (x-axis) over time. It also shows increasing inequalities at high levels of economic development at the upper tail of the GDP distribution.

Fig. 5. Semiparametric estimates (pooled regressions 1860–2010)

In order to further explore this issue, we next examine the potential mechanism behind the inverted-U curve suggested by Kuznets (1955) and Williamson (1965). These authors established that structural change is a major driver of regional inequalities, with the transition from agrarian to industrial economies being responsible for the evolution of these inequalities. A bell-shaped curve is again obtained. Thus, this result suggests that structural change (the shift from agriculture to industry) has caused the inverted-U pattern observed in the data.

Finally, we carry out several robustness checks. On the one hand, we consider alternative measures of inequality instead of the weighted coefficient of variation. On the other, to avoid any possible bias due to the predominance of the capital cities, we calculate regional inequality excluding the region in which the country’s capital is located. In all cases, the results show a clear bell-shaped curve.
All in all, three main results are obtained. First, the study confirms that, over the course of the historical process of economic development, regional income inequality has followed a U-shaped evolution. Interestingly, in the more recent stages of development the trend is on the rise again. This result is robust not only to the inclusion of confounding factors that may have an effect on regional inequality (the size of regions, trade openness, agglomeration economies and public policies), but also to the use of alternative measures of inequality. Second, our results also show that economic growth has been more intense in the most populated regions, which, in the context of the four South-West European countries studied, correspond to those in which the capital cities are located. The dynamism of these ‘capital’ regions could therefore explain the recent upsurge in regional inequalities. Third, in line with Kuznets (1955) and Williamson (1965), we identify structural change as being a significant transmission mechanism of the inverted-U relationship that we have found between economic development and regional inequality in the long term.

Barrios, S., Strobl, E., 2009. The dynamics of regional inequalities. Regional Science and Urban Economics 39 (5), 575-591.
Kuznets, S., 1955. Economic growth and income inequality. American Economic Review 45 (1), 1-28.
Lessmann, C., 2014. Spatial inequality and development. Is there an inverted-U relationship. Journal of Development Economics 106, 35-51.
Lucas, R.E., 2000. Some macroeconomics for the 21st Century. Journal of Economic Perspectives 14 (1), 159-168.
Pollard, S., 1981. Peaceful conquest: the industrialization of Europe, 1760-1970 (Oxford: Oxford University Press).
Williamson, J.G., 1965. Regional inequality and the process of national development: a description of the patterns. Economic Development and Cultural Change 13 (4), 1-84.

Monday, 11 December 2017

Unreal wages? Real income and economic growth in England, 1260-1850

Abstract of the new EHES working paper:
Jacob Weisdorf, University of Southern Denmark.
Jane Humphries, University of Oxford
Historical estimates of workers’ earnings suffer from the fundamental problem that annual incomes are inferred from day wages without knowing the length of the working year. This uncertainty raises doubts about core growth theories that rely on existing income estimates to explain the origins of the wealth of nations. We circumvent the problem by building an income series of workers employed on annual rather than casual contracts. Our data suggests that existing annual income estimates based on day wages are badly off target, because they overestimate the medieval working year but underestimate the working year during the industrial revolution. Our revised annual income estimates (see Figure) indicate that modern economic growth began almost two centuries earlier than commonly thought and was driven by an ‘Industrious Revolution’.

Figure: Estimated real annual incomes in England from day rates (grey) and annual rates (black), 1260-1850
The working paper can be downloaded here:

Wednesday, 11 October 2017

Mikołaj Malinowski won the Figuerola Prize awarded biennially for the best article published in the European Review of Economic History

Mikołaj Malinowski is a Postdoctoral
Fellow at Lund University

European Review of Economic History. 2016, 2, volume 20, pp. 123–146.

Abstract of the article: I investigate the relation between institutions, markets, and preindustrial economic growth. In particular, I analyze the impact of coercive agricultural class structures on urban population growth in Poland. My main point is that the impact of the demesne economy based on serfdom on urban growth was neither inherently negative nor positive. Instead, I suggest that the effect of serfdom depended on market conditions. I propose a new mechanism that explains how higher monetary and labor duties charged by landlords to their enserfed tenant farmers could have made urban settlements more resilient to a market crisis. I find empirical support for this idea with use of new database on urban settlements.

