Week 7: European Catching up 1870-1913

Question 1

Growth facts in Europe 1870-1913?

Answer 1

-Sustainable growth in much of Europe

-More developed countries in Europe doubled their levels of income per head

-Significant growth in less-developed Southern and Eastern Europe

Question 2

What is intensive growth?

Answer 2

-Hours worked per year fall everywhere​

-More capital per worker​

​-Better use of capital and labour -> TFP (total factor productivity) growth

Question 3

Why did Europe have intensive growth?

Answer 3

-Leading industrial nation was Britain​

-Catch-up potential in other European countries​

Question 4

What does Abramovitz, say what catch up growth is?

Answer 4

Leading nation: more capital, modern technology, highest productivity​

Followers: less capital, inferior technology, lower productivity​

“Room to move”: Potential to converge to the frontier

Question 5

What does Abramovitz say facilitates catch up growth ?

Answer 5

-depends on institutions, finance, and human capital to work​

-Roles for government and private sector​

Question 6

What are social capabilities (Abramovitz idea)?

Answer 6

• how people, organisations respond to economic opportunity

-society’s ability to adopt and implement new technologies, organize production efficiently, and maintain institutions that support economic activities

-no one knows how to measure it ​

Question 7

What backs up social capabilities?

Answer 7

-Temple and Johnson

-Index of social, political, economic indicators forecasts growth

Question 8

Difference between Britain and Europe?

Answer 8

-Early reduction in family farming.​

-Commitment to free trade.​

-Big overseas lender​

-Cotton textiles most important industry

Question 9

Agriculture employment fall stats?

Answer 9

-Across Europe it falls , but Britain is an outlier

Question 10

What does a smaller share of people in agriculture lead to?

Answer 10

-higher GDP pc

-productivity in farms rises as less productive people leave

-low prod agriculture into industry

-urbanization

Question 11

Rise in farm productivity stats?

Answer 11

-Productivity growth in farms goes up across Europe

-Still low relative to overall productivity in U.K

Question 12

How important was industrialization (industry from agriculture) in Europe?

Answer 12

Rising importance 1870-1913, growing industrial path

-Except for Spain

Question 13

How did Europe Catch up?

Answer 13

-Gerschcenkron

-‘Substitution for missing prerequisites’​

Question 14

Examples of substitution for prerequisites?

Answer 14

• Germany
  -Italy
  -Russia before 1914

Question 15

How did Germany substitute for prerequisites?

Answer 15

-Zollverein (customs union for German States)

-Financial intermediation: universal joint-stock banks​ and regional public saving banks

Question 16

What did Zollverein do?

Answer 16

-Eliminate internal tariffs, common external tariff​

-Bigger domestic market, protection for new German industries from outside​

-Development of large, export-oriented, cartelised industry (transport subsidies)

Question 17

What did Financial intermediation do in Germany?

Answer 17

• universal joint-stock banks

-Supported by state, comprehensive services, fill missing markets (Deutsche Bank)​

-regional public saving banks, local savings –> local investment​

Question 18

How did Italy substitute for prerequisites?

Answer 18

-Private investment banks with foreign capital: Credito Mobiliare Italiano.​

-Industrial development primarily in Northern Italy

Question 19

Why is Northern Italy more industrially developed?

Answer 19

-Proximity to European markets and trade routes.

-better infrastructure, such as railroads and ports.

-Higher levels of education, skills, and entrepreneurship compared to the South.

-Supportive government policies that favored industrial hubs in the North

Question 20

How did Russia substitute for prerequisites?

Answer 20

-State took a large direct role in development​

-State owned/state financed railways​

-Tariffs & technology transfers (iron, steel, engineering)​

-Foreign entrepreneurs ​

-State Bank and subsidiaries​

Question 21

Why did Sweden have rapid wage growth in the 19th century?

Answer 21

-Growth of industry through trade (export timber and iron)

-Second Industrial revolution: human capital and natural resources complimentary: mechanical engineering

-Integrated labour markets, with lots of migration with Sweden and abroad

Question 22

What comments on Sweden’s wage rise?

Answer 22

-narrow rural-urban wage gap

-most regionally equal nation in 1910

-Regions with higher levels of emigration experienced faster wage growth for unskilled workers.

Question 23

Britain vs Germany is 1913

Answer 23

-UK still the richest country in Europe​

-UK still the most “advanced” economy in terms of agriculture/industry/services mix​

-Higher productivity in agriculture & services​

-Germany overtakes Britain in manufacturing productivity​

-Britain remains dominant in trade​

Question 24

Britain vs Germany in manufacturing facts 1913?

Answer 24

Britain retains leadership in older sectors​

Germany has advantages in newer, more scientific sectors​

Question 25

Europe catching up to Britain relative to U.S?

Answer 25

Europe catching up slowly to UK but falling behind US over 1870-1913

Question 26

What happens if follower countries successfully catch up?

Answer 26

growth and convergence in wages and per capita incomes ​

Question 27

What does Abramovitz argue are issue with this catch up process?

Answer 27

-The catch-up process is neither linear nor guaranteed, as it depends on the interplay of social capability, facilitating factors, and international interactions.

Question 28

What does Williamson argue about transaction costs?

Answer 28

-hierarchies like large firms emerged as they can efficiently manage transactions involving specific assets.

-internalize these costs

Question 29

Why did Britain RELATIVELY decline in the late 19th and Early 20th centuries?

Answer 29

-not due to institutional failure but rather to the fact that its existing institutions were appropriate for its circumstances.

-Britain had well-developed markets and a skilled labor force, which made it less advantageous to adopt mass production techniques and hierarchical firms

Question 30

What does Sylla say about difference between England and Germany bank?

Answer 30

• German system was a response to the underdevelopment of German financial markets and that it would not have been efficient in Britain.