Introduction

Question 1

Key Findings for the Great Divergence Chapter 1

Answer 1

• Europe did not have a comparative advantage over China in terms of transport efficiency, nutrition or life expectancy
• The only comparative advantage Europe had over China was the high wage labours saving technological advancements in the cotton textile industry
• The success of the cotton textile industry was enabled by the land and labour outsourced to the New World

Question 2

Key Findings for China, Europe and the Great Divergence: Historical National Accounting

Answer 2

• Authors create a dataset similar to Maddison’s to estimate the GDP in preindustrial China during 980-1120, 1400-1620, and 1690-1820
• High growth rates observed in the first period confirms qualitative evidence
• Declines in GDP/capita is consistent with the literature pointing to the rapid population expansion -> growing division of land plots.
• China began to stagnate right as England and Europe started to forge ahead during the turning point of industrialization around 1750.

Question 3

Framework for changes in institutions

Answer 3

1. Embeddedness, informal institutions. 100-1000 years
2. Institutional environment. 10-100 years.
3. Governance. 1-10 years
4. Resource allocation & employment. Continuous.

This framework may be difficult to apply to China’s case: authoritarian regime: extends governance, making it easier to change the institutional environment.