Friday, 22 September 2017

Thor Berger won the Gino Luzzatto Dissertation Competition for to the best PhD Dissertation on any subject relating to the economic history of Europe, defended during the period July 2015 to June 2017

Thor Berger is a postdoctoral fellow at
Lund University
Engines of Growth: Essays in Swedish Economic History

A central task for economic historians is to explain why some countries forged ahead, while others fell behind, and how some initially backward countries managed to converge with the leading industrializers in the 19th century. While these divergent growth trajectories are typically attributed to country-level differences in terms of, for example, factor prices or institutions, the vast gaps in industrialization and incomes that opened up within nations are hard to reconcile with such explanations. Against that backdrop, my dissertation analyzes regional and urban growth patterns during Sweden’s remarkable economic transformation during the half century leading up to the Great War.

As forcefully argued by Sidney Pollard, it has always been know that an industrial revolution has to be associated with a revolution in transportation. Above all, the railroad epitomized the 19th-century transport revolution to contemporary observers and the uneven spread of the emerging European railroad networks were often expected to be able to “make or break” a region. However, it has remained challenging for economic historians to identify the impact of the railroad since they often connected already rapidly growing places. In two companion chapters, I exploit the rollout of the Swedish state railroad network to identify its contribution to industrialization and short- and long-term impacts on urban growth respectively. Estimates reveal a sharp acceleration in the pace of industrialization in both cities and rural parishes that were “randomly” traversed by a railroad, while the shock of the first railroads shifted the spatial equilibrium of the urban economy that is still visible in the size distribution of cities some 150 years later.

While the railroad’s importance for Swedish economic development was emphasized already a century ago by Eli Heckscher, economic historians have more recently stressed the role of human capital in Scandinavian catch-up. Yet, it remains a puzzle how the “impoverished sophisticate” arose in the context of an extremely unequal political system, which allowed landed elites to capture local governments and block the provision of public schooling. Analyzing differences in spending across municipalities, however, show that investments in elementary education was substantially higher where local governments were dominated by landed elites, which suggests that economic and political elites were not always a barrier to educational expansions. In the final chapter, I analyze the link between agricultural productivity increases and regional growth by exploiting the potato’s introduction in the early 19th century. Evidence from welfare ratios suggest that the cheaper calories from the potato raised living standards significantly, which led to a sharp acceleration in population growth due to Malthusian adjustments in areas endowed with land suitable for potato cultivation.

A key contribution of the chapters in the dissertation is that they provide evidence of how (often minor) regional differences in terms of geography or transportation costs can be amplified to alter both short- and long-term trajectories of local economic development. At a time when regional tensions are again on the rise in Europe, the notion that economic development is not mainly a national process and that present-day patterns of regional inequality often have deep historical roots seems to be a particularly timely takeaway. 

Monday, 5 June 2017

WEast Workshop, May 19-20 2017 in Bucharest

This blog post was written by
Cristina Victoria Radu,
PhD student at University of
Southern Denmark
The WEast workshop recently took place in Bucharest on the 19th and 20th of May, bringing together scholars working on a wide range of topics in economic history, growth and development dedicated to countries from Eastern and Central Europe. The WEast initiative, which is sponsored by the European Historical Economics Society (EHES), has a long tradition of organizing annual workshops on these subjects in different cities of Eastern Europe and is organized by Dr Mikolaj Malinowski (Lund University), Dr Tamás Vonyó (Bocconi University), and Prof Jacob Weisdorf (University of Southern Denmark).

The Bucharest workshop was hosted by two leading local universities: The Faculty of Theoretical and Applied Economics at the Bucharest University of Economic Studies, and the Faculty of History at University of Bucharest. The local organizers, who made sure the event was a successful one, were: Prof Florentina Nițu, Dean of the Faculty of History at University of Bucharest; Prof Grigore Piroșcă, Dean of the Faculty of Theoretical and Applied Economics at Bucharest University of Economic Studies; Prof Roxana Sârbu, Vice-Rector of the Bucharest University of Economic Studies, and myself - Cristina Victoria Radu, PhD student in economics at the University of Southern Denmark.

On the morning of the first day, the workshop was held in a building of the Faculty of Theoretical and Applied Economics, starting with a warm welcome address by the local organizers. Our first keynote speaker was Sheilagh Ogilvie (Cambridge University) who opened the meeting with a captivating lecture entitled: “The Second Serfdom in Early Modern Central Europe” in which she offered an interesting perspective of the impact of the second serfdom on peasants’ lives in Czech villages. One of the pillars of her speech was the advocacy for shifting focus from the question “did serfdom matter?” to “how did serfdom matter?”. By her way of lecturing, she established a very positive energy, which lasted for the rest of the workshop. 

