Monetary and real aspects of the great divergence between europe and asia, 1500-1800



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MONETARY AND REAL ASPECTS OF THE GREAT DIVERGENCE BETWEEN EUROPE AND ASIA, 1500-1800

Stephen Broadberry and Bishnupriya Gupta
Department of Economics, University of Warwick, Coventry CV4 7AL, United Kingdom

S.N.Broadberry@warwick.ac.uk

B.Gupta@warwick.ac.uk
6 August 2004

Files: money5.doc; China.xls



Abstract: Silver wages were substantially higher in Europe than in Asia during the early modern period. We show that this was not simply the result of inflation in Europe following the inflow of bullion from the New World, since this “price revolution” affected all regions, including Asia. Higher silver wages in Europe reflected higher productivity in the traded goods sector and afforded European consumers greater command over traded goods. Drawing on the new economic geography literature, we link this higher European productivity to agglomeration effects associated with urbanisation.

JEL classification: N10, N30, E42, O10

Key words: Money, prices, wages, development, Europe, Asia




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