The Rise of Europe: Atlantic Trade, Institutional
Change and Economic Growth∗
Daron Acemoglu
Department of Economics, MIT
Simon Johnson
Sloan School of Management, MIT
James Robinson
Departments of Political Science and Economics, Berkeley
May 4, 2004
∗We thank Thomas Becker and Rui Pedro Esteves for outstanding research assistance and Josh
Angrist, Abhijit Banerjee, Timothy Besley, Dora Costa, Jan de Vries, Stanley Engerman, Philip Hoff-
man, Peter Lindert, Sebasti´an Mazzuca, Joel Mokyr, Larry Neal, Steve Pincus, Christina Romer,
David Romer, Andrei Shleifer, Alan Taylor, Hans-Joachim Voth, two anonymous referees, and seminar
participants at Berkeley, the Canadian Institute of Advanced Research, Chicago Business School and
Political Science, George Mason University, Harvard Business School, the Harvard Economic History
Seminar, the London School of Economics, MIT, the National Bureau of Economic Research economic
history, inequality and economic growth groups, New York University and Princeton for comments and
suggestions.
1
The Rise of Europe: Atlantic Trade,
Institutional Change and Economic Growth
Abstract
This paper documents that the Rise of Western Europe between 1500 and 1850 is
largely accounted for by the growth of European nations with access to the Atlantic and,
in particular, by those that engaged in colonialism and transoceanic trade. Significant
variation in economic performance among Atlantic trading nations is explained by the
fact that countries with relatively non-absolutist initial institutions experienced faster
growth.
We suggest that Atlantic trade and colonialism affected Europe not only directly, but
also indirectly by inducing institutional changes. In particular, where initial political
institutions placed significant checks on the monarchy, the growth of New World and
Asian trade after 1500 strengthened merchant groups in favor of constraining the power
of the monarchy further, and enabled them to demand and obtain changes in institutions
to protect their property rights. These induced changes in political institutions were
central to the subsequent process of economic growth. In contrast, when initial political
institutions were more absolutist, trade was monopolized by the crown and groups loyal
to the monarchy, and a strong coalition in favor of institutional change failed to emerge.
Keywords: Colonialism, Economic Growth, Institutions, Political Economy, Social
Conflict, Trade.
JEL Numbers: O10, F10, P10, N13.
2
The world we live in–both our material standards of living and our society–was
shaped by the process of rapid economic growth that started in 19th-century Western
Europe. The origins of this rapid economic growth and the associated Industrial Revolution
are generally considered to lie in the economic, political and social development of
Western Europe over the preceding centuries. In fact, between 1500 and 1800, Western
Europe experienced a historically unprecedented period of sustained growth, perhaps
the “First Great Divergence,” making this area substantially richer than Asia and Eastern
Europe by the beginning of the 19th century. There is little agreement however on
why this process of growth took place in Western Europe and why it started in the 16th
century.
This paper establishes a major fact related to the patterns of economic growth in
Western Europe during this era, develops a hypothesis on the origins of the Rise of
(Western) Europe, and provides historical and econometric evidence on some of the
implications of this hypothesis.
The major fact we document is that the differential growth of Western Europe during
the 16th, 17th, 18th and early 19th centuries is almost entirely accounted for by
the differential growth of nations with access to the Atlantic and of Atlantic traders.
Throughout the paper, the term Atlantic trader refers to Britain, France, the Netherlands,
Portugal and Spain, which were the nations most directly involved in trade and
colonialism with the New World and Asia; Atlantic trade, in turn, means trade with the
New World as well as trade with Asia via the Atlantic, and includes colonialism- and
slavery-related activities as well as trade.1 The differential growth of Atlantic traders
suggests a close link between Atlantic trade and the First Great Divergence. In fact, it
appears that the Rise of Europe between 1500 and 1850 is largely the Rise of Atlantic
Europe, and is quite different in nature from pre-1500 European growth.
Not all societies with access to the Atlantic show the same pattern of growth, however.
The data suggest an important interaction between medieval political institutions and
access to the Atlantic: the more rapid economic growth took place in societies with
relatively non-absolutist initial (pre-1500) institutions, most notably in Britain and the
Netherlands. In contrast, countries where the monarchy was highly absolutist, such as
1Atlantic trade opportunities became available only during the late 15th century, thanks to the
discovery of the New World and the passage to Asia around the Cape of Good Hope. These discoveries
resulted from a series of innovations in ship technology, primarily pioneered by the Portuguese, that
changed the rigging and hull design of ships and developed knowledge of oceanic navigation.
1
Spain and Portugal, experienced only limited growth in the subsequent centuries, while
areas lacking easy access to the Atlantic, even such non-absolutist states as Venice and
Genoa, did not experience any direct or indirect benefits from Atlantic trade.
Figures 1 and 2 illustrate the central fact of this paper. Figure 1 Panel A shows
that urbanization in Western Europe grew significantly faster than in Eastern Europe
after 1500.2 Panel B of Figure 1 shows that these differential trends are due in large
part to the growth of Atlantic traders. The rest of Western Europe had a relatively high
average urbanization rate of 10 percent in 1300 (and 11.4 percent in 1500), but grew at
approximately the same rate as Eastern Europe from 1500 to 1850, by a factor of less
than 2, to reach 17.0 percent in 1850. In contrast, Atlantic traders started with a lower
average urbanization rate of 8.0 percent in 1300 (and only 10.1 percent in 1500), which
almost tripled in the subsequent 550 years to reach 24.5 percent in 1850, overtaking
average urbanization in the non-Atlantic parts of Western Europe between 1600 and
1700 (see also Table 1). Panels A and B in Figure 2 show the same pattern using
Maddison’s (2001) estimates of GDP per capita. While GDP per capita rose by a factor
of almost 2 among Atlantic traders between 1500 and 1820, in the rest ofWestern Europe
it grew at approximately the same rate as in Eastern Europe, just under 30 percent.
The patterns depicted in Figures 1 and 2 do not simply reflect the tendency of
more successful nations to engage in Atlantic trade. There is no differential growth of
Atlantic traders before the opening of Atlantic sea routes, and below we show similar
results using an exogenous measure of access to the Atlantic–ratio of Atlantic coastline
to land area–instead of the distinction between Atlantic traders and non-traders. Nor
do the results reflect some post-1500 advantage of coastal nations: Atlantic ports grew
much faster than other European cities, while Mediterranean ports grew at similar rates
to inland cities.
This evidence weighs against the most popular theories for the Rise of Europe, which
emphasize the continuity between pre-1500 and post-1500 growth and the importance
of certain distinctive European characteristics, such as culture, religion, geography or
features of the European state system.3 Instead, it is consistent with theories that
emphasize the importance of profits made in Atlantic trade, colonialism and slavery.4
2For the purposes of this paper, Western Europe is taken to be all the countries west of the Elbe,
i.e., Austria, Belgium, Britain, Denmark, Finland, France, Germany, Ireland, Italy, the Netherlands,
Norway, Portugal, Spain, Sweden, and Switzerland. Eastern Europe is all European countries to the
east of the Elbe, including Russia and excluding Turkey. See Section 1.1 for details on urbanization and
GDP data. All averages are weighted by population, using numbers from McEvedy and Jones (1978).
3See, e.g., Weber (1905), Jones (1981), Hall (1985), and Landes (1998).
4E.g., Williams (1944), Frank (1978), and Wallerstein (1974-1980).
2
Nevertheless, other evidence suggests that overseas trade and the associated profits
were not large enough to be directly responsible for the process of growth in Europe.
Engerman (1972) and O’Brien (1982) demonstrate that the contribution of profits from
slavery and trade with the rest of the world to European capital accumulation was
modest. O’Brien (1982, p. 2) writes that transoceanic trade “.... could in no way be
classified as decisive for economic growth of Western Europe”. Although recent work by
Inikori (2002) estimates larger trade flows than those of O’Brien, his estimates are not
large enough to suggest that European growth was driven solely by the direct impact of
Atlantic trade on profits or resources.
We advance the hypothesis that West European growth during this period resulted,
in part, from the indirect effects of international trade on institutional development.
Although there were some improvements in economic institutions in the late medieval
and early modern period, rapid economic development did not begin until the emergence
of political institutions providing secure property rights to a broader segment of society
and allowing free entry into profitable businesses (North and Thomas, 1973, and North
and Weingast, 1989). The critical political institutions were those that constrained the
power of the monarchy and allied groups.5 Checks on royal power and prerogatives
only emerged when groups that favored them, that is commercial interests outside the
royal circle, became sufficiently powerful politically. From 1500, and especially from
1600, onwards, in countries with non-absolutist initial institutions and easy access to
the Atlantic, the rise in Atlantic trade enriched and strengthened commercial interests
outside the royal circle, and enabled them to demand and obtain the institutional changes
necessary for economic growth. Although profits from Atlantic trade were small relative
to GDP, they were still substantial, and much larger than previous trading profits. For
example, Figure 3 shows that by the end of the 17th century, the volume of Atlantic
trade was much larger than that of long-distance Mediterranean trade (see the Appendix
for the construction of these series). The recipients of these profits became very rich
by the standards of the 17th- and 18th-century Europe, and typically politically and
socially very powerful.
These changes did not take place in countries with highly absolutist institutions,
such as, Spain, Portugal, and to a large extent France, where the crown was able to
closely control the expansion of trade. Consequently, in these countries, it was the
5It is important to note that these new political institutions neither protected the rights of all citizens
nor were democratic. They can best be characterized as oligarchic, since they increased the political
power of wealthy merchants, and at least in the British case, of the gentry and nascent industrial
interests. Nevertheless, they constituted a distinct improvement over the previous set of institutions,
which placed many fewer checks on the power of the monarchy.
3
monarchy and groups allied with it that were the main beneficiaries of the early profits
from Atlantic trade and plunder, and groups favoring changes in political institutions
did not become powerful enough to induce them. Our hypothesis therefore predicts
an important interaction between initial institutions and Atlantic trade, which is the
pattern we find in the data.
The major fact presented in this paper is consistent with the emphasis of a number
of historians, including, among others, Davis (1973a), de Vries (1984), Bairoch (1988),
Braudel (1992), and de Vries and van der Woude (1997). Although this historical literature
emphasizes the differential growth of Atlantic ports and Atlantic nations, to the
best of our knowledge, there are no other studies documenting the quantitative importance
of Atlantic traders and Atlantic ports or showing that the differential growth of
Western Europe is largely accounted for by the growth of Atlantic traders.
On the theoretical side, our hypothesis builds on the notion that institutional change,
even when socially beneficial, will be resisted by social groups who stand to lose economic
rents or political power. Consequently, the process of institutional change involves significant
conflict between different groups–in the European context, between the monarchy
and its allies versus commercial interests outside the royal circle.6 Our historical account
could also be viewed as a marriage between the Marxist thesis linking the rise of the
bourgeoisie and the development of the world economy (e.g., among others, Williams,
1944, Frank, 1978, and Wallerstein, 1974-1980) and the neoclassical emphasis on the
development of political institutions and secure property rights in Western Europe (e.g.,
North and Thomas, 1973, Jones, 1981, North, 1981, and De Long and Shleifer, 1993).
Distinct from these approaches, however, we offer an explanation based on the interaction
between Atlantic trade and medieval political institutions for why strong private
property rights emerged in Western Europe, especially in Britain and the Netherlands,
and starting in the 16th century. Although some scholars have noted the important
role of overseas merchants in particular instances of political change during this period
(most notably, Brenner, 2003 and Pincus, 2002, in the British case), we are not aware
of a theory along the lines developed in this paper.
The rest of the paper is organized as follows. Section 1 documents the key fact
of the paper, and shows that the pattern seen in Figure 1 and 2 is robust. Section 2
develops our hypothesis for the Rise of Europe and the role played by Atlantic trade in
6See, for example, North (1981), Olson (1982), Krusell and Rios-Rull (1996), Parente and Prescott
(1999), Acemoglu and Robinson (2000, 2002), and Rajan and Zingales (2003).
