Category Archives: 1870-1914

Girls lost the power

The explanatory power to explain the historical Western European Litte Divergence, that is.

The paper:

Historical gender discrimination does not explain comparative Western European development: evidence from Portugal, 1300-1900

by Jaime Reis, Lisbeth Rodrigues and mysef, is now forthcoming at Explorations in Economic History. We show that women’s relative social and economic position was no worse in Portugal than in Northwestern European countries, hence the cause of Portugal’s development failure lies elsewhere. I’ve previously discussed this paper here and here, and we wrote this voxeu column about it as well.

The Little Divergence was the economic and political divergence that characterized the relative decline of southern Europe, which was clear by 1800. Spain and Portugal, previously some of the Europe’s richest regions, were in clear decline for a while, and at the same time Northwestern Europe was was growing and would industrialize fast in the first half of the nineteenth century.

Jan Luiten van Zanden and co-authors have for years argued that there was an “horizontal Hajnal line”: the south of Europe, they argue, had social norms at the family level which did not lead to a strong European Marriage Pattern like Northwestern Europe did, where it encouraged human capital accumulation and having other benefits. This is known as the Girl Power hypothesis, after a well-known 2010 EHR paper by Tine de Moor and van Zanden. Him and co-authors have continued to argue along these lines in recent years, including in a major book. In a recent article, called “Two Worlds of Female Labor”, Sandra de Pleijt and Jan Luiten van Zanden argued that “In the south of Europe women earned about 50 per cent of the wage of unskilled male labourers, a ratio that seems to have been fixed by custom”, while this ratio was higher in Northern Europe.

But in fact it wasn’t. Tracy Dennison and Sheilagh Ogilvie in 2014 ahd already pointed out that the regions of Europe where the EMP measured by age of marriage was strongest did not in fact growh more, and Drelichman and Agudo in a recent paper about Toldeo (Spain) showed that gender wage gaps there in fact were comparable to those of northwestern Europe. Our evidence for Portugal confirms this as well.

Sorry, Jan Luiten & co-authors, but the Dutch were not culturally special, as you think. They were just western europeans like all the others. This is of course not to deny that the EMP and relative equality of women – as compared with other parts of the world – in Europe was not an advantage: it must have been. But this must be endogenous to other factors, and cannot explain first-order differences in economic sucess within Western Europe: The Little Divergence. In Western Europe, the main way women were discriminated against concerned the range of professions that they were allowed to take. The same situation also occurred in Northwestern Europe, including the North Sea area, and there is no evidence that it did so to a lower degree than elsewhere in Western Europe.

If family-level cultural factors or social norms do not explain the Little Divergence, then something else needs to. As readers of this blog may know, to me the true explanation resides in political institutions, which worsened in Spain and Portugal over the early modern period (at different times), but in both cases due to a resource curse problem.

Sources: see our text.

Gender wage gaps for unskilled workers (f/m), 1271-1900:

Sources: see our text.

A Short History of the Bank of England: Dan Snow’s History Hit podcast

You can hear my participation in Dan Snow’s History Hit podcast here. Thanks to Dan for the invitation.

For anyone interested in knowing more, this is the paper (joint with Patrick O’Brien) recently published in the EHR and motivated this participation, available in open access here. This was the main paper underlying our discussion, though in the podcast Dan and I also discuss monetary politcy and the role of central banks in more recent times.

p.s. I heard the recording and take the opportunity to mention that around minute 17.43, when I say “sixteenth century”, I obviously meant to say “eighteenth century”. And just before the break when I said “lending”, I meant “borrowing”: though this should be clear from the context. That was my fault of course: perils of live recordings!

Pictures of the “Economic Consequences of the Age of Liberal Revolutions, 1810-1848” conference

We had a great conference last week (despite a lamentable boycotting attempt). At least I enjoyed a lot learning from and discussing with colleagues, and I believe others did too.

Given Deirdre McCloskey’s visit to Lisbon for this conference, she and I also debated in the day prior to the conference at an event organized by “Instituto +Liberdade”. That too was a fun event, and it was interesting to see how much of a statist I am – at least by comparison with Deirdre! (who has been my friend for 15 years, and from whom I have learned so much). The discussion illustrated what I already knew: that Deirde is a good old-fashioned classical liberal while if I must quickly summarize my political views, I’d say I lie about half way between classical liberalism and social democracy (with the distance to each depending on the topics). There will be a video of the debate, which I’ll post here when made available by the organizers.

