Accounting for the Reversal of Fortune: Spain and Britain, 1501-1800

Leandro Prados de la Escosura

No 21503, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Recent research confirms that per capita income in early modern Spain improved only marginally overall, while also revealing sustained growth through much of the sixteenth and eighteenth centuries, alongside a continued decline from the late sixteenth to the mid-seventeenth centuries. These phases shaped Spain’s relative position within Western Europe and contributed to the Reversal of Fortune. This paper finds that labour productivity, proxied by output per working-age population, improved during the first three-quarters of the sixteenth century, then declined until the mid-seventeenth century, and that the subsequent recovery never reached the levels of the 1570s. What caused these episodes of growth and decline: changes in resource endowments or in the efficiency of their use? Phases of labour productivity growth were often driven by factor intensity, but efficiency losses underpinned periods of stagnation or decline, which contradicts the stylised view that factor intensity is the main driver of labour productivity in a pre-industrial economy. Compared with Great Britain, Spain showed an inverse, divergent pattern, moving from similar levels to less than half of Britain's by 1800. Efficiency was the main driver of the widening gap. Ingenuity appears, therefore, to be the driving force behind the Reversal of Fortune.

Keywords: Spain; Britain (search for similar items in EconPapers)
JEL-codes: E24 J24 N13 O47 (search for similar items in EconPapers)
Date: 2026-05
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