Rogowski (1989) is particularly notable in this context, since he also emphasizes how trade affects
political coalitions via its impact on factor prices, though he does not focus on how trade might induce
institutional change by strengthening commercial interests.
4
this process, and provides historical evidence supporting our interpretation. Sections 3
and 4 provide evidence on some implications of our hypothesis. Section 3 shows that
the evolution of European institutions is closely linked to Atlantic trade, and Section
4 documents an important interaction between initial institutions and Atlantic trade
in European economic growth. Section 5 concludes. The Appendix summarizes the
construction of the variables used in the empirical analysis, and further detail can be
found in Acemoglu, Johnson, and Robinson, henceforth AJR, (2002b).
1 Atlantic Trade and the Rise of Europe
1.1 Data
We use three data series to measure economic development. First, we construct estimates
of urbanization based on the urban population numbers of Bairoch, Batou and
Ch`evre (1988). This is a comprehensive dataset with information on all 2,200 European
cities which had, at some time between 800 and 1800, 5,000 or more inhabitants.7 We use
these data as our measure of urban population and divide by the population estimates
of McEvedy and Jones (1978) to calculate urbanization (percent of the population living
in cities with more than 5,000 inhabitants). We also use estimates of urbanization rates
for Asia from the quantitative and qualitative assessments of Bairoch (1988). Bairoch
(1988, Ch. 1) and de Vries (1976, p. 164) argue that only areas with high agricultural
productivity and a developed transportation network could support large urban populations.
In addition, in AJR (2002a) we presented evidence that both in the time-series
and the cross-section there is a close association between urbanization and income per
capita before as well as after industrialization. We therefore take urbanization as a proxy
for GDP per capita.
Second, we use estimates of GDP per capita from Maddison (2001). These estimates
start in 1500, and are available for 1600, 1700, 1820, and then more frequently. Note
that these estimates are no more than educated guesses, especially before 1820. We
therefore think of these GDP data as a check on our results using urbanization data.
Third, we use the European city-level data from Bairoch, Batou and Ch`evre (1988),
to investigate which urban centers were driving demographic and economic growth, and
also to contrast the growth of Atlantic ports to other ports and to inland cities.
Table 1 gives the estimates of urbanization and income per capita at various dates.
7These data begin in 800, and there are estimates for every 100 years until 1700, then for every 50
years through 1850. However, Bairoch, Batou and Ch`evre (1988) emphasize that estimates before 1300
are rough and less reliable (and they skip the year 1100 due to lack of information). These data were
used previously by De Long and Shleifer (1993).
5
The first column is for the whole sample and is unweighted. The second column is
weighted by population in the corresponding year, giving a better sense of the aggregate
changes. The remaining columns give weighted means for Atlantic traders (Britain,
France, the Netherlands, Portugal and Spain), forWest European countries that were not
Atlantic traders (Austria, Belgium, Denmark, Finland, Germany, Ireland, Italy, Norway,
Sweden and Switzerland), for East European countries, and for the Asian countries in
our sample.8 These numbers confirm the patterns shown in Figures 1 and 2. In the
regression analysis, we will report both weighted and unweighted results. The bottom
third of the table also shows the evolution of our measure of institutions, constraint on
the executive, which we will be described in greater detail and used in Section 3.
1.2 Economic Growth in Europe
Figures 1A and 1B above show the evolution of urbanization rates in Western and
Eastern Europe, and contrast the behavior of Atlantic traders vs. non-Atlantic traders.
We first look at Atlantic traders since the main beneficiaries from the Atlantic should
be those countries that engaged in Atlantic trade and colonialism. However, whether or
not a country is an Atlantic trader is clearly endogenous, i.e., it is the outcome of some
political or economic process. For this reason, we also present results using a measure
of access to the Atlantic, which is a country-level geographic characteristic.
We can test the idea that West European growth after 1500 was due primarily to
growth in countries involved in Atlantic trade or with a high potential for Atlantic trade
by estimating the following regression equation:
ujt = dt + δj + X t≥1600
αt · W Ej · dt + X t≥1500
βt · P ATj · dt + X0jt · γ + εjt, (1)
where ujt is urbanization in country j at time t, W Ej is a dummy indicating whether the
country is inWestern Europe, the dt’s denote year effects, the δj’s denote country effects,
Xjt is a vector of other covariates, and εjt is a disturbance term. In addition, P ATj ,
our measure of the potential for Atlantic trade, is a dummy for Atlantic trader (Britain,
France, the Netherlands, Portugal and Spain) or alternatively, the Atlantic coastlineto-
area ratio (in both cases, a time-invariant characteristic of the country). The βt’s,
8We take current countries as the unit of observation. Although these do not always correspond
to the independent polities at the time, this discrepancy should not bias our empirical inference. For
example, if we had data on each Italian city-state, their average would show the same pattern as our
single Italy observation (presuming that our data for the aggregate of Italy are accurate), but because
of the larger number of observations, the standard errors would be smaller. The analysis of city-level
growth in Section 1.4 below is informative on differential growth across historical political boundaries.
6
the coefficients on the potential for Atlantic trade and the post-1500 time dummies, are
the main parameters of interest. Since our focus is on the rise of Western Europe as a
whole, our basic regressions are weighted by population in each year, but we also report
unweighted regressions for completeness.
Columns 1 and 2 of Table 2 only include the interaction terms between the Western
Europe dummy and dates from 1600, Pt≥1600 αt ·W Ej ·dt, which capture the differential
growth of West European countries relative to Eastern Europe. The top row reports the
p-value from the F-test of the joint significance of these interactions. Column 1 includes
data only for 1300-1850, while column 2 extends the sample back to 1000. Consistent
with Figure 1A, both specifications show significantly faster growth in Western Europe
than in Eastern Europe. For example, the point estimates (not shown in the table to
save space) indicate that in the specification of column 1, West European urbanization
grew by 6.9 percentage points relative to East European urbanization between 1500 and
1850.
Column 3 allows differential growth for countries engaged in Atlantic trade, by including
the term Pt≥1500 βt ·P ATj ·dt. We include 1500 as a “specification check” on the
timing of the effects. We start with P ATj as a dummy for Atlantic trader. Significant
positive estimates of βt’s imply that Atlantic traders grew starting in the period between
1500-1600. The estimates confirm the pattern seen in Figure 1B, and show large effects
from the interaction between the Atlantic trader dummy and dates after 1600. These
effects become statistically significant after 1750; in columns 8-10, the effects are statistically
significant starting in 1700. For example, the estimate for 1850, β1850 = 0.085,
implies that urbanization among Atlantic traders grew approximately by 8.5 percentage
points more than in other Western and Eastern European nations. Notice also that
the estimate of β1500 in this column, which measures the differential growth of Atlantic
traders between 1300-1400 and 1500, is insignificant and small. This is reassuring; since
Atlantic trade was very small before 1500, this finding shows that there is no differential
growth for Atlantic traders before Atlantic trade actually became important.9
Consistent with the patterns shown in Figure 1B, the inclusion of the Atlantic trade
interactions explains almost the entire differential growth of West European nations
9Although the above analysis does not count Denmark and Sweden as Atlantic traders, Sweden had
a small colony on the Delaware river 1637-1681 and Denmark controlled several small Caribbean islands
(now the U.S. Virgin Islands). To check the robustness of our results, we also experimented with a more
inclusive definition of Atlantic trader that includes Denmark and Sweden, with very similar to those
reported in column 3. The p-value for Western Europe x year interactions increases to [0.51], while
the pattern of coefficients on potential for Atlantic trade x year dummies is largely unchanged; the
interactions before 1700 are insignificant, then 0.035 (s.e.= 0.022) in 1700, 0.035 (s.e.= 0.021) in 1750,
0.046 (s.e.= 0.02) in 1800, and 0.08 (s.e.= 0.02) in 1850.
7
relative to Eastern Europe. The Pt≥1600 αt · W Ej · dt terms are no longer statistically
significant, and the point estimates (not shown in the table) imply that West European
urbanization grew only by 2.9 percentage points relative to Eastern Europe between
1300-1500 and 1850 as opposed to 6.9 percentage points in column 1.
Columns 4 and 5 show that the results are similar for the 1000-1850 period and when
observations are not weighted by population.10 Column 6 includes Asian countries. This
has little effect on the estimates of the differential growth of Atlantic traders, but now
West European countries are growing faster relative to the control group, which includes
Asian countries (see Figure 1A). Finally, Column 7 excludes Britain from the sample,
and shows that the results do not simply reflect British growth. The estimates in column
7 are about half the size of those in the other columns, but they show the same pattern.
An important concern with the results reported so far is endogeneity. Being Atlantic
trader is an ex post outcome, and perhaps only countries with high growth potential–
or those that were going to grow anyway–engaged in substantial Atlantic trade and
colonial activity. Belgium, Ireland, Denmark, Germany and Norway also had access to
the Atlantic, either directly or via the North Sea, but they did not take a major part
in long distance oceanic trade. In columns 8, 9 and 10, we use a geographic measure of
potential access to the Atlantic, Atlantic coastline-to-area ratio, as our time-invariant
P ATj variable, which gives positive Atlantic trade potential to all these countries.11 This
measure allows Atlantic trade to play a more important role in the growth of countries
with more Atlantic coastline relative to their land area.12
10In Column 4, the interaction between the West European dummy and the post-1500 dates is
significant at the 10 percent level, which reflects the lower level of East European urbanization in
the base period, which is now 1000-1400.
11Information on the length of coastline and the land area of particular countries is taken from Integrated
Coastline Management (on the web at http://icm.noaa.gov/country/ICM-pro.html), which
reports a standardized measure. We use only Atlantic coastline, i.e., omitting coastlines in the Mediterranean,
the Baltic and the Arctic. Details are provided in the Appendix of AJR (2002b). It is important
to exclude the Baltic coastlines of Denmark and Germany from our measure, since significant Baltic
trade predated the rise of Atlantic trade, and economic growth driven by Baltic trade could be an alternative
explanation for the patterns we observe. It any case, our results are generally robust to including
the Baltic or the Arctic coastlines. For example, we obtain very similar results to those reported in
Tables 2 and 3 when we include the west-facing coastline of Sweden, or when we include the entire
Norwegian coastline on the Arctic and the entire German coastline on the Baltic. Our results are also
generally similar when we include all the coastline of Sweden, Germany, Norway and the entire Baltic
coastline of Denmark, but the size of the coastline-to-area x year interactions are smaller than in our
baseline and Western Europe x year interactions become significant.
12Alternatively, we could use the Atlantic coastline-to-area measure as an instrument for the Atlantic
trader dummy. The results we report can be thought of as the reduced form for this IV strategy (a
univariate regression of the Atlantic trader dummy on the coastline-to-area measure in our sample has
an R2 of 0.30). Nevertheless, we prefer the specification in the text, since it is plausible that, even
conditional on being an Atlantic trader, a country with greater Atlantic coastline will trade and grow
more than another with less coastline, making such an IV procedure invalid. In fact, a comparison
8
The results using the coastline-to-area measure for P ATj are similar to those using
the Atlantic trader dummy. Most notably, the differential growth related to the Atlantic,
now captured by interactions with the Atlantic coastline-to-area ratio, is still strong; the
point estimates for the β’s are significant starting in 1700 and quantitatively large. For
example, the coefficient β1850 = 5.05 indicates approximately 6.5 percentage points more
urbanization growth in the Netherlands than in Italy between 1300-1400 and 1850 (the
Atlantic coastline-to-area ratio for the Netherlands is 0.013 and for Italy it is 0). This
explains over half of the differential 12 percentage point actual urbanization growth
between Italy and the Netherlands between these two dates. Other specifications using
the Atlantic coastline-to-area measure in columns 9 and 10 give similar results.