After a short 15 minutes break, which was mainly used to set the Wi-Fi connection on the phones, the first session of the meeting began. Named “Institutional development and markets”, the session was (strictly!) chaired by Jacob Weisdorf. The first presenter, Mikolaj Malinowski (Lund University) talked about “Economic Consequences of Anarchy; Legal state capacity and market integration in Poland, 1505‐1772” arguing that the early modern Polish parliament had a strong impact on lowering transaction costs, thus the Polish parliamentary crisis contributed to domestic market fragmentation. This suggests that legal state capacity could have been important for market development in preindustrial Europe, and could partially explain the origins of the Little Divergence. The second speaker was Iosif Marin Balog (“George Baritiu” Institute of History Cluj Napoca) who presented his paper: “State‐economy relationship in the Habsburg Monarchy at the Middle nineteenth century: some considerations”. He pointed out the main aspects of the economic policies of Vienna in Transylvania between 1850-1867 and concluded that the legal and institutional mechanisms had major and lasting effects on the economy, while the state showed little interest in large scale economic activities in this province. Further on, Constantin Ardeleanu (Utrecht University and New Europe College, Bucharest) gave a presentation about “The coming of capitalism to the lower Danube. Grain trade, transport infrastructure, international institutions, and national economic policies (1829–1914)” in which he touched upon the important moments in the history of Romania’s maritime ports, with quantitative details and relevant national and international developments. The last presenter from this session was Olga Ivashchenko (The Institute of Sociology, National Academy of Sciences of Ukraine) who spoke about “Post‐soviet Ukraine 25 years way of transition: overcoming the inherited market obstacles and ideological traps”, presenting an analysis of how the soviet ideology affected the social transformation to a market economy in the country.

The second session was chaired by Mikolaj Malinowski and was called “Ethnicity, violence and welfare”. Jacob Weisdorf (University of Southern Denmark) initiated the session with a presentation entitled “Living standards in Eastern Europe in the long run”. Building on Allen’s paper from 2001 (The Great Divergence in European Wages and Prices from the Middle Ages to the First World War), his animated talk inoculated the belief that collecting data on wages and prices for Eastern Europe is actually feasible, which would help place this part of the continent in the Great Divergence debate. The next presenters, Jörg Baten and Thomas Keywood (University of Tübingen) jointly offered a presentation of their paper named “Determinants of Violence in Eastern Europe, 5th‐19th Century” for which they used regicide (the murder of royalty) as a proxy for societal violence, comparing Eastern and Western Europe between the 5th and 18th centuries AD.

Thomas Keywood and Joerg Baten. – debates in the second session at The Faculty of Theoretical and Applied Economics

The subsequent speaker, Beatrice Nicolle Crețu (University of Bucharest) presented “Into the Rose Garden: The Impact of Humanitarian Assistance on the Economy of a City under Siege (Sarajevo, 1992 – 1996)” and provided insights about the effects of humanitarian assistance on the lives of people from Sarajevo in terms of the distribution of food, water, medicine and other items of value during the siege. Her work shows that despite an inherent development of black markets, the humanitarian relief was crucial for their well-being. Young‐ook Jang (London School of Economics) closed up the session by presenting his paper “The Road Home‐the role of ethnicity in Soviet and post Soviet migration”. In this study, he constructed a new dataset for regional ethnic migration by using Soviet and post-Soviet census data and administrative vital records, employing it to bring evidence that ethnic identity was an important factor in shaping migration patterns during the transition period.

After the two interactive sessions with constructive debates, we had lunch at a quiet cantine in the university, enjoying tasteful traditional Romanian dishes among which the “Ciorba de perisoare” (meatball soup) was included. Later, we had a walk, accompanied by sunny weather and pleasant conversations, to the Faculty of History at the University of Bucharest. There, we started the third session of the workshop (a bit later than we had initially planned) chaired by Marta Christina Suciu and labeled “Financial development and business networks”. The first presenter was Anna Gladysheva (Russian Academy of Sciences) with her paper “Joint stock companies – construction element for the new economic relations between the USSR and Central and South‐Eastern European Countries” in which she described the Soviet joint stock companies and their role in Romania and Hungary for the period 1945-1949, showing that the Soviet intervention had a positive influence on the economic recovery for this particular case. Another author, Alexander Opitz (University of Hohenheim) presented “The network of corporate banks in interwar Germany” analyzing the profitability and market valuation of all Berlin-listed German corporate banks in 1920, in context of the formation of a business network through bankers holding various board memberships.