Here are the photos from both events, with a focus on the academic conference:

Conference dinner – most participants ate grilled sardines!
Leandro Prados de la Escosura and António Castro Henriques both could not attend in person last minute due to personal reasons, so presented via Zoom instead
Maria Stella Chiaruttini presenting “Fateful and forgotten: Liberal revolutions and financial development in nineteenth-century Italy”
Guillaume Daudin presenting “The effects of the revolution and warfare on the French economy, 1789-1815” (joint with Loic Charles and Silvia Marzagalli)
Nuno Palma presenting “Anatomy of a premodern state” (joint work with L. Costa and A. Henriques)
Roundtable with Luciano Amaral (Nova SBE), Maria Stella Chiaruttini (University of Vienna), Guillaume Daudin (Université Paris Dauphine), Deirdre McCloskey (University of Illinois at Chicago)
Renato Pistola presenting “From good intentions to institutional failure: Portugal, 1834-1891” (joint with N. Palma)
Arnaud Deseau presenting “The most important event? The long-run impact of the dissolution of the French monasteries”
Arnaud Deseau presenting “The most important event? The long-run impact of the dissolution of the French monasteries”
José Luís Barbosa presenting “The liberal reforms and the Portuguese municipality: the case of Coimbra (1790-1850)”
José Luís Barbosa presenting “The liberal reforms and the Portuguese municipality: the case of Coimbra (1790-1850)”
Guilherme Lambais presenting “Living standards in Imperial Brazil” (joint with N. Palma)
Deirdre McCloskey’s closing address, “Liberalism Caused the Great Enrichment”
Deirdre McCloskey’s closing address, “Liberalism Caused the Great Enrichment”
Another picture from the conference dinner
On the day prior to the conference, Deirdre McCloskey and Nuno Palma debated at “Instituto +Liberdade”
Debate of the day prior to the conference
Debate organized by “Instituto +Liberdade” the day prior to the conference, taking place at “42 Lisboa”. Thanks to Pedro Santa Clara for introducing Deirdre McCloskey and me to the audience!

Interview to Atlantico

Here’s the transcript, in English, of a recent interview I gave to the French media Atlantico, concerning this paper (joint work with Jaime Reis and Lisbeth Rodrigues).

The interview concerns the causes of the Little and Great Divergences, with particular attention to the “Girl Power” hypothesis. (A recent VoxEU column is also available in this link.)

My French is not great so I responded in English. I copy below the responses that I sent them.

In your study “Historical gender discrimination does not explain comparative Western European development”, you mention the fact that the slow economic growth of south-western Europe since the Middle Ages is often attributed to the lesser influence of women compared to northern countries such as England or the Netherlands. Where do we find such statements? Why is this explanation so common?

Around 1900, Global Inequality between countries was at an all-time high. Most of Europe and its offshoots (such and the USA and Australia) had been growing systematically for a long time, while much of the rest of the world had not, including the largest regions by population like China and India.

In the prior centuries, from the late Middle Ages until the early Twentieth Century, the world had witnessed two important economic divergences. One was the Great Divergence: how the richer parts of Europe (e.g. England) became much richer than the richer parts of the rest of the world (e.g. the Yangtze Delta). And even the poorer parts of Europe became considerably richer than the poorer parts of the rest of the world.

The other was the Little Divergence: how the richer parts of Europe (Northwestern Europe) became much richer than the poorest parts of Europe (Southern and Eastern Europe).

There are different explanations in the literature for why these divergences happened. One explanation is cultural, and states that there is a particular “European” way of thinking and acting, and one manifestation of this was comparatively high female agency and an original European Marriage Pattern (EMP), which can be characterized by later female first marriage ages than other parts of the world, a relatively high celibacy rate, and marriages that were monogamous, exogamous, based on consensus and neo-locality. Regardless of the ultimate cause of these cultural behaviors — I personally believe that political institutions are jointly determined with and can shape culture over time and not just the opposite – it does seem undeniable that there was particular, individualist, comparatively liberal way of thinking and acting in Europe, coming from the Middle Ages already – an European culture, if you will.

This European culture was reflected in comparatively high female agency, by contrast with most other parts of the world. It was, in particular, Western European: the first to propose the EMP was a Hungarian scholar, John Hajnal, who in 1965 proposed what is now known as the Hajnal line: an imaginary line running between Saint Petersburg and Trieste, to the West of which the EMP operated. A good book to understand the deep origins of a Western European mentality and political culture is in my view Siedentop’s Inventing the individual: The Origins of Western Liberalism.