Equation (1) allows for an arbitrary pattern of differential growth in Atlantic traders.
Instead, we might expect the differential growth of Atlantic traders to be related to the
volume of Atlantic trade. For this reason, in Panel B we report results from estimating
a structured model of the form:
ujt = dt + δj + X t≥1600
αt · W Ej · dt + β · P ATj · ln ATt + X0jt · γ + εjt, (2)
where ATt denotes our estimate of the aggregate volume of Atlantic trade, shown in
Figure 3 above. The construction of this variable is explained briefly in the Appendix,
and further details and robustness results can be found in AJR (2002b).
Note that the model in equation (2) is more restrictive than that in (1), since we
are forcing the pattern of βt’s in (1) to be the same as that of ln ATt. In all columns,
the estimate of β, the coefficient on the interaction term between the log volume of
Atlantic trade and potential for Atlantic trade at the country level, is highly significant,
while the interaction terms between Western Europe and dates from 1600 onwards are
again insignificant. Notably, the R2 of this more restrictive regression is close to the
R2 of the flexible specifications reported in Panel A. These results suggest that the
significant interaction between potential for Atlantic trade and dates after 1600 is due
to the importance of Atlantic trade, not some other parallel process.
Table 3, which has the same structure as Table 2, provides regression evidence using
log GDP per capita as the dependent variable. Maddison (2001) reports estimates of
GDP per capita for 1500, 1600, 1700, 1820 and 1870. We take 1500 as the base year,
and add interactions between our measure of potential for Atlantic trade, P ATj, and
of columns 3-7 with columns 8-10 shows that the fit of the models with the Atlantic coastline-to-area
ratio is marginally better than those with the Atlantic trader dummy, because the former measure gives
greater potential for trade to Britain and the Netherlands, which have relatively high coastline-to-area
ratios.
9
the dates from 1600 on to capture the importance of Atlantic trade for the country (so
we can no longer test for pre-existing trends using the interaction between P ATj and
1500). Output numbers for 1870 are already heavily influenced by differential industrialization
experiences of various countries, so our baseline specification stops in 1820.
For completeness, we also report regressions that extend the sample to 1870.
Parallel to our results in Table 2, West European countries grow faster after 1500,
though this pattern is somewhat less pronounced, especially when we limit the sample to
1500-1820. The interactions between the Atlantic trader dummy and the dates after 1600
are typically significant starting either in 1600 or 1700, and quantitatively large. For
example, the estimate of β1820 = 0.27 in column 3 indicates that Atlantic traders grew,
on average, 31 percent (≈0.27 log points) more than non-Atlantic trader West European
nations between 1500 and 1820. Columns 4-7 report similar results to those in Table 2.
The pattern is the same when the sample is extended to 1870, with unweighted regressions,
when Britain is excluded from the sample, and when Asian countries are included.
Columns 8-10 report similar results using the Atlantic coastline-to-area measure.
Panel B of Table 3 reports structured models similar to (2) where we include the
interaction term, P ATj · ln ATt instead of the full set of post-1500 interactions between
P ATj and time dummies. This more structured specification again shows that the
differential growth of Western Europe from 1600 is closely linked to the extension of
Atlantic trader.
Overall both Table 2 and Table 3 show an important role for Atlantic trade in
West European growth. When the effect of Atlantic trade is not taken into account,
the estimates of αt’s are significant, positive and large–Western Europe is growing
faster than Eastern Europe and Asia. Once Atlantic trade interactions are included,
αt’s are typically no longer significant, while the effect of Atlantic trade is very strong.
Furthermore, the estimates show no evidence of differential growth by Atlantic traders
before the age of Atlantic trade.
1.3 Other Determinants of Economic Performance
To check the robustness of our results, Table 4 adds a number of covariates to our basic
regressions. The overall patterns are not affected. To save space, Table 4 only reports
the structured specifications of equation (2).
Weber (1905) and Landes (1998) argue that religion is an important determinant
of economic and social development. To assess the importance of religion, we allow
Protestant countries to grow at different rates than non-Protestant countries by inter-
10
acting a dummy for being a majority Protestant country in 1600 with year dummies
starting in 1600.13 The p-values from the joint significance test reported in columns 1 of
Panels A and C show that when the dependent variable is the urbanization rate, these
interactions are either insignificant or only marginally significant. In contrast, when
the dependent variable is log GDP per capita and we use the Atlantic trader dummy
for our potential Atlantic trade measure (Panel B), there is a significant effect from
these religion×year interactions. Nevertheless, this has little impact on the pattern of
differential growth between Western and Eastern Europe, or between Atlantic and non-
Atlantic trader. Moreover, the quantitative effects of Protestantism on economic growth
are smaller than those of Atlantic trade.14
Many social scientists view war-making as an important factor in the process of state
building and subsequent economic development (e.g., Hintze, 1970, Kennedy, 1987, Tilly,
1990). Incidence of wars might also proxy for the importance of inter-state competition,
which many historians, including Jones (1981) and Hall (1985), have emphasized. To
assess the importance of wars, in columns 2 and 6 we include a variable which is the
average number of years at war during the previous period (a century or half century).
We find that this variable itself is insignificant in the urbanization regressions and has
no effect on the patterns documented so far.15
A popular view sees the roots of European growth in the Roman Empire (e.g., Anderson,
1974, Jones 1981, Landes, 1998), and perhaps in the culture of Ancient Greece.
To investigate whether Roman heritage is important for the Rise of Europe, we created
a dummy that indicates whether a country was part of the Roman Empire. We then
interacted this variable with dates from 1600 onwards to see whether there is differential
growth depending on the extent of Roman heritage (columns 3 and 7). These interactions
are typically insignificant, and do not affect the patterns reported in the previous
tables. The only exception is when we use log GDP per capita as the dependent variable
and the Atlantic trader dummy for P ATj . But in this case, the results indicate
13See the Appendix for the construction of the variables used in this subsection.
14The point estimates (not reported) imply that Protestant countries experienced 4.5 percentage
points greater urbanization growth between 1500 and 1850, and 30 percent more GDP growth between
1500 and 1820. The corresponding numbers for Atlantic traders in the flexible specifications including
the Protestant dummy interacted with dates from 1600 are 8.4 percentage points more urbanization
and 41 percent more GDP growth.
15As an alternative exercise more favorable to the war hypothesis, we also controlled for the average
number of years at war that ended in victory during the previous 50 or 100 years. To the extent that
rich nations are more likely to succeed in war, the coefficient on this variable will be biased upwards.
The inclusion of this variable has remarkably little effect on our estimates of the interaction between
access to the Atlantic (or Atlantic trader) and the post-1500 years (or the volume of Atlantic trade),
and this war variable itself is insignificant when the dependent variable is the urbanization rate and
marginally significant with log GDP per capita.
11
that countries with Roman heritage grew more rapidly between 1400 and 1600, and
significantly slower thereafter.
Finally, in columns 4 and 8 we add interactions between distance from the equator
(the absolute value of the latitude of the nation’s capital) and dates from 1600 to see
whether the move of economic activity away from Southern towards Northern Europe
can explain the rise of Atlantic nations. Once again the addition of these variables does
not affect the importance of Atlantic trade, and the latitude interactions are typically
insignificant (except in Panel B where the point estimates have the wrong sign).
1.4 Urban Expansion and Atlantic Ports
We next turn to an analysis of data on the population of individual cities compiled
by Bairoch, Batou and Ch`evre (1988). Figure 4A shows that the urban expansion of
Western Europe was driven by cities that were Atlantic ports. Table 5 confirms this
pattern with regression analysis. It estimates models similar to (1), with the log of
city-level urban population as the dependent variable. The key right-hand side variable
is the interaction between a dummy indicating whether the city is an Atlantic port (or
in our alternative specification, whether it is a potential Atlantic port), denoted by APi,
and dummies from 1500.16 The sample for all regressions in Table 5 is the balanced
panel of cities for which we have observations in each date.17
In column 1, APi is a dummy for Atlantic port, and observations are weighted by
current population in each year. The interactions between the Atlantic port dummy
and dates after 1600, the APi · dt terms, are statistically and economically significant
and positive. For example, the coefficient of 0.79 implies that Atlantic ports grew approximately
120 percent (≈0.79 log points) relative to other cities between 1300-1400
and 1800. Notably, there appears to be no differential growth of Atlantic ports before
1600, once again supporting the notion that the growth of these ports is related to the
emergence of trading and colonial opportunities via the Atlantic. In the bottom panel,
16See the Appendix of AJR (2002b) for the list of Atlantic ports in our panel. In Figures 4 and 5,
we use the definition of actual Atlantic port. In the regression analysis, we also report results with a
dummy for potential Atlantic port. The distinction between Atlantic port and potential Atlantic port
parallels our use of Atlantic trader dummy and the coastline-to-area measure of potential for Atlantic
trade in Tables 2, 3 and 4.
17The focus on a balanced panel of cities avoids problems of composition bias, which would result
from the fact that cities enter the data set only once they exceed a certain threshold (typically 5,000
people). For example, if an area is growing rapidly, the population of the smaller cities in this area will
also grow and exceed the relevant threshold, but the addition of cities with population around 5,000
may reduce the average population of the cities in this area. Nevertheless, in practice this bias does not
seem to be important, and in AJR (2002b) we report similar results using a larger, unbalanced panel
of cities.
12
we report results from a structured specification similar to equation (2). Once again,
the coefficient on the interaction term between the volume of Atlantic trade and the
Atlantic port dummy is highly significant, and the R2 of this more restrictive regression
is almost the same as the regression reported in the top panel.
Column 2 reports estimates from an unweighted regression. The results are similar,
but quantitatively smaller, since large Atlantic ports, such as London and Amsterdam,
no longer get more weight. Columns 3 and 4 report weighted and unweighted estimates
from similar models, with a dummy for potential Atlantic port– that is, any city that in
our balanced panel that could have been used as a port for Atlantic trade. The results
are similar to those in columns 1 and 2.18 Column 5 drops London and Amsterdam
to show that the results are not driven by these two major cities. The coefficients on
Atlantic port times year interactions are approximately halved from 1700 onwards, but
they remain significant. Column 6 adds a full set of country times year interactions
to show the differential growth of Atlantic ports relative to other cities in the same
country. The coefficients on Atlantic port times year interactions after 1700 are about
half those of column 1, but still highly statistically significant. Column 7 adds Asian
cities from Chandler (1987), so now West European cities are being compared to both
East European and Asian cities. The results are similar, but also show the differential
growth of all West European cities relative to Asian cities.19
Is there something special about ports, or is it Atlantic ports that are behaving
differently after 1500? To answer this question, Figure 4B and column 8 show that
Mediterranean ports grew at similar rates to inland European cities; what we find is not
a general port effect but an Atlantic port effect.
Was the urban and economic expansion of Atlantic nations driven solely by the
growth of Atlantic ports? Figure 5A shows the expansion of Iberian (Spanish and Portuguese)
Atlantic ports, other Iberian cities, and West European inland cities. Almost
all of the differential growth of Spain and Portugal comes from Atlantic ports. In fact,
non-Atlantic parts of Spain and Portugal grew slower than West European inland cities.
Relevant to our hypothesis below, this Iberian pattern contrasts with the steady growth
18To allow for the specification test discussed in the text, these regressions use 1300-1400 as the base
period. Because there was rapid growth in a few potential–but not actual–Atlantic ports from 1400 to
1500, some of the coefficients on potential Atlantic port are higher than the corresponding coefficients
on Atlantic port. However, cumulative growth between 1500 and any subsequent date is always higher
for Atlantic ports than for potential Atlantic ports. It should also be noted that some potential Atlantic
ports flourished as a result of secondary trade from the Atlantic.
19We also investigated the importance of the same controls used in Table 4 for country-level growth.
