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The three horsemen of riches: Plague, war and urbanization in early modern Europe

Nico Voigtländer () and Hans-Joachim Voth

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: 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.

Keywords: Malthus to Solow; Long-run Growth; Great Divergence; Epidemics; Demographic Regime (search for similar items in EconPapers)
JEL-codes: E27 N13 N33 O14 O41 (search for similar items in EconPapers)
Date: 2008-08, Revised 2012-06
New Economics Papers: this item is included in nep-dev, nep-his, nep-mac and nep-ure
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Journal Article: The Three Horsemen of Riches: Plague, War, and Urbanization in Early Modern Europe (2013) Downloads
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