Concerning the Little Divergence, one well-known and increasingly popular explanation for it, associated in particular with Jan Luiten van Zanden and his multiple co-authors, is essentially that Southwestern/Mediterranean Europe was not really part of Western Europe in this EMP sense. According to this explanation, the lower female agency which characterized regions such as Spain, Portugal, or even south France and south Italy explain their comparative underdevelopment. Women, this literature claims, married early, had high fertility (with consequences for low human capital accumulation, of themselves and their children), did not participate in the labor market as much as elsewhere, and faced comparatively high gender wage gaps, which were supposedly determined by social norms, not market forces. A related literature also exists which splits Europe in religious terms, for instance Joseph Henrich argues that the EMP was stronger in Protestant regions of Europe.

What we’ve done in our present paper was show this was not, empirically, the case. Culturally, something we can call “Western Europe” did exist, with variations within, but these differences could not be first-order to explain the Little Divergence. Dennison and Ogilvie had already shown in fact that the parts of Europe where the EMP were historically stronger were not the most successful in a development sense.

But let me be clear. The evidence does not support the view that the Southern or Catholic part of Western Europe discriminated against women more, but it does largely support Hajnal’s original point that there is such a thing as a “Western European” culture reflected in high female agency and the EMP, among other aspects. In the long run, this may have been a key advantage of Western Europe relative to other parts of the world. In this sense my disagreement with Jan Luiten van Zanden – a scholar for whom I have the utmost respect – is only partial.

One of your conclusions is that economic development fosters the improvement of women rights and not the over way round. Is that the explanation for usual misreading of the situation?

The usual explanation – most associated with Jan Luiten van Zanden and his co-authors –  is that the high female agency was a cause of development: the regions of Europe that had it grew more. We are pointing out that, within Western Europe, there were not important historical differences in female agency. Consequently the differences in rights that emerged – mostly only visible only by the early Twentieth century and for the most part gone by the late 1970s – were more in fact a consequence of differential development.

You’ve compared the discrimination against woman in several countries, including, Portugal, England, Netherlands, etc. You’ve found no significant differences in the discrimination towards women. How do you measure that?

We rely on a new dataset of thousands of observations from archival sources covering six centuries, and we complement it with a qualitative discussion of comparative social norms. Compared with Northwestern Europe, women in Portugal faced similar gender wage gaps, married at similar ages, and did not face more restrictions to labor market participation.

What are the influences of the European Marriage Pattern (EMP) according to your findings? 

Please see above

You write that “an explanation for the growing income inequality between European countries during the early modern period, especially from the mid-seventeenth century onward – the ‘Little Divergence’ – must be found elsewhere” than gender discrimination. Do you have leads on what might be the explicative factor?

As I mentioned, by the late Middle Ages Western Europe was characterized by an individualist culture that was jointly determined with representative and even proto-democratic political institutions. Parliaments, the judiciary, and the independent power of the Church led to checks and balances to executive power in a way that was particularly Western European and absent from all other parts of the world. Scholars such as Acemoglu and Robinson believe that the Crowns of Spain and Portugal were absolutist already around 1500, but the evidence does not in fact support this claim. Instead, the evidence suggests that Iberia [later] suffered from a resource curse. Note that the second country to have an Industrial Revolution was [Catholic] Belgium, and France followed shortly afterwards. At the same time, Italy and Germany were able to industrialize quickly once they unified politically, in the second half of the nineteenth century.

Measuring the Great Divergence: A study of global standards of living, 1500-1950

I’m delighted to announce that I have been awarded a ESRC New Investigators grant for the project: “Measuring the Great Divergence: A study of global standards of living, 1500-1950”. A call for a postdoc will open soon. In this thread I briefly give details about the project. Stay to end for some juice about Portugal’s funding agency, FCT, which had twice rejected a similar proposal of mine previously (and for less money, €250K instead of the £300K that I was now awarded).

We will use archives in Portugal and its former colonial sites to collect five centuries of real wages and welfare ratios. We will focus on locations such as Luanda in Angola, the Mozambique island, Goa in India, and Macao. We will know their comparative development and inequality levels over time.

Our data will be the earliest quantitative welfare comparative information for several regions in Africa, for example. Hence the project will open new avenues for understanding the causes and timing of the ascendency of Europe.

Some scholars argue that slavery and colonialism were what made Europe rich – and kept Africa and other regions of the world poor. We will, for example, be able to see the evolution of the welfare levels in Africa before (and during) any large-scale European presence and demand for slaves. Portugal’s sources go two centuries further back than any others, and cover regions such as Angola from which a disproportionate amount of slaves were taken.