The results, which are reported in AJR (2002b), show that the pattern in Table 5 is robust to the
inclusion of these controls.
13
of non-Atlantic British cities shown in Figure 5B (notice that the non-Atlantic British
line starts below the West European line and overtakes it by 1850, see AJR 2002b for
further evidence).
1.5 Interpretation
The evidence presented so far has established a significant relationship between the
potential for Atlantic trade and post-1500 economic development, and suggests that the
opportunities to trade through the Atlantic, and the associated profits from colonialism
and slavery, played an important role in the Rise of Europe. This evidence weighs
against theories linking the Rise of Western Europe to the continuation of pre-1500
trends driven by certain distinctive characteristics of European nations or cultures, such
as Roman heritage or religion.
At face value, this evidence is more consistent with theories emphasizing the direct
contribution of profits from Atlantic trade, colonialism and slavery, such as those
advanced by Williams (1944), Frank (1978), and Wallerstein (1974-1980). It is undoubtedly
true that colonial relations with the New World and Asia contributed to European
growth. Nevertheless, quantitative analyses, for example, Engerman (1972), Engerman
and O’Brien (1981), O’Brien (1982), and Bairoch (1995, chapter 5), suggest that the
volume of trade and the profits generated by Atlantic trade appear to be too small to
account for much of European growth directly. Atlantic trade may have also played
an important direct role by inducing a reallocation of resources within Europe, even if
profits from trading were low (as would be the case in a competitive economy). This
direct channel is unlikely to be the whole story either, since the volume of trade was
small. For example, Bairoch (1995) calculates that commodity trade between Western
Europe and the rest of the world amounted to less than 4 percent of the GNP of Western
Europe before 1800. Although recent work by Inikori (2002) argues that profits from
colonial activities, in particular from the slave trade, were larger than those estimated
by O’Brien, even with his estimates, the direct effect of Atlantic trade and colonialism
could account for the Rise of Europe only with significant increasing returns to scale in
leading sectors.20
20For example, O’Brien (1982) calculates that total profits from British trade with less developed
regions of the world during the late 18th century were approximately $5.6 million, while total gross
investment during the same period stood at $10.3 million. Inikori (2002, Table 4.2) suggests that
imports from the periphery around 1800 were about double O’Brien’s estimate. During this period, the
aggregate savings rate was between 12 and 14 percent, so if we assume that this savings rate also applies
to profits from trade, the contribution of these profits to aggregate capital accumulation would be less
than 15 percent, even using Inikori’s estimates. Even assuming considerably higher savings rates, the
14
Overall, therefore, the weight of evidence inclines us towards a view in which the
Rise of Europe reflects not only the direct effects of Atlantic trade and colonialism, but
also a major social transformation induced by these opportunities.
2 OurHypothesis
2.1 The Argument
Our hypothesis is that Atlantic trade–the opening of the sea routes to the New World,
Africa, and Asia and the building of colonial empires–contributed to the process ofWest
European growth between 1500 and 1850 not only through its direct economic effects,
but also indirectly by inducing fundamental institutional changes. Atlantic trade in
Britain and the Netherlands (or more appropriately, in England and the Duchy of Burgundy)
altered the balance of political power by enriching and strengthening commercial
interests outside the royal circle, including various overseas merchants, slave traders and
various colonial planters. Through this channel, it contributed to the emergence of political
institutions protecting merchants against royal power.21 Our hypothesis also implies
that the tendency for institutional change to emerge should have been much stronger in
societies with already-existing checks on royal power than in countries with absolutist
regimes and monarchy-controlled trade monopolies, because in these latter countries
Atlantic trade did not enrich and strengthen merchant groups outside the royal circle as
much, and did not disturb the political status quo.
This hypothesis can be broken into 4 subhypotheses:
1. Political institutions placing limits and constraints on state power are essential
for the incentives to undertake investments and for sustained economic growth.
2. In early modern Europe, such political institutions were favored by commercial
interests outside the royal circle, but were not welcome by the monarchy and its allies.
3. Institutions favored by economically and politically powerful groups are more
likely to prevail.
4. In countries with non-absolutist initial political institutions, Atlantic trade and
colonial activity enriched and strengthened commercial interests, including new groups
without ties to the monarchy.
Together these four subhypotheses yield our main hypothesis. In countries with easy
contribution would remain relatively small.
21An additional channel via which Atlantic trade may have contributed to institutional change may
be the desire of the monarchy to secure the property rights of merchants in order to encourage longterm
investments in long distance trade. Our reading of the relevant history, discussed below, makes us
believe that the greater contribution of Atlantic trade to the development of capitalist institutions was
by strengthening commercial interests in favor of political change in their fight against the monarchy.
15
access to the Atlantic and without a strong absolutist monarchy, Atlantic trade provided
substantial profits and political power for commercial interests outside the royal circle.
This group could then demand and obtain significant institutional reforms protecting
their property rights. With their newly gained power and property rights, they took
advantage of the growth opportunities offered by Atlantic trade, invested more, traded
more, and fueled the First Great Divergence.22
Initial institutions placing sufficient checks on the monarchy are essential for the
fourth subhypothesis, so that merchants not directly associated with the crown benefit
significantly from Atlantic trade. When the power of the crown was relatively unchecked,
as in Spain, Portugal and France, trade was largely monopolized and regulated, the crown
and its allies became the main beneficiaries of the Atlantic expansion, and the same
induced institutional changes did not take place. Therefore, our hypothesis explains not
only the major role played by Atlantic trade in West European growth, but also why
economic growth took off in Britain and the Netherlands, and not in Spain and Portugal.
AJR (2002b) provided historical evidence consistent with these subhypotheses. Space
constraints preclude us from going into details here. We refer the reader to that paper
for a more detailed discussion, and briefly discuss the evidence related to the fourth
subhypothesis, which is perhaps the most important for our argument.
2.2 Atlantic Trade and Commercial Interests
We now discuss the major changes in the political institutions of Britain and the Netherlands.
Our argument highlights that in both cases: (1) the political institutions at the
beginning of the 16th century, though not as absolutist as in Spain and Portugal, did
not provide secure property rights to commercial interests outside the royal circle;23 (2)
there was significant conflict between these merchant groups and the monarchy; (3) Atlantic
trade created large profits for some of these merchants in favor of institutional
change, who then used part of these profits to support the conflict against the crown.
Britain. In the British case the two milestones in the emergence of political institutions
constraining royal power are the (English) Civil War of 1642-49, when Parliamentarian
forces defeated Charles I, and the Glorious Revolution of 1688—89, where
James II was deposed by the Parliament with the help of an invading Dutch army, and
22The establishment of political institutions limiting the power of the monarchy may have also created
positive spillovers on the rest of the economy, especially on industrial capitalists (consistent with the
subsequent growth of non-Atlantic British cities in Figure 5B).
23More explicitly, these commercial interests included merchants not receiving crown-granted monopolies,
slave traders, various producers in the colonies and parts of the gentry in Britain, and the
majority of the Dutch merchants not allied with the Habsburg monarchy in the Netherlands.
16
replaced by William of Orange and a parliamentary regime with a constitutional monarchy.
Although there is no consensus among historians on the relative importance of
these two events, this is secondary for our focus. What is important is that there was
a major improvement in British political institutions between the mid 17th and early
18th centuries.
Although after the War of the Roses, Britain was never as absolutist as France,
Portugal and Spain, both the Tudor and Stuart monarchs consistently attempted to
expand their powers. The insecurity of property rights was clear during the reign of
Henry VIII, when there were continual attempts to regulate trade and undermine the
powers of the Parliament (see Elton, 1991). A significant attempt to establish a form
of absolutism came during the period of so-called “personal rule” of Charles I, after he
dissolved his third parliament in 1629, raised taxes in an unconstitutional way, and used
the Star Chamber to manipulate legal decisions in his favor (Sharpe, 1992).
Though undoubtedly complex social events, both the Civil War and the Glorious
Revolution were also battles over the rights and prerogatives of the monarchy.24 In both
cases, commercial interests (including large segments, but not all, of the merchants and
the gentry) predominantly sided with those demanding restrictions on the power of the
monarchy. During the Civil War, for example, the majority of the merchants, and even
many of those with royal monopolies, supported the Parliament (see Brenner, 1973, 2003,
Keeler, 1954, and Brunton and Pennington, 1954).25 Members of the Commons from
the City of London, which was the main center of mercantile activity, as well as many
non-London commercial constituencies, such as Southampton, Newcastle and Liverpool,
supported the Parliament against the King. Sacks (1991, pp. 230-247) shows that in
Bristol trading, commercial and industrial interests outside of theMerchant Adventurers,
the trading company then enjoying the royal monopoly, were Parliamentarians. Brunton
24Other prominent interpretations of the English Civil War have emphasized various factors apart
from those we stress here. Russell (1990) argues that the Civil War was a plot by the traditional
aristocracy to regain power it had lost under the Tudors. Many, for example, Morrill (1993), focus on
the role of religious differences in determining who supported which side, and recent work by Manning
(1996) stresses more general class conflict. Although there are doubtless elements of truth in these
approaches, the general role of mercantile interests seems undeniable (see Richardson, 1998, for a
balanced overview of the debate).
25Pearl’s seminal study (1961) argued that there were political divisions between groups such as the
Merchant Adventurers who benefited from monopolies granted by the crown and new merchants, who
did not. For example, the two pre-Civil War MPs for Bristol, Humphrey Hooke and Richard Long
were Royalists. Ashton (1979, 1996), on the other hand, documented that even merchants who enjoyed
monopolies tended to oppose the crown by the Civil War, and argued “the majority of the City fathers,
far from being the natural supporters of Stuart absolutism at the end of the period of Charles I’s
personal rule in the late 1630’s, were as alienated from royal policies as were the vast majority of the
political nation” (1996, p. 3).
17
and Pennington (1954, p. 62) also note that “in the country as a whole there was
probably a preponderance of Parliamentarian feeling among merchants.”
The situation for the Glorious Revolution is similar. The East India Company under
the control of Josiah Child supported James II, his claim to tax without consent of
Parliament, and his right to grant trading monopolies–of which it was the main benefi-
ciary. But the majority of commercial interests, alienated by James II’s grants of various
monopoly privileges, and especially the interlopers–merchants trying to break into trade
with Asia–were on the side of the revolution (Carruthers, 1996, Pincus, 2002). These
merchants also received strong support from Whigs who sought to constrain the king
(Horwitz, 1978). Summarizing the evidence, Pincus (2002, p. 34) concludes “England’s
merchant community actively supported William’s plan for invasion, and provided a key
financial prop to the regime in the critical early months.”
The victory of Parliament in the Civil War and after the Glorious Revolution introduced
major checks on royal power and strengthened the rights of merchants. After the
Civil War, the fraction of MPs who were merchants increased dramatically. Although,
even in the 1690s, this number was not large enough to constitute a majority on its
own, as Stasavage (2003) shows, the interests of merchants were assured by the formation
of the Whig coalition of merchants and Protestant landowners. This period also
witnessed a series of policies favoring merchants, including the Navigation Acts of 1651
and 1660, which restricted trade with British colonies to British ships and merchants
(Farnell, 1964, Cooper, 1972) and strengthened the position of British overseas traders
(especially slave traders, see Holmes, 1993, p. 64). Similarly, the Glorious Revolution led
to a series of economic reforms sought by merchants outside the royal circle, including
the dismantling of all monopoly charters, except the East India Company (Gauci, 2001),
and the establishment of the Bank of England. The conventional wisdom in economic
history emphasizes the importance of these institutional changes for the protection of
property rights, and how they led to a wave of innovations in economic institutions, particularly
in financial markets (e.g., North and Weingast, 1989, Carruthers, 1996, Neal,
2000).
