EH1: SB TOPIC 4
ACCOUNTING FOR THE GREAT
DIVERGENCE
OVERVIEW
• Title of this topic is “Accounting for the Great
Divergence” and I use the word “accounting”
in 2 ways
• Measurement: use HNA framework to
compare GDP p.c. in Europe and Asia, c.10001870
• Explanation: provide a historical account of
why the divergence happened
2
Overview
• Measurement: revisionist claim that richest parts of
Asia on par with richest parts of Europe as late as
1800 rejected, but emphasis on regional variation
fruitful
• Explanation: need to account for divergence of North
Sea Area (GB & Holland) from rest of Europe as well
as Asia, but also some similarities between GB and
Japan, which made first transition to MEG in Asia
3
TOPIC 4: ACCOUNTING FOR THE
GREAT DIVERGENCE
• A. ECONOMIC GROWTH IN EUROPE AND ASIA
• 1. A Short-Cut method for estimating GDP per
capita
• 2. Europe’s Little Divergence
• 3. Asia’s Little Divergence
• 4. The Great Divergence
• 5. The Transition to Modern Economic Growth
4
A. ECONOMIC GROWTH IN
EUROPE AND ASIA BEFORE 1870
• Now possible to provide historical national accounts
on an annual basis for some countries reaching back to
c.1270
• Derived from data collected at the time, in contrast to
Maddison’s “guesstimates”
• Picture that emerges is of reversals of fortune within
both Europe and Asia, as well as between the two
continents
5
1. A SHORT-CUT METHOD FOR
ESTIMATING GDP PER CAPITA
• In Topic 1, we saw how GDP per capita has been
reconstructed in GB on an annual basis back to 1270,
using a wealth of information gleaned from archives
(Broadberry et al., 2015)
• A similar approach has also been possible in the case
of Holland (van Zanden and van Leeuwen, 2013)
• For Italy and Spain, where less information is
currently readily accessible, researchers have
developed a short-cut method that requires data
only on: population; wages & prices; urbanisation
rate
6
Agricultural output
• Agricultural output is estimated from the
demand side
• Allen (2000) begins with identity:
QA = r c N
Where:
QA = real agricultural output,
r = ratio of production to consumption
c = consumption per head
N = population
7
Agricultural output
• Agricultural consumption per head is a function of its
own price in real terms (PA/P), real price of nonagricultural goods & services (PNA/P) and real income
per head (y):
ln c = α0 + α1 ln (PA/P) + α2 ln (PNA/P) + β ln y
• Constraint: α1 + α2 + β = 0
• For Italy, Malanima (2011) suggests on basis of
evidence from developing countries that β = 0.4 and
α2 = 0.1, which constrains α1 to be -0.5
8
Agricultural output
• Corroborating evidence is usually available for
individual countries (e.g. Malanima confirms his
elasticities with evidence from Italy, 1861-1910)
• In other cases, supply side evidence of changing
grain yields and the cultivated land area is available
(e.g. Broadberry, Custodis & Gupta, 2015, on India)
• For early modern period, also reasonable to assume
zero net trade in grain (high weight to value ratio in
an era of very high transport costs) so agricultural
consumption is equal to production (r = 1)
9
Non-agricultural output
• Share of population living in towns (urbanisation
rate) is used as a measure of size of non-agricultural
sector
qa
q
1 qna / q 
• Output per head (q) is derived from agricultural
output per head (qa) using the urbanisation rate as a
measure of non-agricultural share of output per
head (qna/q)
10
Non-agricultural output
• Again, it is possible to incorporate additional
information for individual countries
• E.g., Álvarez-Nogal and Prados de la Escosura
(2013) have to take account of “agro-towns”
needed to provide security for rural workers
during reconquest era
11
2. EUROPE’S LITTLE DIVERGENCE
• Data sources for Europe:
– England/GB: Broadberry, Campbell, Klein, Overton
and van Leeuwen (2011; 2015)
– Holland/NL: van Zanden and van Leeuwen (2012)
– Italy: Malanima (2011)
– Spain: Álvarez-Nogal and Prados de la Escosura
(2012)
• Per capita income data produced in national
currencies, then converted to 1990 international
dollars
12
TABLE 1: GDP per capita levels in Europe (1990 international
dollars)
1750
1800
England/
GB
754
759
755
777
1,090
1,055
1,114
1,143
1,123
1,100
1,630
1,563
1,710
2,080
1820
1850
2,133
2,997
1086
1270
1300
1348
1400
1450
1500
1570
1600
1650
1700
Holland/
NL
876
1,245
1,432
1,483
1,783
2,372
2,171
2,403
2,440
2,617
1,752
1,953
2,397
Italy
Spain
1,482
1,376
1,601
1,668
1,403
1,337
1,244
1,271
1,350
957
957
1,030
885
889
889
990
944
820
880
1,403
1,244
910
962
1,376
1,350
1,087
1,144
Sources: Broadberry et al. (2015); van Zanden and van Leeuwen (2012);
Malanima (2011); Alvarez-Nogal and Prados de la Escosura (2013)
13
Europe’s Little Divergence
• Before Black Death in 1348, p.c. incomes substantially
higher in Italy and Spain than in England and Holland
• Reversal of fortunes between North Sea Area and
Mediterranean Europe: by 1800 p.c. incomes
substantially higher in GB and NL than in Italy and
Spain
• First turning point was Black Death: Italy, England and
Holland all experienced substantial increase in p.c.