Alexander Optiz during his talk, and the audience

Further, Nikolaos Leonidakis (University of Crete) conveyed a presentation of his essay “Post Greek civil war loans in Greek textile companies ‐ The example of Erioklostiria Pennie‐Lanara Bros SA” in which he studied the economic progress of the textile industry, before and after receiving funds from the Marshall Plan, concluding that the centralized postwar Greek credit system favored a close relationship between the political and the business banking elite. The last speaker from this session was Robert Nagy (Babeș‐Bolyai University) who delivered the talk entitled “State policy and capital investments in Transylvania 1800‐1918” in which he presented the major economic trends and processes as well as the main branches of the economy that saw significant foreign investment in the period 1880-1918, for historical Transylvania and for the Eastern parts of the Hungarian Kingdom. 

After a break and some savory pastries, the 4th session began, having Christian Nasulea as chair. The session was called “Economic and social policies” and started with Suzana Mihajlović Babić (University of Belgrade) presenting “The economic thought influence on the social policy development in the nineteenth century in Serbia”. The main objectives of her work were the description of the economic policies of that period, highlighting the link between the influence of  Enlightenment, civic economic thought and the economic thought of socialism with measures in the field of social policy. Afterwards, Dragoș Sebastian Becheru (University of Bucharest) gave a presentation named “Romanian trade with the Middle East, under the influence of the Arab League’s Central Bureau of Boycott. 1970‐1978” describing Romania’s diplomatic and commercial relations during this period and their impact on the economy. Based on financial data, he analyzed overall and individual losses suffered by Romanian companies during the duration of the Arab League’s boycott. Roberta Stanef‐Puică (The Bucharest University of Economic Studies) closed the session with a paper entitled “Considering the new historical and economic context is the EU forced to adopt a Common Defense Policy?” presenting the key features of the Common Security and Defense Policy, how current global events have undermined the EU's role as a security actor in recent years, and the necessity of a common defense policy. 

The day ended with the second key-note lecture by Bogdan Murgescu (University of Bucharest), entitled “Explaining the Ups and Downs of Economic Performance in European Socialist Systems. Structural Change, Human Capital and Institutions in Romania (1948‐1989)”. He gave a stimulating and motivating overview of the performance of Romania’s economic history during the communist period, seen in an international context.

Bogdan Murgescu giving his keynote lecture at the Faculty of History

Emerging background music coming from a nearby concert along with the key-note lecture, signaled that a fruitful day of presentations had come to an end, so that we could receive a well-deserved dinner at “Casa Universitarilor”. The official day was completed with an affectionate speech by WEast organizer Mikolaj Malinowski, followed by unexpected chocolate gifts from the WEast organizers to the local organizers.

The second day of the workshop started with a provocative session named “Urbanization, growth and development”, chaired by myself. Katarzyna Wagner (University of Warsaw) opened the session by presenting her paper “Did large cities exist in the 17th century Polish‐Lithuanian Commonwealth? An attempt at definition”. Analyzing the registers of both municipal szos and Swedish contributions, attempts were made to define the metropolis status in the 17th century Crown by taking into account big discrepancies between the wealth of city residents, as well as type of housing, number of tenants and occupational structure of the residents. The session continued with Uygar Karaca (Koç University) offering a presentation named “A Comparative Analysis of Economic Development and Urbanization in Southeast European and Western Anatolian Towns, 1840‐1940”. This paper, coauthored with M. Erdem Kabadayı, analyzed micro-level occupational data extracted from the 1845 Ottoman tax survey to compare levels of urban economic development. This data, together with migration data, painted a picture of structural change, at the end of the Ottoman Empire, in Southeast Europe and Anatolia. The third presenter, Michal Ďurčo (Slovak academy of sciences) provided an innovative talk entitled “Road infrastructure development as a prerequisite for socio‐economic development of the regions of Slovakia during the interwar period” in which he discussed construction policy, motorization and the impact of the new roads. The speaker who ended the workshop was Ilya Voskoboynikov (National Research University Higher School of Economics) with “Labor productivity growth and structural change in the union republics of the USSR in 1966‐1990”. His research, based on a new dataset on input-output tables, analyzed the consequences of the planned economy of the Soviet Union for long run economic growth. 