Critically for our thesis, the major changes in political institutions and the new
assertiveness of merchant groups coincided with the expansion of British mercantile
groups trading through the Atlantic. The East India Company was founded in 1600,
and from 1600 to 1630 there was an unprecedented wave of investment by merchants,
gentry, and even some aristocracy in overseas ventures (Rabb, 1967). Virginia tobacco
cultivation boomed in the 1620s and from the 1640s the highly profitable Caribbean
18
sugar colonies started to develop. Finally, in the 1650s the British began to take over
the Atlantic slave trade.
A number of historians, most notably Brenner (2003), have emphasized that Atlantic
merchants were critical in ensuring the military victory of Parliament in the Civil War.
In his famous book Stone also points out that: “... other important merchant elements
can now be identified, men interested especially in the American trades, in New England
colonization, and in breaking the monopoly of the East India and Levant Companies.
They were new men in new fields of entrepreneurial endeavor who chafed at the political
and economic stranglehold of the older established monopolistic oligarchies. These men
were important members of the group of radicals who seized control of London at a
critical moment in 1641, and so swung the power and influence of the city decisively on
the side of Parliament” (1972, p. 144).
Atlantic trade indeed created large profits for the fortunate who succeeded in this
high-risk endeavor. In the Appendix, we use data on profits from Chaudhuri (1965)
and de Vries and van der Woude (1997), on investment from Rabb (1967), on trade
from Inikori (2002) and de Vries (2001), and on rates of return from Grassby (1969
and 1970) and O’Brien (1982) to estimate profits of various merchant companies, slave
traders and colonial planters from Atlantic trade during this period. These estimates
suggest that profits from Atlantic trade were negligible before 1575, about $40,000
on average per annum from 1576-1600 (mostly from a few highly profitable privateering
expeditions), perhaps $200,000 on average per annum from 1601-1650, around $500,000
p.a. from 1651-1675, and then rose with the expansion of sugar and the slave trade to
around $900,000 p.a. in 1676-1700, $1.7m p.a. in 1701-1750, and probably about $5m
p.a. in the late 18th century (all figures adjusted to 1600 prices using the index of
building craftsmen’s wages from Phelps-Brown and Hopkins, 1955). These profits were
substantial relative to the personal wealth of merchants and gentry during this time
period. For example, personal wealth of $ 10,000 in the early 17th century was enough
to be very rich. A minimum investment of $2,000 was required to become a director
of the East India Company, and $200 represented a substantial investment (Brenner,
1973, pp. 62-63; Brenner, 2003, p. 78). Moreover, because profits from Atlantic trade
were highly concentrated, they created a number of very wealthy merchants (see Grassby,
1995, p. 248 and p. 263). These profits were also large relative to the resources necessary
to make a difference politically and militarily.26
26The English monarch was always short of cash from 1550 to 1688, and war typically required
additional funds. For example, King Charles I was forced to recall Parliament in 1640 because he
needed to raise about $ 300,000 ($250,000 in 1600 prices) for war against Scotland–enough to pay and
19
Many merchants used their profits from Atlantic trade to support the conflict against
the crown. For example, the Earl of Warwick, who earned at least $50,000 from privateering
in one year prior to the Civil War (Craven, 1930), applied his fortune and
experience with naval warfare to effectively oppose the king.27 More generally, Parliament
during the Civil War was partly financed by taxes on and profits from Atlantic
trade. Parliamentary leaders such as Sir Edwin Sandys and John Pym were active in
colonization and trade with the Americas. James I, well aware of the links between major
Atlantic trading ventures and Parliamentary opposition, intervened in the election
of treasurer for the Virginia Company, saying “Choose the devil if you will, but not Sir
Edwin Sandys” (Rabb, 1998, p. 349). Similarly, for the Glorious Revolution, Pincus
(2002, pp. 32-33) provides evidence that “the merchant community poured money into
William of Orange’s coffers in 1688”– perhaps around $ 800,000 (about $500,000 in
1600 prices), enough to pay for a sizable army.
The Netherlands. Dutch merchants always had considerable autonomy and access
to profitable trade opportunities. Nevertheless, prior to the Dutch Revolt, the Netherlands
(in fact, the entire Duchy of Burgundy) was part of the Habsburg Empire, and the
political power of Dutch merchants was limited. The Habsburg monarchy consistently
attempted to increase its political dominance over and fiscal revenues from the Netherlands
(Fritschy, ’t Hart, and Horlings, 2001). The critical improvement in Dutch political
institutions was therefore the establishment of the independent Dutch Republic, with
political dominance and economic security for merchants, including both the established
wealthy Regents and the new merchants immigrating from Antwerp and Germany.28
Dutch politics was shaped by the conflict between Dutch merchants and the Habsburg
monarchy starting in the 15th century, and before then by the conflict between merchants
and the Duke of Burgundy. By 1493 Maximilian of Habsburg had reversed the Grand
Privilege of 1477, which gave the States General the right to gather on their own initiative
equip about 12,000 soldiers for a year (Ashton, 1960, p.176). Total English government revenues were
around $500,000 in 1600 and about $850,000 in 1640 (Bean, 1973). Armies on both sides of the English
Civil War were small, 10,000-20,000 men, and most of the conflict was small-scale local operations by
regional forces (Parker, 1988, p. 28 and p. 41). Parliament fielded 27,000 at the battle of Marston
Moor and just 13,000 at Naseby; the presence or absence of a few thousand troops was therefore decisive
(Parker, 1988, p. 41). Kennedy (1987 p. 63) estimates that the average annual cost of a soldier was
around $27 in 1657 (about $20 in 1600 prices).
27A privateer is an armed private vessel bearing the authorization or commission of a sovereign power
to attack an enemy, i.e., a privately funded and manned extension of a country’s naval forces. Privateers
typically engaged in trading activities as well as fighting (see, for example, the case of John Hawkins
discussed in Rodger, 1997, p. 201).
28By 1600 a third of the population of Amsterdam were immigrants (Israel, 1995, p. 309). In 1631
there were 685 citizens of Amsterdam with wealth over 25,000 florins. Only half of them were native
Hollanders (Parker, 1977, p. 251).
20
and curbed the right of the ruler to raise taxes. After 1552, war with France and England
increased the Habsburgs’ fiscal needs and led them to impose a large tax burden on the
Netherlands. Growing fiscal and religious resentment in 1572 led to a series of uprisings,
mostly orchestrated by commercial interests (see Israel, 1995). These culminated in a
war of independence, which began with the Revolt in the 1570s and did not end until
1648, punctuated by Philip II diverting resources to intervene in France after 1590, the
successful Dutch offensives of 1591-97 under the command of Maurice of Nassau, the
embargoes against Dutch trade with Spain and Portugal in 1585-90, 1598-1609, 1621-47,
and the Twelve Years truce from 1609 to 1621.
The major turning point came in the 1590s when important changes in Dutch military
and commercial strategy became evident. New military tactics made it possible for the
Dutch to hold their own against experienced Spanish infantry (Parker, 1988, pp. 19-
20). This was combined with a fiscal and financial “revolution” that allowed states,
particularly Holland, to both increase their tax revenues and borrow against future
taxes in order to finance the war effort (Fritschy, 2003). At the same time, the Dutch
took the critical strategic step of seeking direct access to Asian and American trade
centers. This both enriched a generation of Dutch merchants and undermined Spanish
and Portuguese revenues sufficiently to induce Philip III to offer peace. By 1605 it
was clear to a Spanish royal councillor, the Count of Olivares, that victory would go to
“whoever is left with the last escudo” (Parker, 1977, p. 238).
Merchants were naturally the primary political and economic force on the side of
independence. De Vries and van der Woude (1997) argue that “urban economic interests
ultimately believed it advantageous to escape the Habsburg imperial framework”
(p. 369). They also note that, in the case of Amsterdam, the “[Habsburgs’] opponents
included most of the city’s international merchants....[I]n 1578 a new Amsterdam city
council threw the city’s lot in with the Prince of Orange... among the merchants returning
from... exile were [those whose families] and several generations of their descendents
would long dominate the city” (1997, p. 365).
Commercial interests involved in the Atlantic were particularly important in the
shaping of the conflict (see for example, Israel, 1982, 1995, and van der Wee, 1993,
pp. 272-273). In 1609, in an attempt to prevent the creation of the Dutch West India
Company, Philip III offered peace and independence in return for a Dutch withdrawal
from both the West and East Indies. But these terms were “simply not feasible politically
because many regents and elite merchants had invested heavily in the [Dutch
East India Company]” (Israel, 1995, p. 402). Prominent in the anti-peace camp was
21
the famous Dutch leader and general Maurice of Nassau, who was heavily involved in
colonial trades, and “Reynier Pauw, the pre-eminent figure and leader of the anti-truce
faction in Holland, besides being a champion of the West India Company project, had
been a founder member of the East India Company and for many years a director of its
Amsterdam chamber.” (Israel, 1982, p. 40).
It is therefore no surprise that independence put merchants firmly in control of the
political process. De Vries and van der Woude (1997, p. 587) describe the new political
elite following the Dutch Revolt as: “6 to 8% of urban households with incomes in
excess of 1,000 guilders per year. This was the grote burgerij from whom was drawn the
political and commercial leadership of the country. Here we find, first and foremost, the
merchants.” They also point out how merchants dominated the governments of Leiden,
Rotterdam and the cities in two largest states, Zeeland and Holland.
The Dutch economy had been expanding since the 15th century, and experienced
advances in economic institutions, including in shipping, agriculture and finance, particularly
public finance, prior to this revolt (Tracy 1985, van Zanden 1993). Nevertheless,
the potential of these institutions were severely limited under the Habsburg yoke because
of the threat of arbitrary taxation. For example, ’t Hart, Jonker and van Zanden
(1997, Figure 2.3, p. 19) show that, despite the changes in financial institutions in
the mid-16th century, interest rates did not fall systematically until after 1600 when
they declined to about 1/3 of their pre-revolt level. Consequently, the economy appears
to have experienced a major transformation after the process of political change
began. Van Zanden (1993) notes that: “we can see the starting point of the rapid urbanization
at 1580” (pp. 35-36) and continues: “during this transformation process,
the pre-1580 proto-capitalist structure disappeared . . . out of this ‘unspecialised’ class
of small-holders, fishermen, homeworkers and sailors, separate classes of large farmers,
agricultural laborers and craftsmen arose” (p. 39). Similarly, Braudel (1995, p. 547)
dates the start of the divergence between the South and North of Europe to 1590 with
the “explosion” of Dutch commerce and the rise of Amsterdam.
Critical was the Dutch merchants’ improving economic fortunes, partly from Atlantic
trade, which were used to field a powerful army against the Habsburg Empire. The Baltic
trade is widely recognized as important for the Dutch economy in the 16th century, but
profits from Atlantic trade quickly surpassed those from Baltic trade, and provided the
funds necessary for the Dutch military effort against the Habsburgs (Israel, 1989). De
Vries and van der Woude (1997) estimate that the annual profits of the Dutch East India
Company alone between 1630 and 1670, 2.1 million guilders per annum, were more than
22
twice the total annual profits from the Baltic grain trade between 1590 and 1599 (pp.
373 and 447).
Fritschy (2003) estimates that, as a result of these developments, tax revenue per
head in Holland rose nearly 5 times from 1575 to 1610, while population increased by
a third (see also Tracy, 2001, Table 7.2). These revenues enabled Holland to provide
960,000 guilders for the war in 1579 and to pay 5m guilders in 1599 (Parker, 1977, p.
251). Israel (1995, pp. 241-242) summarizes the basic reason for the Dutch victory
as follows: “From 1590, there was a dramatic improvement in the Republic’s economic
circumstances. Commerce and shipping expanded enormously, as did the towns. As a
result, the financial power of the states rapidly grew, and it was possible to improve the
army vastly, both qualitatively, and quantitatively, within a short space of time. The
army increased from 20,000 men in 1588 to 32,000 by 1595, and its artillery, methods of
transportation, and training were transformed.” By 1629, the Dutch were able to field
an army of 77,000 men, 50% larger than the Spanish army of Flanders (Israel, 1995, p.