incomes, as population fell sharply
14
Europe’s Little Divergence
• GB and Holland received permanent boost to
p.c. incomes from this
• Italian p.c. incomes increased at first but fell
back to pre-Black Death level as population
growth returned after 1450
• Spain did not experience any increase in p.c.
income after Black Death
15
Europe’s Little Divergence
• Second turning point around 1500, as new trade
opportunities opened up between Europe and Asia
around southern Africa and between Europe and
Americas across Atlantic
• Around 1500, p.c. incomes c. $1500 in Italy and
Holland
• Little Divergence assured with surge in p.c.
incomes in NSA, led initially by Holland with
Golden Age 1570-1650, then by GB after 1650
16
FIGURE 1: Real GDP per capita in European countries, 1270-1870 (1990
international dollars, log scale)
6,400
3,200
1,600
800
400
1270
1295
1320
1345
1370
1395
1420
1445
1470
1495
1520
1545
1570
1595
1620
1645
1670
1695
1720
1745
1770
1795
1820
1845
1870
200
Italy
Spain
Sources: Broadberry et al. (2015); van Zanden and van Leeuwen (2012);
Malanima (2011); Alvarez-Nogal and Prados de la Escosura (2013)
17
FIGURE 1: Real GDP per capita in European countries, 1270-1870 (1990
international dollars, log scale)
6,400
3,200
1,600
800
400
1270
1295
1320
1345
1370
1395
1420
1445
1470
1495
1520
1545
1570
1595
1620
1645
1670
1695
1720
1745
1770
1795
1820
1845
1870
200
GB
NL
Sources: Broadberry et al. (2015); van Zanden and van Leeuwen (2012);
Malanima (2011); Alvarez-Nogal and Prados de la Escosura (2013)
18
FIGURE 1: Real GDP per capita in European countries, 1270-1870 (1990
international dollars, log scale)
6,400
3,200
1,600
800
400
1270
1295
1320
1345
1370
1395
1420
1445
1470
1495
1520
1545
1570
1595
1620
1645
1670
1695
1720
1745
1770
1795
1820
1845
1870
200
GB
NL
Italy
Spain
Sources: Broadberry et al. (2015); van Zanden and van Leeuwen (2012);
Malanima (2011); Alvarez-Nogal and Prados de la Escosura (2013)
19
Annual data
• FIGURE 1: growth booms alternated with growth
reversals
• For Italy and Spain, no long run growth of p.c. GDP
• For GB and Holland, do get positive trend, as a
result of dampening of growth reversals
• Europe’s Little Divergence (and also Great
Divergence) not so much about getting growth
going as dampening growth reversals
20
3. ASIA’S LITTLE DIVERGENCE
• Data sources for Asia:
– Japan: Bassino, Broadberry, Fukao, Gupta and
Takashima (2014)
– China: Broadberry, Guan and Li (2014)
– India: Broadberry, Custodis and Gupta (2015)
21
Chinese data sources
• Official historical literature, compiled at the
time to assist imperial court
• Private historical works by distinguished
historians of their era
• Local Gazetteers
• Pioneering work of Chinese quantitative
economic historians
22
Output by sector
• GDP reconstructed from output side:
agriculture, industry and services
• Although some series are available annually,
grain yields (crucial for annual cycle) are not,
so estimates presented at 10-year frequency
• Agriculture: results driven by cultivated land
area per capita
• FIGURE 2: Cultivated area grew over time, but
failed to keep pace with population growth
23
FIGURE 2: Cultivated land per capita of the Northern Song,
Ming and Qing dynasties (mu, log scale)
24
Agricultural output
• FIGURE 3: Output of cash crops increased in
line with population
• But grain output failed to keep pace with
population growth
• So agricultural output per head declined
between Northern Song and Qing periods.