We will produce a set of outputs for academically interested stakeholders and the interested general public. These will include a book to be published by a major publisher and three articles for international peer-reviewed academic journals, plus dissemination events, etc.

Now a personal anecdote about my attempts at getting this funded. This was my third attempt. I tried twice before with a similar project via FCT, Portugal’s research funding agency. It was rejected once by a History panel, and once by an Economics one. It got funded at my first attempt with ESRC.

The comments provided by FCT were factually incorrect, and pathetically bad from a scientific standpoint.
– claims made in direct contradiction to the project’s abstract
– claimed I was “too junior” to be the PI (no rules placed any age constraint, and my CV is top compared with any full professor in Portugal; so this is an example of Portugal’s gerontocracy, and probably illegal).

The History panel was in fact mainly composed of archeologists (this is public information) and funded instead of mine, projects such as (again this is public information which can be found online):

A aldeia histórica de Idanha-a-Velha: cidade, território e população na antiguidade (séc. I a.C. – XII d.C.) – The historical village of Idanha-a-Velha: city, territory and population in ancient times (first century BC. – twelfth century AC)”

“O Percurso Cromático do Azulejo Português – The Chromatic Journey of the Portuguese Azulejo”

Pensa em grande sobre as pequenas vilas de fronteira: Alto Alentejo e Alta Extremadura leonesa (séculos XIII – XVI) – Think big on small frontier towns: Alto Alentejo and Alta Extremadura leonesa (13th – 16th centuries)”

Na espessura das paredes e na profundidade do solo – In the width of the walls, in the depth of the soil”

Undeterred, I tried FCT again the following year. To avoid the History panel, I tried Economics, and got these comments:
– contributions the proposal not clear
– only one study country (Mozambique) fits into East Africa (!!)
– The PI (…) has insufficient expertise and the team isn’t sufficently international

In fact, I have published several papers on long-run standards of living (see for instance this), and the proposed team was composed of the PI, me (having my main affiliation abroad) and only two other Portuguese scholars with affiliations in Portugal; the latter two were experts in the sources, located in Portugal and its former colonies. All the other 4 proposed team members are nationals of other countries with affiliations in foreign institutions and all were experts in these types of sources.

To be fair, you sometimes get idiotic comments from referees at good journals too. But FCT does this far too consistently. A key source of criticism to FCT concerns not only the bad scientific quality of the comments one gets but also the fact that one does not have a chance to respond. In ESRC, I got 4 referee assessements of my project, and had a chance to respond to clarify any misunderstandings. Two of those 4 classified this project as “outstanding” along all categories and there was really nothing to respond to; while the other two had minor criticisms, and I got a chance to clarify whether these were misunderstandings. This led to much more fairness and transparency of the process. By contrast, FCT hires supposedly “international experts” – but really most are substandard researchers from often terrible universities – perhaps because it pays them badly, so no one better wants to do the work. The result is what it is: they send their assessment, and if you appeal the rejection, it goes to the same people again (and they just double down on the nonsense).

Anyway, the moral of the story is of course: Starting out is hard, but don’t give up! I’m now looking forward to looking deep into the comparative quantiative history of Africa and other regions of the world.

Luanda 1.jpg

Historical gender discrimination does not explain comparative Western European development

Historical gender discrimination does not explain comparative Western European development: This is what we argue in a new paper (joint work with Jaime Reis and Lisbeth Rodrigues). Also available as a CEPR discussion paper.

Here’s the abstract:

Gender discrimination has been pointed out as a determining factor behind the long-run divergence in incomes of Southern vis-à-vis Northwestern Europe. In this paper, we show that there is no evidence that women in Portugal were historically more discriminated against than those of other parts of Western Europe, including England and the Netherlands. We rely on a new dataset of thousands of observations from archival sources which cover six centuries, and we complement it with a qualitative discussion of comparative social norms. Compared with Northwestern Europe, women in Portugal faced similar gender wage gaps, married at similar ages, and did not face more restrictions to labor market participation. Consequently, other factors must be responsible for the Little Divergence of Western European incomes.

Comparative gender wage gap (f/m) for unskilled casual workers

Slavery delayed the industrialization of Brazil

Slavery in Brazil was only abolished in 1888.

In a new paper we consider the relationship between slavery and development in 19th c. Brazil. The paper is forthcoming in Capitalism: A Journal of History and Economics.

We show that despite its centrality, slavery was not essential for the production of cotton or industrialization. Our paper provides a critical comparative perspective to the New History of Capitalism literature that has attracted a lot of attention from both scholars and the media in recent years by arguing that slavery was essential for economic development and industrialization in the USA.