507).
Overall, both the British and Dutch evidence therefore appears favorable to our
hypothesis that Atlantic trade enriched a group of merchants who then played a critical
role in the emergence of new political institutions constraining the power of the crown.
Spain, Portugal and France. There is general agreement that Spanish and Portuguese
political institutions at the turn of the 16th century were more absolutist than those in
Britain and the Netherlands, and did not experience similar improvements.29
A key difference between these cases and the British-Dutch patterns is the organization
of trade, which, in turn, reflected differences in political institutions. Throughout
this period, the granting of trade monopolies was a central tool for the rulers to raise
revenue. When the power of the monarchs was constrained, they were unable to use this
fiscal tool. For example, the English Parliament successfully blocked many attempts of
both Tudor and Stuart monarchs to create such monopolies (Hill, 1969). Consequently,
in Britain “most trade was carried on by individuals and small partnerships, and not by
29Davis (1973b, p. 66), for example, emphasizes the high degree of absolute control by the monarchy
in Spain as follows: [in Castille] “the king ruled subject only to weak constitutional restraints. In the
first decades of the sixteenth century the crown had reduced the pretensions of the Castillian nobility
and towns, so that the representative body, the Cortes, could obstruct but not in the last resort prevent
royal tax raising,” and contrasts this with the situation in Britain (e.g., Davis, 1973b, p. 210).
The modern literature, in particular, Thompson (1994) and Graves (2001), suggests that the extent of
Spanish absolutism has been overemphasized by scholars such as North and Thomas (1973), and points
out important differences between Castille and other parts of Iberia such as Aragon and Catalonia.
Nevertheless, it is certainly true that the Spanish Crown was able to create trade monopolies and raise
taxes in ways that the Tudor and Stuart monarchies could not.
23
the Company of Merchant Adventurers, the Levant Company ... or others of their kind”
(Davis, 1973b, p. 41). At least by 1600 there was quite free entry into the British merchant
class (Lang, 1974). In contrast, Cameron (1993, p. 127) describes the Portuguese
situation as follows: “The spice trade in the East Indies of the Portuguese Empire was a
crown monopoly; the Portuguese navy doubled as a merchant fleet, and all spices had to
be sold through the Casa da India (India House) in Lisbon ... no commerce existed between
Portugal and the East except that organized and controlled by the state” (see also
Boxer, 1985, and Hamilton, 1948). Similarly, in Spain colonial trade was a monopoly of
the Crown of Castille and was delegated to the Casa de Contrataci´on (House of Trade)
in Seville, which was itself closely monitored by the government (Parry, 1966, Ch 2).
France, on the other hand, can be viewed as an intermediate case. Although French
institutions were equally absolutist (Church, 1969, Parrott, 2001), early Atlantic activity
enriched some merchant groups, in particular, the protestant Huguenots. However, the
monarchy soon clashed with and defeated the Huguenots, first with the siege of La
Rochelle by Louis XIII and then the outlawing of the Protestant church by Louis XIV
(see, e.g., Scoville, 1960). The monarchy then kept much of overseas trading activity
as a royal monopoly, especially under Colbert (see, e.g., Davis, 1973a, pp. 222-224,
and Doyle, 1974, pp. 210-211). Nevertheless, certain strong French commercial and
industrial interests developed, and arguably, forced institutional change before, during
and after the French Revolution (see Lefebvre, 1947, and Doyle, 1988, for the debate on
the origins of the French Revolution).
Overall, the evidence is therefore consistent with our thesis that in Spain and Portugal,
and also largely in France, merchant interests with sufficient power to challenge
the crown did not develop because the crown, and groups allied to it, were the main
beneficiaries of the profits from transoceanic trade and plunder.
3 Atlantic Trade and Institutional Change
We now attempt to substantiate our hypothesis further by providing empirical evidence
on the link between changes in political institutions and Atlantic trade. A prerequisite
for this exercise is a measure of relevant political institutions. Unfortunately, no such
measure exists for this period.30 So as a first step, we attempted to create a measure
of political institutions for European countries between 1300 and 1850, adapting the
30An alternative approach would be to use the terms of finance for trading entities, as suggested by
one of our reviewers. Although there are some data on this, the coverage is not broad enough for our
purposes. Moreover, the terms of finance may be affected by the demand for and supply of financial
resources as well as the underlying security of property rights.
24
definition of “constraint on the executive” from Gurr’s Polity data set. This is a useful
concept since it measures limitations on the arbitrary use of power by the executive (for
the relevant time period, the monarchy), and is presumably correlated with the security
of property rights for merchants and the control over the monopoly of overseas trade by
the monarchy.31
We follow the Polity IV coding handbook, giving a score 1 to 7 for constraint on the
executive to each country.32 For 1800 and 1850, we use the Polity coding for constraint
on the executive, where available. For earlier periods, we coded these measures ourselves.
The main source for this exercise was Langer (1972), a classic historical encyclopedia,
written with a focus on constitutional events. We supplemented this work with the more
recent edition by Stearns (2001). While there may be disagreement about the precise
values used in particular years, the general level of constraint on the executive does not
appear to be controversial. For example, the absolutist regimes of France, Portugal, and
Spain clearly had much less constraint on the executive than did the Netherlands after
independence or England after the Civil War. AJR (2002b) gives further details and
reports the entire series.
Table 6 documents the differential changes in institutions between Atlantic traders
and other West European nations by estimating an equation similar to (1) with constraint
on the executive as the left-hand side variable. The results show significant
differential improvements in institutions among Atlantic traders, and no evidence of differential
pre-existing trends. Unlike our results when urbanization was the dependent
variable, however, even after the inclusion of Atlantic trade interactions, there is some
evidence of differential West European effects.
Other columns use the same controls and time interactions as in Table 4. Although
the F-statistics show that many of these time interactions are significant, neither Protestantism,
nor wars, nor Roman heritage, nor latitude appear to have led to greater insti-
31The measure of constraint on the executive may not be not ideal for our purposes, however, since
a number of significant constraints on monarchs were imposed by the nobles, and did not necessarily
serve to protect the rights of merchants. For example, in much of the 1500-1750 period, Poland had
a highly constrained executive. But there was relatively little protection for urban merchants–most
of the rights rested with the nobility. For this reason, we modified the definition of constraint on the
executive to create an alternative measure, which we refer to as “protection for capital”. The coding
of this measure depends on the formal rights given to urban merchants, particularly their protection in
the event of a dispute with the nobility or monarch. The results using this measure are similar to the
those using constraint on the executive, and are contained in AJR (2002b).
32A value of 1 means “there are no regular limitations on the executive’s actions,” 3 means “there
are some real but limited restraints on the executive,” 5 means “the executive has more effective
authority than any accountability group, but is subject to substantial constraints by them,” and 7
means “accountability groups have effective authority equal to or greater than the executive in most
activity.” Scores of 2, 4, and 6 are used for intermediate values. See Marshall and Jaggers (2000).
25
tutional change after 1500 (for example, institutions in Protestant countries improved
more rapidly until 1750, and significantly slower thereafter).
Overall, these results suggest that, following the surge in Atlantic trade, there were
greater strides towards better political institutions in nations engaged in Atlantic trade
and colonialism (or in those with a greater potential to engage in Atlantic trade).
4 The Role of Initial Institutions
We now investigate whether, as implied by our hypothesis, it was predominantly societies
with less absolutist initial institutions (and relatedly, those without widespread royal
granted monopoly rights in overseas trade) that took advantage of the opportunities
offered by Atlantic trade. We also investigate the related hypothesis of North and
Thomas (1973) and Jones (1981) that post-1500 developments largely reflect divergence
between societies that had very different political institutions at the turn of the 15th
century. This differs from our hypothesis which emphasizes the interaction between
initial political institutions and Atlantic trade.
To investigate these ideas, we estimate models of the following form:
ujt = dt+δj+ X t≥1600
αt·W Ej ·dt+β·ln ATt·P ATj+ X t≥1500
γt·Ij,1415·dt+η·ln ATt·P ATj ·Ij,1415+εjt,
(3)
where, as before, ujt is the urbanization rate, ln ATt is our measure of Atlantic trade,
P ATj is again either a dummy for Atlantic trader or the Atlantic coastline-to-area ratio,
and Ij,1415 is country j’s initial institutions, calculated as the average of its constraint on
the executive in 1400 and 1500. We choose the average of these two dates to capture the
long-term institutional differences in the pre-1500 period. The γt · Ij,1415 · dt terms allow
any differential economic trends related to differences in initial institutions that would
apply even with no access to the Atlantic. Significant coefficients on these interaction
terms would imply that at least part of the post-1500 developments in Europe reflect
divergent paths taken by countries with different initial institutions, independent of the
effects of Atlantic trade. The table reports the p-value from a joint significance test for
all of these interaction terms. The ln ATt · P ATj term, on the other hand, measures
the effect of Atlantic trade for a given level of institutions. In the table, this term is
evaluated at the lowest score of institutions, i.e., for Ij,1415 = 1, so the coefficient on this
term measures the growth contribution of Atlantic trade and access to the Atlantic for
a society with the worst possible initial institutions.
The variable ln ATt · P ATj · Ij,1415 tests the hypothesis of interest. A significant coef-
ficient η implies that there were divergent paths taken by countries with different initial
26
institutions, but this divergence relates significantly to whether they took advantage of
the opportunities presented by Atlantic trade.
The results are reported in Table 7 using the Atlantic trader dummy for the potential
for Atlantic trade, P ATj (results using the coastline-to-area ratio measure are identical,
and are contained in AJR, 2002b). Panel A presents estimates of equation (3), while
Panel B presents estimates of a similar equation with log income per capita as the
dependent variable. Panel C shows the role of the interaction between initial institutions
and Atlantic trade for the evolution of institutions.
The results in all three panels are similar. The interaction between the aggregate
measure of Atlantic trade and potential for Atlantic trade, ln ATt · P ATj , is generally
significant by itself, and also when entered against the γt · Ij,1415 · dt terms. This shows
that the ability to take advantage of Atlantic trade was of major importance for post-
1500 developments. When we add the triple interaction ln ATt · P ATj · Ij,1415, this
is typically the only significant term.33 For example, the coefficient of 0.021 on this
triple interaction term in column 4 implies that urbanization in an Atlantic trader with
an initial constraint on the executive equal to 3, like the Netherlands, grew by 15.7
percentage points more than urbanization in an Atlantic trader country with the worst
initial institutions, 1 (0.021 × 2 × 3.74 ≈ 0.157, where 3.74 is the change in the log
volume of Atlantic trade between 1500 and 1800).
These results imply that the patterns reported so far are explained almost entirely
by countries with initial institutions constraining rulers taking advantage of the opportunities
presented by Atlantic trade. Although Spain and Portugal benefited from the
transfer of resources from the New World during the 16th century, they neither developed
the political institutions to support economic growth nor experienced sustained
economic development. Our evidence suggests that these differential patterns are closely
related to the fact that they started the post-1500 era with absolutist regimes in control
of overseas activity. On the other hand, it appears that the Italian city-states, which
started with relatively non-absolutist institutions around 1500, did not experience further
economic development because they did not have as easy access to the Atlantic
as Britain and the Netherlands did. Britain and the Netherlands were the economic
winners because they had both relatively good political institutions to start with and
ready access to the Atlantic.
33When the ln ATt · P ATj · Ij,1415 term is included, ln ATt · P ATj has typically a negative and
sometimes significant coefficient–reinforcing the conclusion that nations with absolutist institutions
did not benefit much, or even at all, from the opportunity to trade in the Atlantic. In addition, in three
specifications in Table 7, the interactions between initial institutions and dates after 1600 are jointly
significant, but the coefficients (not shown in the tables) are negative.