25
FIGURE 3: Indices of agricultural output (1840=100)
26
Industrial production
• FIGURE 4: Metals and mining more volatile than other
industries, with burst of rapid growth during mid-Song
period, then stagnation after 1078. Boom driven by iron
(Hartwell)
• Metals and mining remained depressed during Ming
dynasty (less iron for warfare and less copper for coinage
in state sector), before picking up again during Qing
dynasty (rapid growth phase in private sector during
C18th)
• Food processing, other manufacturing and building all
grew rapidly, but with setbacks across dynastic changes.
27
FIGURE 4: Indices of industrial output (1840=100)
28
Service sector shares
• Service sector data collected primarily on
value rather than volume basis
• FIGURE 5: shares of the main service subsectors
– Most significant long term trend was decline in
share of government (tax revenue stable as
population increased)
– This was offset by growing share of commerce and
housing
– Share of finance remained stable
29
FIGURE 5: Subsectoral shares of service sector output
30
REAL GDP PER CAPITA
• FIGURE 6: Sectoral outputs are aggregated into
GDP and divided by population to produce real
GDP per capita
• Northern Song dynasty was peak level of Chinese
economic development
• Consistent with traditional views of Hartwell,
Elvin, Wittfogel, Needham
• But contrary to California School (good Chinese
performance until C19th)
31
FIGURE 6: Real GDP per capita of the Northern Song, Ming and
Qing dynasties (1990 international dollars, log scale)
32
Explaining Chinese decline
• Agriculture accounted for 65-75% of GDP
• Given decline of cultivated land per capita and
failure of grain yields to rise sufficiently to
offset this, decline in living standards
inevitable
• Huang called this a process of involution
33
TABLE 2: GDP per capita levels in Asia (1990 international dollars)
725
900
980
1020
1050
1086
1120
1150
1280
1300
1400
1450
1500
1570
1600
1650
1700
1750
1800
1850
Japan
551
476
China
India
1,247
1,518
1,458
1,204
1,063
508
552
552
605
619
597
622
703
777
960
983
1,127
968
977
841
685
597
594
682
638
622
573
569
556
Sources: Bassino et al. (2014); Broadberry et al. (2014); Broadberry et al.
(2014)
34
Asian Little Divergence
• China was Asia’s p.c. GDP leader at start of 2nd
millennium, but then on a downward trajectory from
high-point during Northern Song Dynasty
• Japan had very low levels of p.c. GDP at start of 2nd
millennium, but then experienced episodic growth
phases without major growth reversals
• Japan followed similar path to GB, but at slower rate of
growth and starting from lower level
35
Asia’s Little Divergence
• India shared in Chinese pattern of declining p.c.
GDP from 1600, at height of Mughal Empire
under Akbar
• Japan overtook China and India during C18th
36
Regional variation
• But China is a large economy. Perhaps Yangzi
Delta was on a par with Japan until C19th?