We show that the Brazilian cotton export boom kickstarted by the American Civil War took place both in regions dependent on slave labor and those relying on free workers and was rooted in new seeds and technologies rather than an increase of violence.

We further show that large-scale slavery distorted and constrained industrial development by diminishing the ability of areas of Brazil well-suited for industrial development to leverage their comparative advantage.

We conclude that slavery enriched a small elite, while damaging Brazilian society and economy at large, as indeed was also the case for the U.S. south (e.g. as argued by Gavin Wright).

“Standards of living in Europe’s Global Empires” session in the WEHC, Paris 2022

UPDATE: the date and locations are out – July 29th 2022 PA.137, 09:00 – 12:30,  Centre des colloques – Room 3.09

This session has been accepted to the World Economic History Conference in Paris.

Session title: “Standards of living in Europe’s Global Empires”

Organizer: Nuno Palma (University of Manchester; ICS, Univ. de Lisboa; CEPR)

Please notice this program is still subject to changes. I will update it as new information arrives.

There are 10 papers in total, which means approx. 15 minutes per paper (plus questions at the end of each session) as this will be a double (2 x 90 minutes) session.

Session 1 (90 minutes)

India and Bengal

Pim de Zwart (Wageningen University), When did India’s decline begin? Real wages in western India, c. 1500-1850 (with Hélder Carvalhal, Jan Lucassen and Paulo Teodoro de Matos)

Jan Lucassen (IISH, Amsterdam): Deep monetization and real wage developments: India C13th-19th

Joseph Enguehard (Lyon): Local living standards and development in Bengal, 1890-1930

Africa

Nuno Palma (Univ. Manchester, Univ. Lisboa; CEPR), Living standards in Angola, 1760-1800, with Hélder Carvalhal (University of Manchester)

Session 2 (90 minutes)

Latin America & Southern Europe

Tancredi Buscemi (University of Perugia), Real wages in the Kingdom of Sicily (1540-1830)

Guilherme Lambais (ICS-UL), Welfare and real wages in Bahia (1574-1920), with Nuno Palma (University of Manchester; ICS-UL; CEPR),

Russia

Elena Korchmina (University of South Denmark): Living standards in Russia, 1700-1850, with Viktor Borisov (HSE University, Moscow)

Comparative

Calumet Links (Stellenbosch University), Ecology and Agency: Indigenous responses to Europeans in the Cape Colony and Hudson Bay, with Ann Carlos, Erik Green and Angela Redish

Michael Adelsberger (University of Vienna) and Georg Stoger (Salzburg). Re-evaluating Urban Real Wages and Standards of Living for the Central European Area, ca. 1450-1850

manila-galleons

Monetary Policy in Historical Perspective (16th-19th Centuries)

Monetary Policy in Historical Perspective (16th-19th Centuries)

Friday 15 October 2021

UPDATE: Due to COVID-19, this conference will take place one year after the originally scheduled date.

A subset of these papers will also be presented as a double session (2 x 90 minutes) session in the WEHC 2022 in Paris.

Organisers: Dr Stefano Locatelli (History, UoM), Dr Nuno Palma (Economics, UoM)

This event (which I previously mentioned here) is sponsored by The Manchester School, and is the second part of a two-part event organised in collaboration with the History Department, the Department of Economics and the Centre for Economic Cultures at the University of Manchester. Coffee breaks, a light lunch, and dinner will be provided.

note: unfortunately, due to unforseen circumstances Joel Felix from the University of Reading who was going to present “Credit and money in France between John Law and the Caisse d’escompte: Paris de Montmartel’s bank” can no longer attend the conference. The same is true of André Silva of Nova SBE, Roman Zaoral of Charles University and Alejandra Irigoin of the LSE. The program below has now been adjusted accordingly.

Location: Arthur Lewis Building, room G.020/21, The University of Manchester

In the following day, Saturday 16, 2021, there will be an optional visit to the Quarry Bank Mill & Cottages, followed by lunch (costs not included). You can see photos from a past visit here.

Program

9.00-10.00. Keynote: François Velde (Federal Reserve Bank of Chicago), The Neapolitan banks in the context of early modern public banks

10.00-10.20. Coffee break

10.20-10.40. Nicholas J. Mayhew (Oxford), The medieval roots of the early modern and modern monetary system

10.40-11.00. Malik Çürük (Tilburg University), The Determinants of the Differences in Price Levels Across Europe, 1300-1914 (with Kivanç Karaman and Seçil Yıldırım-Karaman).