27
5 Conclusion
This paper documented a distinctive and interesting fact related to the process of European
growth: between 1500 and 1850, the growth of nations with access to the Atlantic
and of Atlantic ports accounts for most of the differential growth of Western Europe
relative to Eastern Europe. It therefore appears that the Rise of Europe between 1500
and 1850 was largely the rise of Atlantic Europe and the rise of Atlantic ports. This fact
weighs against theories of the origins of European development emphasizing distinctive
European characteristics and purely internal dynamics, but is consistent with those that
give a prominent role to Atlantic trade and de-emphasize the continuation of pre-1500
trends or permanent European characteristics, such as religion, Roman heritage or European
culture. If these factors are important, it must be because of the interaction
between them and the opportunity to trade in the Atlantic.
We suggested that Atlantic trade contributed to European growth through an indirect
institutional channel as well as via its more obvious direct effects. Our hypothesis
is that Atlantic trade generated large profits for commercial interests in favor of institutional
change in countries which met two crucial preconditions: easy access to the Atlantic
and non-absolutist initial institutions. These profits swung the balance of political
power away from the monarchy and induced significant reforms in political institutions,
which introduced more secure property rights and paved the way for further innovations
in economic institutions. With their newly gained property rights, English and Dutch
merchants nations invested more, traded more and spurred economic growth.
Our analysis stopped before West European industrialization, focusing instead on
economic and political developments between the 16th and 19th centuries. Consequently,
we did not investigate why some successful Atlantic nations, like the Dutch, did not industrialize
early, while Britain and some non-Atlantic nations such as Germany did. We
suspect that the answer is related to inter-state competition, “defensive modernization”
responses of certain European nations, and possibly to the adverse effects of oligarchies
on industrialization, but leave further investigation of this issue for future research.
The process of early modern European growth is undoubtedly multi-faceted. We are
aware that our account leaves out many important aspects of the social and economic
development of Western Europe. Our intention is not to offer a mono-causal explanation
for the Rise of Europe, but rather to suggest that Atlantic trade played a major role in
this process. It is our hope that the empirical patterns documented in this paper and
our hypothesis will encourage further research.
28
6 Appendix: Construction of Key Variables
Country-Level and City-Level Urbanization Data. Calculated from the urban population
dataset of Bairoch, Batou and Ch`evre (1988) and country population estimates
from McEvedy and Jones (1978). Details are provided in the Appendix of AJR (2002b).
Trade Measures. AJR (2002b) explains in detail the construction of our Atlantic and
Mediterranean trade volume measures. These series are annual average voyages equivalent
for ships of 400 deadweight tons. The Mediterranean trade estimates are based on
information on Venetian trade levels from Lane (1934), but we also include Genoa, Catalonia,
and other trading centers (Phillips, 1990). They exclude short haul coastal trade
and trade by the British and Dutch–these countries also engaged in Mediterranean
trade as they built their naval power and trading empires after 1600.
Key sources for our Atlantic trade series are de Vries (2001), Tracy (1990), Davis
(1962), and Steensgaard (1974). We have also constructed an alternative Atlantic trade
series based on O’Rourke and Williamson (2002). Robustness results using this series
are reported in AJR (2002b). The growth of our volume-based Atlantic trade series
matches closely with the sum of annual value of Europe-Africa-New World commerce
series in Inikori (2002, Table 4.8, p. 202) and de Vries’ (2001) trade flows with Asia.
Estimates of British Profits from Trade. All figures are approximately in 1600 prices
using the index of building craftsmen’s wages, constructed by Phelps-Brown and Hopkins
(1955), which show a doubling of wages from 1500 to 1600, then a 50% increase from
1600 to 1650, followed by rough stability through 1700 and a further 50% increase during
the 18th century.
1576-1600: Rabb (1967, pp. 61-62) calculates that total profits from privateering in
1585-1603 were $700,000. Dividing by 25 years gives an average of $28,000 per year,
approximately $40,000 in 1600 prices.
1601-1650: Profits for the vertically integrated Dutch East India Company from
1630-1670 were 2.1m guilders (de Vries and van der Woude, p. 447), British trade
with Asia was around a half of Dutch levels in the 17th century (de Vries 2001), and
the guilder-pound exchange rate fluctuated around 10, so total British profits from
Asian trade (including interlopers and suppliers) were likely around $100,000 per annum
(which is consistent with Chaudhuri, 1965). Around $10m was invested between 1600
and 1630 in joint stock companies active in the New World and Africa (Rabb, 1967).
Even when a company failed to show returns, as with the Virginia Company, individual
colonists and their suppliers could earn good profits. Privateering in the 1630s and 1640s
was highly profitable (Craven, 1930). We assume the same level of earnings in the New
World as in the East India trade, i.e., $100,000 per annum, yielding an estimate of
average annual profits of $200,000 in 1600 prices.
1651-1675: From 1650 we use the annual value of export production in British America
from Inikori (2002, p. 181). This was $421,000 in 1651-70 and $2.7m p.a. for
1711-60; we take the average value for 1651-1700 to be $1m. O’Brien’s (1982) numbers
suggest that profits were 50% of import volume, implying profits of $500,000. To this,
29
we add $100,000 p.a. from the East India trade with the same calculation as above,
yielding profits of $600,000 p.a., or approximately $ 500,000 in 1600 prices.
1676-1700: Inikori’s British America trade estimate is $2.7m p.a. for 1711-60; we
assume $2m p.a. for 1676-1700, which implies profits of $1m. Adding East India profits
of $100,000 gives an average annual profit estimate of $1.1m, or $900,000 in 1600 prices.
1701-1750: Inikori’s British America trade estimate is $6.8m for 1761-80; we take
the average value for 1701-50 to be $4m, thus profits of $2m. Adding again profits of
$100,000 from East India gives an average annual profit estimate of $2.1m, about $
1.7m in 1600 prices.
1751-1800: Inikori’s British America trade estimates is $19,545 for 1781-1800, implies
annual profits of around $10m, i.e., double O’Brien’s profit estimate (approximately,
$5m in 1600 prices).
It is worth noting that our profit estimates would be significantly higher prior to 1650
if we also included British and Dutch trade in Asian goods passing through Portugal,
Spain and the Levant (Israel, 1989, Brenner, 2003).
Religion. From Langer (1972) and Stearns (2001), Britain, the Czech Republic, Denmark,
Finland, Germany, the Netherlands, Norway, Sweden, Switzerland were majority
Protestant in 1600. Germany was largely Protestant, but the balance remained unclear
until the end of the 1600s. The results are robust to coding Germany as Catholic. We
have also tried an alternative specification in which religion is coded directly as Catholic,
Muslim, Orthodox or Protestant, with essentially identical results.
Roman Heritage. From Langer (1972) the following countries had a Roman heritage:
Belgium, Britain, France, Italy, the Netherlands, Portugal, Spain, and Switzerland.
Bulgaria, Greece, Romania, and Yugoslavia had their Roman traditions eradicated by a
long period of Ottoman rule. If they are also coded with Roman heritage, the effect of
this variable is weakened further.
Wars. Kohn (1999) lists the dates of every European wars from about 1000AD, and
a brief explanation of participants, duration, intensity, and outcome. We calculate the
average number of years of war in a time interval before each date in our dataset: for
the preceding 100 years through 1700 and for the preceding 50 years for 1750, 1800, and
1850, excluding purely civil wars and colonial wars outside Europe. Alternative codings
such as dropping “minor” wars do not affect our main results. Kohn (1999) does not
provide reliable information on the wars of Finland and Greece during this period, so
we drop these countries from regressions involving the “wars per year” variable.
Constraint on Executive. This variable is coded using the method of Polity IV as
described in footnote 32. Our primary source in this exercise was the historical encyclopedia
of Langer (1972), supplemented with Stearns (2001). AJR (2002b) provide
more details on our coding, the full series, and robustness checks with some reasonable
alternatives. We also checked our results using the three codings of institutions in De
Long and Shleifer (1993), which are somewhat different from ours, for example awarding
a much better score to feudal systems than does coding based on the Polity criteria.
Using their measures leads to very similar results to those reported in the text.
30
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37
Whole
Sample,
unweighted
Whole
Sample,
weighted
Atlantic
Western
Europe
Non-
Atlantic
Western
Europe
Eastern
Europe Asia
Urbanization in 1300 6.6 9.9 8.0 10.0 4.1 11.0
(5.2) (3.2) (2.8) (6.1) (3.3) (0.7)
Urbanization in 1400 7.6 10.3 8.5 12.1 3.9 11.1
(9.5) (3.6) (2.4) (10.0) (1.5) (0.5)
Urbanization in 1500 8.3 10.6 10.1 11.4 4.0 11.5
(7.6) (3.4) (5.3) (6.8) (1.8) (0.7)
Urbanization in 1600 9.6 11.7 13.6 14.0 4.4 12.0
(7.6) (4.0) (7.6) (8.8) (2.7) (0.7)
Urbanization in 1700 10.7 11.2 14.5 13.1 3.7 11.6
(8.5) (4.1) (6.8) (8.1) (2.2) (0.7)
Urbanization in 1800 14.1 10.3 19.8 16.9 7.0 8.9
(9.1) (4.9) (7.9) (7.5) (3.3) (1.4)
GDP per capita in 1500 627.54 608.3 721.46 850.73 506.94 575
(159.3) (118.0) (31.1) (217.1) (78.2) (35.4)
GDP per capita in 1600 740.73 630.5 916.31 908.22 578.29 576.8
(225.6) (144.2) (149.3) (167.3) (112.3) (35.3)
GDP per capita in 1700 862.12 622.2 1079.21 980.82 636.0 574.2
(348.4) (208.1) (321.4) (128.2) (136.1) (35.3)
GDP per capita in 1820 988.00 691.7 1321.95 1095.40 719.5 575.5
(373.6) (264.5) (348.7) (125.3) (174.9) (45.7)
Constraint on Executive in 1500 1.67 1.73 1.80 1.99 1.46
(0.76) (0.79) (0.59) (0.99) (0.79)
Constraint on Executive in 1600 1.67 1.53 1.65 1.54 1.45
(1.01) (0.84) (1.15) (0.59) (0.79)
Constraint on Executive in 1700 1.83 1.52 1.96 1.41 1.30
(1.31) (1.17) (1.71) (0.94) (0.76)
Constraint on Executive in 1800 2.25 2.18 4.16 1.90 1.00
(1.82) (1.83) (1.72) (1.78) (0.00)
Atlantic Coastline-to-Area 0.0057 0.0014 0.0118 0.0026 0.00 0.00
(0.0117) (0.0065) (0.0181) (0.0052)
Weighted by population
First column is unweighted means; other columns are mean values weighted by total population in
year indicated, from McEvedy and Jones. Standard deviation is in parentheses. There are 24 European
countries in these data. Atlantic Western Europe is England, France, the Netherlands, Portugal, and
Spain. Non-Atlantic Western Europe is Austria, Belgium, Denmark, Finland, Germany, Ireland, Italy,
Norway, Sweden and Switzerland. Eastern Europe is Albania, Bulgaria, the Czech Republic, Greece,
Hungary, Poland, Romania, Russia, and Serbia. Asia is India and China. Urbanization for Europe is
percent population towns with population of at least 5,000 at some time between 800 and 1800, from
Bairoch, Batou and Chèvre for Europe; comparable data for Asia are from Bairoch. GDP per capita is
from Maddison. Constraint on executive is on a scale from 1 to 7, where a higher score indicates more
constraints; this is coded using the Polity IV methodology, as explained in the text. We have not coded
constraint on the executive for Asia. Atlantic Coast-to-Area includes those parts of Germany, Denmark
and Norway that are on the North Sea. For more detailed definitions and sources see Appendix Table 1.