After the session, final remarks and conclusions were expressed by the audience and key-note speakers, followed by a lovely excursion to one of Romania’s most beautiful scenes: the mountain resort of Sinaia and the Peleș Castle.

Group photo at the Peles Castle in Sinaia
This blog post was written by Cristina Victoria Radu, PhD student in economics at the University of Southern Denmark

Wednesday, 24 May 2017

Resource endowments and agricultural commercialization in colonial Africa: Did labour seasonality and food security drive Uganda’s cotton revolution?

Michiel de Haas is PhD student at
Wageningen University
Agricultural commercialization was a key driver of African economic change during the colonial era. Why did some African smallholders adopt cash crops on a considerable scale, while most others were hesitant to do so? 
In recent years, debates on the determinants of African development have been dominated by institutional explanations (Acemoglu and Robinson, 2010). However, there is also a current of literature pointing at the importance of ecological factors and resource endowments (Austin, 2008; Tosh, 1980). In this study, we investigate and test the plausible claim that factor endowments crucially shaped the degree to which export crops were adopted by smallholders in colonial tropical Africa. 
Kostadis Papaioannou is Post Doc
at London School of Economics 

In his seminal contribution, Tosh (1980) made a strong case for a resource endowments perspective on African agricultural commercialization during the colonial era. Tosh argued that different responses of African farmers to export crop cultivation can be explained by the distinction between ‘forest’ and ‘savanna’ areas, in which farmers faced distinct resource endowments. Forest areas have fertile soils and well-distributed rainfall patterns, and are suitable for crops that yield high caloric returns per unit of labour (such as yam, banana) as well as lucrative cash crops (such as coffee and cocoa). Savanna areas, instead, were characterized by a brief growing season during which farmers struggled to secure their subsistence requirements. Not only were labour demands unevenly distributed under such dryer savannah conditions, but farmers also had to rely on drought-resistant but labour intensive grain cultivation, and less lucrative cash crops such as cotton and groundnuts. Consequently, insufficient labour was available to cultivate cash crops without facing food insecurity. 

Uganda’s cotton revolution
We conduct an in-depth case study of the ‘cotton revolution’ in colonial Uganda to put Tosh’ argument to the test. Ugandan smallholders, unlike their counterparts elsewhere in Sub-Saharan Africa, adopted cotton on a substantial scale. Cotton was first exported in the early 1900s, and already by the 1920s, Uganda had become the world’s fourth cotton exporter in per capita terms (and 11th in terms of total production). Two common explanations exist in the literature for the exceptional cotton uptake by Ugandan farmers. Firstly scholars arguing from a resource endowment perspective have argued that the success of cotton in Uganda should be attributed to cultivation of the perennial banana by Uganda’s cotton growers. Bananas yielded high caloric returns to labour and left farmers with sufficient labour to cultivate an inedible and labour intensive export crop (Elliot, 1969; Tosh, 1980). However, as illustrated by Figure 1, bananas were only grown in some parts of Uganda, while smallholders in grain growing regions were equally invested in the cultivation of cotton. In other words, this crop-based version of the resource endowments explanation does not hold up to the historical record. Secondly, scholars taking an institutional perspective have argued that Ugandan cotton adoption was the outcome of particularly effective colonial coercion (Hanson, 2003; Young, 1994). Again, however, the explanation does not hold up to the historical evidence: while the most outright Ugandan colonial coercive policies were scaled back during the 1920s, cotton production in this period accelerated.

Figure 1: Average annual cotton cultivation in Uganda’s colonial districts (1925-1960) (click to enlarge)

Figure 2. Bi-modal rainfall and Cotton Planting in Uganda (click to enlarge)

Rainfall patterns, labour seasonality and cash crop adoption
We argue that the previous literature has focused too much on crops and coercion, and has overlooked a crucial environmental condition that characterized all of Uganda’s cotton growing regions, namely its equatorial bimodal rainfall patterns (see Figure 2). Bimodal rainfall – i.e. the occurrence of two distinct rainy season per year – gave smallholders an important edge over their counterparts farming in conditions of unimodal rainfall, and enabled them to cultivate cash crops while retaining food security. The benefits were two-pronged.