11.00-11.20. Nuno Palma (Univ. of Manchester), The Spanish Curse (with Carlos Javier Charotti and J. Santos)

11.20-11.40. Phillip Roessner (Univ. of Manchester), Money, and the Wealth and Ruin of Nations. Monetary Policy, State Capacity and Economic Development in Historical Perspective

11.40-12.00. Coffee break

12.00-12.20. Meng Wu (Univ. of Manchester), Adjustments and Vicissitudes: Indirect Notes Issuance in Republican China, 1915-1936 (with Xin Dong)

12.20-12.40. Felix Ward (University of Rotterdam), The vagaries of the sea: evidence on the real effects of money from maritime disasters in the Spanish Empire (with Adam Brzezinski, Yao Chen and Nuno Palma)

12.40-13.00. Mina Ishizu (LSE), How the West India trade fostered the last resort lending by the Bank of England (with Carolyn Sissoko)

13.00-14.00 Lunch

14.00-14.20. Carolyn Sissoko (University of the West of England), How Post-War Normalization Caused the 1825 Crisis

14.20-14.40. Jan Greitens (Württemberg), Mid-18th Century Monetary Theory and Policy in Prussia: Johann Graumann and Johann Heinrich Gottlob Justi

14.40-15.00. Adam Brzezinski (Oxford), Monetary Capacity (with R. Bonfatti, K. Karaman and Nuno Palma)

15.00-15.20 Coffee break

15.20-15.40. Matthias Morys (University of York), Taming the Global Financial Cycle: Central Banks and the Sterlization of Capital Flows in the First Era of Globalization (1891-1913) (with Eric Monnet and Guillaume Bazot)

15.40-16.00 Alba Roldan Marin (Universidad de Barcelona), Reconsidering Spanish economic history during the gold standard era: the consequences of having a flexible exchange rate

16.00. END OF CONFERENCE, followed by dinner at The Wharf at 19.00.

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What can we learn from two centuries of budget data? (Highlight IV)

This post continues the highlights series. The author is Per F. Andersson, who is a Lecturer at Lund University, and an expert in Comparative Politics, Institutions, and Taxation. He is responsible for the text below, and the amazing dataset he mentions was was put together both by him and by Thomas Brambor.

The data and codebook are available at: https://www.perfandersson.com/data.html

andersson-Cropped-297x341

What can we learn from two centuries of budget data? Introducing the “Financing the State: Government Tax Revenue from 1800 to 2012” dataset – Per F. Andersson

The history of the state is closely linked to the history of taxation. Austrian sociologist Rudolf Goldscheid held that “the budget is the skeleton of the state stripped of all misleading ideologies”, and  Joseph A. Schumpeter went even further, famously stating that “The spirit of a people, its cultural level, its social structure, the deeds its policy may prepare – all this and more is written in its fiscal history, stripped of all phrases. He who knows how to listen to its message here discerns the thunder of world history more clearly than anywhere else ([1918]1991 p. 101).“ If Schumpeter and Goldscheid were right, much can be gained from studying taxation during the last two centuries, an era that saw dramatic changes not only in the extent of taxation but also in economic and political organization.

Given the importance of taxation for understanding politics, state capacity, and economic growth, it is surprising that there is no historical cross-country dataset over government finances. In this post I present an attempt by me and Thomas Brambor to provide this information. The dataset provides information from 31 countries: Argentina, Australia, Austria, Belgium, Bolivia, Brazil, Canada, Chile, Colombia, Denmark, Ecuador, Finland, France, Germany, Ireland, Italy, Japan, Mexico, New Zealand, Norway, Paraguay, Peru, Portugal, Spain, Sweden, Switzerland, the Netherlands, the United Kingdom, the United States, Uruguay, and Venezuela from 1800 (or independence) to 2012. In other words, it includes all South American, North American, and Western European countries with a population of more than one million, plus Australia, New Zealand, Japan, and Mexico.

We make three main contributions. First, we move beyond previous historical studies which focus on Western Europe by including North America, all major countries in South America, and Australia, Mexico, New Zealand and Japan. Second, in contrast to existing modern datasets, usually covering a large number of countries but only for a few decades, our dataset goes back to the early nineteenth century. Third, while previous efforts have concentrated on overall revenue or contrasting direct and indirect taxes, we provide more detailed information allowing for a more comprehensive understanding of the rise of the modern tax state.

This post begins with a short description of how the dataset was put together, and how it differs from previous efforts (for longer discussion see the online codebook available at: https://www.perfandersson.com/data.html). In the second part of the post I demonstrate how the data can be used to explore changes in the size and composition of government revenue during the last two centuries.