• Li and van Zanden find per capita GDP in
Yangzi Delta 53.8% of level in NL in 1820s
• This suggests p.c. GDP of c. $1,000 for Yangzi
Delta (in 1990 international dollars), above
Japanese level
37
4. GREAT DIVERGENCE
• Table 3 puts together Europe and Asia to focus
on Great Divergence
38
TABLE 3: GDP per capita levels in Europe and Asia (1990
international dollars)
England/
GB
725
900
980
1020
1050
1086
1120
1150
1280
1300
1348
1400
1450
1500
1570
1600
1650
1700
1750
1800
1850
Holland/
NL
Italy
Spain
Japan
China
India
551
476
1,247
1,518
1,458
1,204
1,063
754
679
755
777
1,090
1,055
1,114
1,143
1,123
1,110
1,563
1,710
2,080
2,997
876
1,245
1,432
1,483
1,783
2,372
2,171
2,403
2,440
1,752
2,397
1,482
1,376
1,601
1,668
1,403
1,337
1,244
1,271
1,350
1,403
1,244
1,350
957
957
1,030
885
889
889
990
944
820
880
910
962
1,144
508
552
552
605
619
597
622
703
777
960
983
1,127
968
977
841
685
597
594
682
638
622
573
569
556
39
Great Divergence
• China richer than England in 1086, but England
was a relatively poor part of Europe in C11th
• Comparing China with richest part of medieval
Europe, likely that Italy already ahead by 1300
• But smaller region of China such as Yangzi Delta
may still have been on a par with Italy in 1500
40
Great Divergence
• But even allowing for regional variation, Great
Divergence clearly underway long before 1800
• Holland well above China by 1600, even allowing
for regional variation
• But Holland is small
• GB also clearly ahead of China by 1700, even
allowing for regional variation
• Pomeranz (2011) now accepts this
41
Little and Great Divergences
• Asian Little Divergence parallels European Little
Divergence
– In Europe, GB and Holland overtake Spain and Portugal by
having growth spurts without growth reversals
– In Asia, Japan overtakes China and India
– Great Divergence
– Japan started from lower level than GB, grew more slowly,
and achieved transition to MEG much later
– Hence the 2 continents diverged as reversals of fortune
occurred within each continent
42
5. THE TRANSITION TO MODERN
ECONOMIC GROWTH
• The timing of the Great Divergence as measured
using historical national accounts fits well with the
start of what Kuznets called “modern economic
growth”
• Kuznets was keen to distinguish MEG from premodern growth, which he believed was Malthusian
• For Kuznets, temporary gains in living standards
could be achieved when population declined, as after
the Black Death, for example
43
Transition to modern economic
growth
• One of the conditions for MEG suggested by Kuznets
was therefore that there should be sustained growth
of population as well as output per head
• The new historical national accounting evidence
suggests that on this definition, MEG began in GB
around 1700
• FIGURE 4: Earlier p.c. GDP growth episodes in 2nd half
of C14th after the Black Death and in 2nd half of 17th
after the Civil War were accompanied by declining
population
44
FIGURE 4: Real GDP, population, and real GDP per head,
England 1270-1700 and Great Britain 1700-1870 (averages per
decade, log scale, 1700 = 100)
1,280
GDP
GDP per head
population
640
320
160
80
40
20
1270
1320
1370
1420
1470
1520
1570
1620
1670
1720
1770
1820
1870
45
Transition to modern economic
growth
• After 1400, p.c. income growth petered out
and p.c. incomes remained on a plateau
• After 1700, population growth returned and
GDP p.c. growth remained positive, rather
than the level of p.c. income remaining on a
plateau
• This was the first case of modern economic
growth
46
TOPIC 4: ACCOUNTING FOR THE
GREAT DIVERGENCE
•
•
•
•
•
•
B. EXPLAINING THE GREAT DIVERGENCE
1. Shocks and Structural Differences
2. Sectoral Diversification
3. Institutions and the Role of the State
4. The Quantity and Quality of Labour
5. Interaction between Shocks and Structural
Factors
47
B. EXPLAINING ECONOMIC
GROWTH
1. SHOCKS AND STRUCTURAL DIFFERENCES
• Can now “account” for Great Divergence, in
sense of measurement, providing quantitative
picture of when and where it occurred
• Full “account” requires explanatory narrative
• Divergences can be seen as arising from
differential impact of shocks hitting
economies with different structural
characteristics
48
Key shocks
• Black Death began in western China and
spread to Europe, reaching England in 1348
• New trade routes c. 1500 between Europe
and Asia around south of Africa and between
Europe and Americas
49
Underlying factors
• These shocks had asymmetric effects on
different economies because of 3 important
underlying factors:
– Sectoral diversification: agriculture, industry &
services
– Institutions: fiscal state & executive constraints
– Quantity & quality of labour: “industriousness”
and human capital
50
2. SECTORAL DIVERSIFICATION
• Pre-modern growth typically based on TOT
boom in a staple product, followed by growth
reversal when TOT returned to equilibrium
• Diversification helped to dampen growth
reversals
• Within agriculture, NSA more diversified than
rest of Europe or Asia: mixed farming
• GB & NL also saw early shift of labour from
agriculture to industry & services
51
TABLE 1: Share of agriculture in the European labour force (%)
1300
1400
1500
1600
1700
1750
1800
England
-57.2
58.1
-38.9
36.8
31.7
Netherlands
--56.8
48.7
41.6
42.1
40.7
Italy
63.4
60.9
62.3
60.4
58.8
58.9
57.8
France
-71.4
73.0
67.8
63.2
61.1
59.2
Poland
-76.4
75.3
67.4
63.2
59.3
56.2
Sources: Broadberry et al. (2015); Allen (2000).
