An electronic version of the paper may be downloaded • from the SSRN website: www.SSRN.com • from the RePEc website: www.RePEc.org • from the CESifo website: Twww.CESifo-group.org/wpT CESifo Working Paper No. 3936

Abstract: As a result of recent work on historical national accounting, it is now possible to establish firmly the timing of the Great Divergence of living standards between Europe and Asia. There was a European Little Divergence as Britain and Holland overtook Italy and Spain, and an Asian Little Divergence as Japan overtook China and India. The Great Divergence occurred because Japan grew more slowly than Britain and Holland, starting from a lower level. Key turning points are identified around 1348 and 1500, and a framework is developed to explain these divergences via the differential impact of shocks on economies with different underlying structures. The key shocks were the Black Death of the midfourteenth century and the new trade routes which opened up from Europe to Asia and the Americas at the end of the fifteenth century. The key structural factors were the extent of sectoral diversification, the nature of state institutions and the quantity and quality of labour. JEL classification: N10, N30, N35, O10, O57

We investigate the historical dynamics of the decline in fertility in Europe and its relation to measures of cultural and ancestral distance. We test the hypothesis that the decline of fertility was associated with the di¤usion of social and behavioral changes from France, in contrast with the spread of the Industrial Revolution, where England played a leading role. We argue that the di¤usion of the fertility decline and the spread of industrialization followed di¤erent patterns because societies at di¤erent relative distances from the respective innovators (the French and the English) faced di¤erent barriers to imitation and adoption, and such barriers were lower for societies that were historically and culturally closer to the innovators. We provide a model of fertility choices in which the transition from higher to lower levels of fertility is the outcome of a process of social innovation and social inuence, whereby late adopters observe and learn about the novel behaviors, norms and practices introduced by early adopters at the frontier. In the empirical analysis we study the determinants of marital fertility in a sample of European populations and regions from 1830 to 1970, and successfully test our theoretical predictions using measures of genetic distance between European populations and a novel data set of ancestral linguistic distances between European regions.

This paper studies the causes and consequences of political centralization and fragmentation in China and Europe. We argue that the severe and unidirec-tional threat of external invasion fostered political centralization in China while Europe faced a wider variety of smaller external threats and remained politically fragmented. We test our hypothesis using data on the frequency of nomadic attacks and the number of regimes in China. Our model allows us to explore the economic consequences of political centralization and fragmentation. Political centralization in China led to lower taxation and hence faster population growth during peacetime than in Europe. But it also meant that China was relatively fragile in the event of an external invasion. Our results are consistent with historical evidence of warfare, capital city location, tax levels, and population

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