Constructing the dataset

The dataset contains information on the public finances of central governments. We focus on tax revenues, defining taxes as compulsory and unrequited levies by the government. The information on tax revenue is presented as a share of the total budget and as a share of total domestic product. We have divided tax revenue from the central state into several categories. First, we are interested in the shares of total revenue coming from direct and indirect taxes. Further, we measure types of direct taxes, namely taxes on property and income. For indirect taxes, we separate excises (taxes on specific goods, such as salt or tobacco), broad-based consumption taxes (such as value-added tax), and taxes on international trade (a complete list of variables and their definitions is available in the codebook.)

Collecting data for a large number of countries over long time spans presents difficult issues regarding measurement and consistency. The overall goal of the data collection has been to create long time series that are internally consistent within a country over time and that connect to contemporary datasets which in turn allow easy continual updates in the future. When different sources of data are combined, there need to be decisions about how to decide which sources to use and how to judge their quality. In addition, using and combining different sources has the potential to introduce measurement error and potentially bias the constructed estimates. In the codebook we describe in detail the decisions about how we integrated disparate sources, and also address a few issues that are relevant for analysis based on these data.

Comparison with related efforts

Previous research using historical tax revenue data either relies on information with a long historical coverage (some even long before 1800, e.g., Dincecco 2009, Karaman and Pamuk 2013) but for a few number of countries — usually Western Europe (Aidt and Jensen 2013), sometimes adding English-speaking off-shoots and Japan (Tanzi and Schuknecht 2000) — or a wide geographic coverage but only for the most recent decades (e.g., Prichard et al. 2014). These efforts rarely provide yearly data (e.g., Tanzi and Schuknecht 2000), or present information only on the size of government (Mauro et al 2013, Karaman and Pamuk 2013).

Many recent papers still rely heavily on Mitchell (2007) (e.g., Beramendi et al. 2019; Lee and Paine 2020). For various reasons we have a different approach which we believe has much to contribute.

Instead of taking existing cross-country databases (such as Mitchell) at face value, we took great pains at comparing and evaluating different sources – often cross checking them with country-specific sources – in order to find as reliable data as possible. During our work we discovered that Mitchell in particular is often unreliable. When comparing the information provided in his volumes with contemporary, high-quality, country-specific data we found two main causes for concern. First, Mitchell is often inconsistent in the way budget items are coded or even which parts of government budgets are presented, which causes problems when interpreting changes over time and across countries. The second problem is that the subcategories of revenues in Mitchell (e.g., direct and indirect taxes) at times sum to more than a hundred percent, which suggest underlying issues in the aggregation process. For these reasons, among others, we have tried to minimize our use of Mitchell as a source, and when we use it, we try to find ways of validating the trustworthiness of his estimates (for example by using country-specific sources).

Overall, a substantial part of our dataset comes from country-specific sources, all listed in the codebook. For users who wish to explore the data in more depth, we also provide detailed information by country allowing analysts to scrutinize by variable which sources were used for every year.

Exploring the data

To begin with, Figures 1 and 2 below present total tax revenues and the share coming from direct and indirect taxes (averages for all countries in the dataset). The figures show how the overall size of the state grew from about six percent of GDP in the nineteenth century to almost twenty percent in the 2000s. During the same period states went from financing themselves mainly through indirect taxes to a more even mix of direct and indirect taxes.

 

1

   Figure 1. Central Tax Revenue/GDP

2

Figure 2. Share of Direct and Indirect Tax Revenue

However, this general development hides important changes within the categories of direct and indirect taxes. As Figure 3 shows, excises and taxes on international trade were the main sources of indirect tax revenue in the nineteenth century, while broad-based consumption taxes – such as value-added tax – became more important in the late twentieth century. Figure 4 shows the evolution of direct taxes in the same period, documenting how property taxes — an important part of budgets in the nineteenth century — were superseded by income taxes in the twentieth century.

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    Figure 3. Indirect Taxes.

4

Figure 4. Direct Taxes.

It is also interesting to observe what happened to taxation around the world during and after major international conflicts. Figure 5 below show total revenues and the share of income taxes — which is considered to be a good indicator of fiscal capacity (e.g., Rogers and Weller 2014) — and three major conflicts: the Napoleonic Wars, the First World War, and the Second World War. While the number of countries for which we have data (and some did not exist at the time) is lower during the Napoleonic wars, it is still interesting to note that the conflict is neither associated with a permanent increase in income tax share nor in the overall size of the state. The two world wars are different. After World War I, the average size of government remained higher than before the war, and this tendency is even stronger after World War II. Looking at the share of revenue coming from income tax, this tendency is much weaker after World War I: while the share increased dramatically during the war, it decreased after the conflict ended (but not all the way down to pre-war levels). In contrast, income tax revenues not only became hugely important during World War II, they also remained so afterwards.