52
3. INSTITUTIONS AND THE ROLE OF
THE STATE
• Epstein/O’Brien: Medieval state power
fragmented, with “freedoms” granted to interest
groups
• Needed centralisation of state power for market
integration and expansion of state capacity for
provision of public goods
• Link to sectoral diversification: access to food
guaranteed for those who left the land through
integrated markets and system of poor relief
(Solar)
53
AJR: need executive constraints
• In GB & Holland, constraints on rulers
sufficient to ensure rulers unable to act
arbitrarily in dealings with merchants
• In Spain & Portugal, merchants unable to stop
powerful rulers intervening in business
matters
• Dincecco: needed regime that was both
fiscally centralised and politically limited
54
Institutions and Europe’s Little
Divergence
• Early modern GB & Holland dominated Spain
& Portugal in terms of:
– (1) ability to raise taxes that allowed expansion of
state capacity (Table 2)
– (2) control exercised by mercantile interests over
state through parliament (Table 3)
55
TABLE 2: Per capita fiscal revenues, 1500/09 to 1780/89 (grams of
silver)
Dutch Republic
England
France
Spain
Venice
Austria
Russia
Prussia
Ottoman Empire
Poland
China
India
1500/09 1550/59 1600/09 1650/59 1700/09 1750/59 1780/89
76.2
114.0
210.6
189.4
228.2
5.5
8.9
15.2
38.7
91.9
109.1
172.3
7.2
10.9
18.1
56.5
43.5
48.7
77.6
12.9
19.1
62.6
57.3
28.6
46.2
59.0
27.5
29.6
37.5
42.5
46.3
36.2
42.3
10.6
15.6
23.0
43.0
6.3
14.9
26.7
2.4
9.0
24.6
53.2
35.0
5.6
5.8
7.4
8.0
9.1
7.1
1.5
0.9
1.6
5.0
1.2
0.8
11.2
7.0
7.2
4.2
3.4
11.1
17.4
21.9
17.6
5.5
Sources: Karaman and Pamuk (2010); Brandt et al. (2013); Broadberry et al. (2015)
56
TABLE 3: Activity index of European parliaments, 12th to 18th
centuries (calendar years per century in which parliament met)
12th
13th
14th
15th
16th
17th
18th
North Sea Area
England
Scotland
Netherlands
0
0
0
6
0
0
78
10
0
67
61
20
59
96
80
73
59
100
100
93
100
Mediterranean
Castile and Leon
Catalonia
Aragon
Valencia
Navarre
Portugal
2
3
2
0
2
0
30
29
25
7
7
9
59
41
38
28
17
27
52
61
41
29
33
47
66
16
19
12
62
12
48
14
11
4
30
14
7
4
1
0
20
0
Source: van Zanden et al. (2012).
57
Institutions and the role of the
state in Asia
• Asian states sometimes portrayed as holding
back development because more centralised
and autocratic than European states
• But easier to see problems of state weakness
58
Institutions
• India: declining revenue per capita with
collapse of Mughal Empire (Roy)
• China: per capita fiscal revenue on downward
trajectory since Northern Song peak (Brandt,
Ma & Rawski)
• Japan: per capita tax revenue and provision of
local public goods higher in Tokugawa Japan
than in Qing China (Sng & Moriguchi)
59
4. THE QUANTITY AND QUALITY OF
LABOUR
• Quantity of labour: “Industrious Revolution”
increased supply of labour effort
• Basic idea: people worked harder to obtain new
goods made available by long distance trade
and industrial innovation
• English data consistent with this pattern
60
TABLE 4: Annual days worked per person in England
Period
1433
1536
1560-1599
1578
1584
1598
1600-1649
1650-1699
1685
1700-1732
1733-1736
1760
1771
1800
1830
1867-1869
1870
Blanchard/Allen
and Weisdorf
165
180
Clark and
van der Werf
Voth
257
260
210
259
266
276
312
286
295
258
280
333
336
293-311
318
Sources: Allen and Weisdorf (2011); Clark and van der Werf (1998); Voth (2001).