Firstly, the occurrence of two rainy seasons meant that agricultural labour demands were more smoothly distributed throughout the year, effectively enabling farmers to use more labour to grow crops. Indeed, farmers used the first rainy season to grow food crops, and relegated cotton to the second rainy season. The benefit of spreading out farming operations over two rainy seasons is best illustrated by a comparison between the Teso region of Uganda and northern Côte d’Ivoire (Figure 3). If we assume that the month with the greatest labour input in Figure 3 signifies the potential maximum monthly household labour capacity, this would imply that, because of a more favourable seasonal distribution, farmers in the three Ugandan cases were able to use between 69 and 71 per cent of their annual labour capacity in agriculture, while farmers in Côte d’Ivoire, could only effectively exploit 49 per cent of their labour capacity to produce crops. This gap of just over 20 percentage points may well account for the difference between cotton adoption and rejection.

Figure 3. Intra-annual distribution of labour inputs (left axis) and rainfall (inches, right axis) (click to enlarge)

Secondly, having two chances to secure subsistence per year mitigated the impact of a single harvest failure, and allowed farmers to take greater risks, such as devoting one of the rainy seasons to the cultivation of an inedible cash crops. We show that farmers relegated cotton to the second rainy season, and hypothesize that the allocation of labour to cotton depended on the degree of food security achieved in the first rainy season.

Food security and cotton cultivation: an empirical analysis

To test this hypothesis, we perform a panel analysis on a newly constructed, strongly balanced, district-level dataset of cotton acres per capita over a 36 year period (1925-1960). Food crop yield data are impossible to obtain in a smallholder economy with very limited administrative capacity. To proxy for food crop harvests in the first rainy season, we look at rainfall deviation. An extensive body of previous research has shown that rainfall deviation is a reliable estimate of harvest outcomes (Papaioannou, 2017; Papaioannou & De Haas, 2017 for further discussion). Usually, studies look at rainfall on an annual basis, but for our analysis and bimodal context, we take rainfall deviation of the first six months of the year – that is before the planting of cotton. Our panel analysis indicates that rainfall deviation in the first season had a negative impact on subsequent cotton cultivation, suggesting that food security trumped cotton cultivation, and that farmers shifting resources from cotton to food during the second reason to compensate for the disappointing food crop harvest. The effect is stable and highly significant (at the 1% confidence level), and holds up to numerous robustness checks. Interestingly, when we do not find heterogeneity between the grain and banana districts, indicating that rainfall patterns rather than farming systems were decisive to smallholders’ willingness and ability to adopt cotton. 


Our study highlights the importance of food security and labour seasonality as important determinants of agricultural commercialization in colonial tropical Africa. We propose that, in a colonial context, bimodality was a close-to-necessary condition for a ‘cash crop revolution’ to occur. At the same time, we are careful not to argue that cash crop adoption can be understood and explained solely by looking at labour seasonality, or even resource endowments more broadly. In this study, we have treated thin markets for credit and food, and limited adoption of agricultural technologies as exogenously given. In reality, of course, such limitations were an outcome of the policies of colonial governments, which operated on a shoestring and were unwilling to invest to any large extent in the agricultural development of their colonies. That resource endowments mattered so much testifies to the poor institutional context in which famers operated.

The working paper can be downloaded here:

Acemoglu, D., and J.A. Robinson. 2010. “Why is Africa poor?” Economic History of Developing Regions 25 (1):21-50.

Austin, G. 2008. “Resources, techniques, and strategies south of the Sahara: revising the factor endowments perspective on African economic development, 1500-2000.” The Economic History Review 61 (3):587-624.

Elliot, C.M. 1969. “Agriculture and economic development in Africa: theory and experience 1880-1914.” In Agrarian change and economic development, edited by E.L. Jones and S.J. Woolf. London: Methuen.

Frankema, Ewout, Jeffrey Williamson, and Pieter Woltjer. 2015. An economic rationale for the African scramble: the commercial transition and the commodity price boom of 1845-1885. National Bureau of Economic Research.

Papaioannou, Kostadis J. 2017. ““Hunger makes a thief of any man”: Poverty and crime in British colonial Asia.” European Review of Economic History 21 (1):1-28.

Papaioannou, Kostadis J., and Michiel de Haas. 2017. “Weather Shocks and Agricultural Commercialization in Colonial Tropical Africa: Did Cash Crops Alleviate Social Distress?” World Development 94:346-365.

Tosh, John. 1980. “The cash-crop revolution in tropical Africa: an agricultural reappraisal.” African Affairs 79 (314):79-94.

Young, Crawford. 1971. “Agricultural policy in Uganda: capability and choice.” In The state of the nations: constraints on development in independent Africa, edited by M.F. Lofchie, 141-164.