The timing and pattern of real wage divergence in pre‐industrial Europe: evidence from Germany, c. 1500–1850

Abstract

This study uses price information relating to 12 towns and wage information from 18 towns to develop a real wage index for unskilled urban labourers in Germany during the three-and-a-half centuries preceding the onset of rapid industrialization.Combining the new series with information from other parts of Europe establishes two stages of real wage divergence during the seventeenth to nineteenth century. The first occurred in the middle of the seventeenth century when real wages in centres of trade and finance located on the rim of the North Sea rose far above the level prevailing in their hinterland. The second stage unfolded from the second quarter of the eighteenth century when the real wage in south England, northern and central Italy, and Germany began to diverge; Germany followed a middle path between the other two countries. The second commercial revolution, which improved business techniques and promoted Smithian growth, goes a long way towards accounting for this development.

Eight Centuries of Global Real Interest Rates, R-G, and the ‘Suprasecular’ Decline, 1311–2018

“…Cit. inSchwartz (1987, 153).81 To the extent that inflation series such as orPfister (2017) are interpolating price dynamics over longer time spans, one could speculate that this contrasts with the higher frequency nominal yield data, thus creating a disparity and the measurement of a real rate "lag". However, the higher multiples hold for country-level subperiods where prices series are of high frequency, such as Northern Italy (average here 1331-1500: 15.4x).…”

The quantitative development of Germany’s international trade during the eighteenth and early nineteenth centuries

“…The rapid increase of the weight of cotton goods in Germany's exports over the final decades of the eighteenth century, which partly compensated for the relatively modest growth of linen exports, sheds new light on the early development of a future industrial leading sector that calls for in-depth research. Growth of manufacture exports should be considered in the context of the parallel fall of day wages of unskilled urban labourers (Pfister, 2014): Expansion of the production of tradables by means of an increasing work effort per capita -which includes work during the slack seasons of the agricultural year as well as the mobilisation of the labour capacity of women and childrenconstituted a means to compensate for the effect of a rapidly falling marginal product of labour in the sectors producing nontradables on material welfare. Export growth of manufactures thus resolves the contradiction between falling day wages and stagnant per capita income.…”

“…On an aggregate level, this decline must have been offset by an increase of the annual work effort and/or an expansion of other sources of income, such as the land rent. Population grew at a fairly steady rate of a bit less than a half per cent (Fertig and Pfister, 2010;Pfister, 2011;Pfister, 2014).…”

“…Reference population for overseas imports in the eighteenth century is Germany in the borders of 1871 excluding Alsace-Lorraine, the three north-eastern provinces of Prussia and Schleswig; reference population in 1830 is Germany in the borders of 1871 excluding Alsace-Lorraine. -Price deflators: Domestic prices refer to the consumer price index of twelve German towns (Pfister, 2014); the import price index of Hamburg is from Pfister (2012 The most conspicuous result of Table 1 is contained in the first two lines that relate to trade flows between the Admiralty of Amsterdam and its German hinterland, and overseas imports of Hamburg. Figures for Hamburg are proportionally inflated to compensate for omissions and to take into account import trade of other German sea ports (see note to Table 1).…”

“…It will be interesting to see, therefore, to what extent Germany was linked to Atlantic trade and felt its effects posited by the Industrious Revolution and Great Divergence theses. Second, income per capita probably stagnated during the second half of the eighteenth century, and the real wage of unskilled urban workers fell (Pfister, 2011(Pfister, , 2014. A study of growth and patterns of trade holds the potential to show to what extent an increase of the labour effort per capita in the non-agricultural sectors producing goods for export served to mitigate the effect of a falling marginal product of labour on household income.…”