61
Industrious revolution
• De Vries finds similar pattern in NL, but slower
elimination of saints’ days in Catholic Europe so
average days worked lower
• Term “industrious revolution” often associated with de
Vries writing on Europe
• But phrase was coined by Hayami writing on Tokugawa
Japan
• Highlights similarities as well as differences between
Japan and GB
62
Labour quality: human capital
• Northwest Europe had different demographic
regime from rest of world, characterised by
later marriage and hence limited fertility
• This facilitated human capital accumulation:
– labour market opportunities for females
– fewer children associated with more investment in
human capital
63
TABLE 5: Female age of first marriage
A. Northwest Europe
16th century
mean
n
England
24.8
3
Netherlands
-Italy
19.5
8
Spain
19.3
2
17th century
mean
n
25.7 66
25.2
2
21.6 31
20.3
2
18th century
mean
n
25.4 110
27.1 11
22.7 72
23.7 26
19th century
mean
n
24.4 48
26.4 12
24.0 94
23.9
4
B. Asia
Japan
China
India
Period
1680-1860
1550-1931
1911-1931
Range
18.8 to 24.6
17.2 to 20.7
12.9 to 13.3
Mean
22.1
18.6
13.0
Sources: Dennison and Ogilvie (2013); Mosk (1980); Lee and Wang (1999);
Bhat and Halli (1999).
64
Marriage patterns and fertility
• Relatively high age of first marriage for females in NSA
by C16th
• Upward trend in Mediterranean Europe but sizeable
gap with NSA before C19th
• Age of marriage in China and India much lower than in
NW Europe
• Japan an intermediate case, with average age 22.1,
compared with 25.4 in England, but 18.6 in China and
13.0 in India
• Highlights similarities between Japan and GB
65
5. INTERACTION BETWEEN SHOCKS
AND STRUCTURAL FACTORS
A. Effects of the Black Death
• Catching-up process of NSA with
Mediterranean Europe and China started with
Black Death of mid-C14th
• Same shock had different effects in different
parts of Europe through interaction with
structural features of the different economies
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Black Death
• Italy: classic Malthusian response to mortality crisis.
Rise in incomes for survivors, followed by decline in
incomes as population recovered
• GB, NL: per capita income gains sustained:
– Diversified structure
– State strong enough to ensure integrated market
– Industrious revolution (more work days per year)
plus high age of marriage of females (more human
capital)
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Black Death
• Spain: no rise in per capita incomes
• Land-abundant frontier economy during
Reconquest
• Population decline further isolated an already
scarce population, reducing specialisation and
division of labour
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Black Death
• Asia: no signs of a positive Black Death effect:
– Japan: remained isolated so disease never took
root
– China: population declined sharply in C14th, but
Mongol interlude undermined institutional
framework that had underpinned Northern Song
boom
– India: no record of mortality crisis
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B. Effects of the new trade routes
• Opening of new trade routes from Europe to
Asia and the Americas c. 1500 also had
asymmetric effects through interaction with
structural features of the different economies
• Might have expected Spain and Portugal to gain
most from these changes, since they were the
pioneers and both had Atlantic as well as
Mediterranean coasts
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New trade routes
• But early modern GB and Holland dominated
Spain and Portugal in terms of institutional
structures:
– ability of states to raise taxes to finance the
expansion of state capacity
– control exercised by mercantile interests over the
state through parliament
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New trade routes
• China adopted restrictive closed door policy
towards long distance trade after “voyages to
the western oceans” (1405-1433)
• Following an initial period of openness to
relations with European traders, Tokugawa
Japan adopted policy of seclusion from 1630s
• So any Japanese advantage from earlier
Chinese turn inwards was short lived
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New trade routes
• Extent to which trade really was closed off by
these policies remains unclear
• But striking contrast with outward orientation
of European states which sponsored voyages
of discovery from C15th
• With early modern China and Japan turned
inwards, India was the Asian country most
open to trade
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New trade routes
• However, this did not lead to Indian prosperity
because of low levels of state capacity
• Low state capacity had consequences for
enforcement of property rights e.g. major
problems of piracy in Indian Ocean
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CONCLUSION
• HNA has now made a substantial contribution to
understanding the Great Divergence, but there is
more to be done
• Historical national accounts needed for more
countries, reaching further back in time
• More regional disaggregation needed within large
countries
• More comparative data needed on explanatory
variables
• Need to pay more attention to Japan
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