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Figure 5. Size of Government, Income Tax, and War.

Finally, one of the great strengths of our wide geographic coverage is that it allows for comparisons between regions. Figure 6 below shows the evolution of total tax revenues and income tax share between Latin America and Europe.

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Figure 6: The Size of Government and Income Tax in Europe and Latin America

There are several interesting things to note. First, although Latin America does not experience an increase in the income tax share during World War I as Europe does, both regions experience an increase in income tax revenues around the time of World War II. Second, between the end of World War II and the mid-1970s, Europe and Latin America relied to a similar extent on income taxes. But after around 1975, the two regions diverge, both in terms of the income tax share and in terms of total tax revenues.

These are just a couple of examples of what can be explored using our dataset. In my own work I have looked into how democracy and urbanization affect the tax mix (Andersson 2018),  how electoral systems condition the impact of ideology on taxation (Andersson 2019a), and how the adoption of taxes affects fiscal capacity and what types of states make these investments (Andersson 2019b). Thomas Brambor has investigated the legacy effect of non-democratic introductions of the income tax (Brambor 2016).

The data and the codebook are available at: https://www.perfandersson.com/data.html.

References

Andersson, Per F. 2018. “Democracy, Urbanization, and Tax Revenue.” Studies in Comparative International Development 53(1):111–150.

Andersson, Per F. 2019. “Power-sharing and Income Taxation in non-Democratic States.” STANCE Working Paper. Lund University.

Andersson, Per F. 2019. “Left-wing Tax Strategy Depends on the Electoral System.” Working Paper. Lund University.

Aidt, Toke ., & Peter S. Jensen. 2013. “Democratization and the size of government: Evidence from the long 19th century”. Public Choice, 157(3/4), 511-542.

Beramendi, Pablo, Mark Dincecco and Melissa Rogers. 2019. “Intra-Elite Competition and Long-Run Fiscal Development.” The Journal of Politics 81(1):49–65.

Brambor, Thomas. 2016. “Fiscal Capacity and the Enduring Legacy of the First Income Tax Law”. Unpublished manuscript: Lund University.

Dincecco, Mark. 2009. “Fiscal Centralization, Limited Government, and Public Revenues in Europe, 1650–1913.” The Journal of Economic History 69(1):48–103.

Flora, Peter, Franz Kraus, and Winfried Pfenning. 1983. State, Economy, and Society in Western Europe 1815-1975: The growth of industrial societies and capitalist economies, Frankfurt: Campus Verlag.

International Monetary Fund (IMF). 2012. “Government finance statistics (GFS).”

Karaman, K. Kivanc and Sevket Pamuk. 2013. “Different Paths to the Modern State in Europe: The Interaction Between Warfare, Economic Structure, and Political Regime.” American Political Science Review 107(3):603–626.

Lee, Alexander and Jack Paine. 2020. “The Great Revenue Divergence”. Working paper.

Mauro, Paolo, Rafael Romeu, Ariel Binder, and Asad Zaman. 2013. “A Modern History of Fiscal Prudence and Profligacy,” IMF working paper WP/13/5

Mitchell, Brian R. 2007. International historical statistics: Africa, Asia & Oceania, 1750- 2005, 5. ed., New York: Palgrave Macmillan.

, International historical statistics: Europe, 1750-2005, 6. ed., New York: Palgrave Macmillan.

, International historical statistics: the Americas, 1750-2005, 6. ed., New York: Palgrave Macmillan.

Prichard Wilson, Alex Cobham and Andrew Goodall. 2014. “The ICTD Government Revenue Dataset” ICTD Working Paper 19. https://www.wider.unu.edu/sites/default/files/ICTD_WP19.pdf

Rogers, Melissa Ziegler and Nicholas Weller. 2014. “Income taxation and the validity of state capacity indicators.” Journal of Public Policy 34(2):183–206.

Schumpeter, Joseph. 1991. “The Crisis of the Tax State”. In Joseph A. Schumpeter: The Economics and Sociology of Capitalism, ed. Richard Swedberg. Princeton: Princeton University Press. First published in 1918.

Tanzi, Vito & Ludger Schuknecht. 2000. Public spending in the 20th Century. Cambridge, UK: Cambridge University Press.