Table 1
Descriptive Statistics
Panel, 1300-1850 Panel, 1000-1850
Panel, 1300-
1850
Panel, 1000-
1850
Panel, 1300-
1850,
unweighted
Panel, 1300-
1850, with Asia
Panel, 1300-
1850, without
Britain
Panel, 1300-
1850
Panel, 1000-
1850
Panel, 1300-
1850,
unweighted
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
p-value for Western Europe x [0.00] [0.00] [0.45] [0.10] [0.80] [0.00] [0.12] [0.09] [0.01] [0.78]
year dummies, 1600-1850
Potential for Atlantic Trade x 1500 0.016 0.0086 0.055 0.014 0.018 0.50 0.38 0.75
(0.021) (0.019) (0.026) (0.022) (0.016) (0.68) (0.65) (0.87)
Potential for Atlantic Trade x 1600 0.006 -0.004 0.0495 0.0054 0.0085 0.21 0.03 0.94
(0.023) (0.021) (0.028) (0.028) (0.018) (0.68) (0.64) (0.94)
Potential for Atlantic Trade x 1700 0.032 0.022 0.071 0.032 0.024 1.81 1.64 2.01
(0.021) (0.019) (0.028) (0.026) (0.016) (0.63) (0.58) (0.94)
Potential for Atlantic Trade x 1750 0.032 0.022 0.073 0.032 0.023 2.16 1.99 2.60
(0.021) (0.018) (0.028) (0.025) (0.015) (0.62) (0.57) (0.94)
Potential for Atlantic Trade x 1800 0.048 0.038 0.110 0.047 0.028 3.30 3.12 3.76
(0.019) (0.017) (0.028) (0.023) (0.015) (0.57) (0.51) (0.94)
Potential for Atlantic Trade x 1850 0.085 0.076 0.115 0.084 0.043 5.05 4.88 4.67
(0.018) (0.016) (0.028) (0.022) (0.014) (0.51) (0.44) (0.94)
R-Squared 0.87 0.85 0.89 0.87 0.82 0.84 0.93 0.94 0.92 0.83
Number of Observations 192 240 192 240 192 208 184 192 240 192
p-value for Western Europe x [0.00] [0.00] [0.35] [0.06] [0.83] [0.00] [0.11] [0.16] [0.02] [0.81]
year dummies, 1600-1850
Potential for Atlantic Trade x 0.011 0.0083 0.016 0.011 0.005 0.75 0.65 0.62
Volume of Atlantic Trade (0.0024) (0.0020) (0.0034) (0.0029) (0.0018) (0.07) (0.06) (0.11)
R-Squared 0.87 0.85 0.88 0.86 0.81 0.84 0.92 0.92 0.90 0.82
Number of Observations 192 240 192 240 192 208 184 192 240 192
Table 2
Atlantic Trade and Urbanization
Dependent variable is country-level urbanization
Standard errors are in parentheses. Panel regressions with full set of country and year dummies; regressions are weighted unless otherwise stated. Weighted
regressions use total population in each year as weights, from McEvedy and Jones. Dependent variable is level of urbanization (percent of population living in
towns which had at least 5,000 population at some point between 800 and 1800) in each country in each year. Urbanization in Europe is from Bairoch, Batou
and Chèvre, and urbanization in Asia is from Bairoch. We report results with two different measures of potential for Atlantic trade: a dummy for whether a
country was an Atlantic trader (one for Britain, the Netherlands, France, Spain and Portugal; zero for all others) in columns 3, 4, 5, 6 and 7; and the ratio of
Atlantic coastline to area for the Atlantic trader countries plus Belgium, Denmark, Germany, Ireland, and Norway (columns 8, 9, and 10). Column 6 includes
the available data on Asia (just for India and China) and column 7 drops the data for Britain. Volume of Atlantic Trade is the log average number of voyages
per year. For more detailed data definitions and sources see Appendix Table 1.
Potential for Atlantic Trade is measured by:
Atlantic coastline-to-area Atlantic trader dummy
Panel A: flexible specification
Panel B: structured specification
Panel, 1500-1820 Panel, 1500-1870
Panel, 1500-
1820
Panel, 1500-
1870
Panel, 1500-
1820,
unweighted
Panel, 1500-
1820, with Asia
Panel, 1500-
1820, without
Britain
Panel, 1500-
1820
Panel, 1500-
1870
Panel, 1500-
1820,
unweighted
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
p-value for Western Europe x [0.44] [0.05] [0.92] [0.23] [0.17] [0.01] [0.89] [0.97] [0.58] [0.31]
year dummies, 1600-1820 or -1870
Potential for Atlantic Trade x 1600 0.14 0.15 0.16 0.14 0.13 4.43 4.46 3.42
(0.07) (0.11) (0.07) (0.13) (0.07) (2.42) (3.61) (2.21)
Potential for Atlantic Trade x 1700 0.18 0.19 0.21 0.18 0.14 8.84 8.80 6.32
(0.07) (0.10) (0.07) (0.12) (0.06) (2.27) (3.40) (2.21)
Potential for Atlantic Trade x 1820 0.27 0.27 0.18 0.27 0.20 12.03 11.89 8.06
(0.06) (0.10) (0.07) (0.11) (0.06) (2.10) (3.14) (2.21)
Potential for Atlantic Trade x 1870 0.22 15.84
(0.09) (2.93)
R-Squared 0.94 0.94 0.96 0.95 0.96 0.92 0.96 0.96 0.96 0.96
Number of Observations 96 120 96 120 96 104 92 96 120 96
p-value for Western Europe x [0.44] [0.05] [0.92] [0.48] [0.14] [0.01] [0.88] [0.99] [0.54] [0.23]
year dummies, 1600-1850
Potential for Atlantic Trade x 0.069 0.040 0.047 0.069 0.051 3.21 3.18 2.22
Volume of Atlantic Trade (0.016) (0.017) (0.018) (0.028) (0.015) (0.53) (0.50) (0.58)
R-Squared 0.94 0.94 0.96 0.95 0.96 0.92 0.96 0.96 0.96 0.96
Number of Observations 96 120 96 120 96 104 92 96 120 96
Atlantic coastline-to-area
Standard errors are in parentheses. Panel regressions with full set of country and year dummies; regressions are weighted unless otherwise stated. Weighted
regressions use total population in each year as weights, from McEvedy and Jones. Dependent variable is log GDP per capita, from Maddison. We report
results with two different measures of potential for Atlantic trade: a dummy for whether a country was an Atlantic trader (one for Britain, the Netherlands,
France, Spain and Portugal; zero for all others) in columns 3, 4, 5, 6 and 7; and the ratio of Atlantic coastline to area for the Atlantic trader countries plus
Belgium, Denmark, Germany, Ireland, and Norway (columns 8, 9, and 10). Column 6 includes the available data on Asia (just for India and China) and
column 7 drops the data for Britain. Volume of Atlantic Trade is the log average number of voyages per year. For more detailed data definitions and sources
see Appendix Table 1.
Atlantic trader dummy
Panel A: flexible specification
Panel B: structured specification
Table 3
Atlantic Trade and GDP per capita
Dependent Variable is country-level log GDP per capita
Potential for Atlantic Trade is measured by:
Panel, 1300-1850,
controlling for
religion
Panel, 1300 to
1850,
controlling for
wars
Panel, 1300 to
1850,
controlling for
Roman
heritage
Panel, 1300 to
1850,
controlling for
latitude
Panel, 1500-1820,
controlling for
religion
Panel, 1500 to
1820,
controlling for
wars
Panel, 1500 to 1820,
controlling for
Roman heritage
Panel, 1500 to
1820, controlling
for latitude
(1) (2) (3) (4) (5) (6) (7) (8)
p-value for Western Europe x [0.73] [0.49] [0.49] [0.09] [0.24] [0.91] [0.15] [0.85]
year dummies, 1600-1850
Atlantic Trader Dummy x 0.013 0.011 0.011 0.011 0.089 0.070 0.125 0.078
Volume of Atlantic Trade (0.002) (0.003) (0.003) (0.002) (0.013) (0.017) (0.017) (0.015)
p-value for Protestant x Year [0.05] [0.00]
Wars per year in preceding century -0.0006 0.075
(0.008) (0.029)
p-value for Roman Heritage x Year [0.89] [0.00]
p-value for Latitude x Year [0.11] [0.00]
R-Squared 0.89 0.89 0.89 0.89 0.97 0.95 0.97 0.97
Number of Observations 192 176 192 192 96 88 96 96
p-value for Western Europe x [0.19] [0.26] [0.39] [0.09] [0.99] [0.98] [0.71] [0.81]
year dummies, 1600-1850
Coastline-to-area x 0.79 0.76 0.75 0.78 2.78 3.33 3.32 2.96
Volume of Atlantic Trade (0.08) (0.08) (0.07) (0.07) (0.54) (0.56) (0.54) (0.56)
p-value for Protestant x Year [0.51] [0.05]
Wars per year in preceding century 0.0082 0.032
(0.007) (0.026)
p-value for Roman Heritage x Year [0.77] [0.32]
p-value for Latitude x Year [0.52] [0.38]
R-Squared 0.93 0.93 0.92 0.93 0.97 0.96 0.97 0.97
Number of Observations 192 176 192 192 96 88 96 96
Protestant is a dummy for whether country was majority Protestant in 1600. Protestant x Year is the Protestant dummy interacted
with year dummies for 1600 and after. Wars per year are in preceding century through 1700, 1700-1750 for 1750, 1750-1800 for 1800
and 1800-1850 for 1850. Roman heritage is dummy for whether country was in the Roman empire; this is interacted with year dummies
for 1600 and after. Latitude is distance from the equator for capital city of this country today; this is interacted with year dummies for
1600 and after. For more detailed data definitions and sources see Appendix Table 1.
Standard errors are in parentheses. Weighted panel regressions with full set of country and year dummies. Weights are total
population of country in each year from McEvedy and Jones. Dependent variable in Panels A and C is level of urbanization (percent of
population living in towns with more than 5,000 population.) Urbanization in Europe is from Bairoch, Batou and Chèvre. Dependent
variable in Panels B and D is log GDP per capita, from Maddison. Panels A and B use the Atlantic trader dummy as the measure of
potential for Atlantic trade (one for Britain, France, Spain, Portugal and the Netherlands, zero for all others). Panels C and D use the
ratio of Atlantic coastline to area. Volume of Atlantic Trade is the log average number of voyages per year.
Panel C: Dependent Variable is Level of
Urbanization Panel D: Dependent Variable is Log GDP per capita
Table 4
Robustness Checks
Using Atlantic trader dummy measure of Potential for Atlantic Trade
Using Atlantic coastline-to-area measure of Potential for Atlantic Trade
Panel B: Dependent Variable is Log GDP per capita
Panel A: Dependent Variable is Level of
Urbanization
Balanced Panel,
1300-1850, weighted
Balanced Panel,
1300-1850,
unweighted
Balanced Panel,
1300-1850,
weighted
Balanced Panel,
1300-1850,
unweighted
Balanced Panel,
1300-1850, weighted,
without London and
Amsterdam
Balanced Panel,
1300-1850, weighted,
with full set of country
x year interactions
Balanced Panel,
1300-1850, with
Asia
Balanced Panel,
1300-1850; with
Mediterranean and
Atlantic ports
(1) (2) (3) (4) (5) (6) (7) (8)
p-value for Western Europe x [0.34] [0.05] [0.30] [0.16] [0.28] [0.30] [0.41] [0.32]
year dummies, 1600-1850
Atlantic Port x 1500 -0.04 -0.05 0.027 0.048 -0.008 -0.072 -0.03 -0.05
(0.19) (0.20) (0.17) (0.16) (0.20) (0.20) (0.20) (0.19)
Atlantic Port x 1600 0.36 0.46 0.41 0.43 0.41 0.36 0.36 0.40
(0.16) (0.20) (0.14) (0.16) (0.17) (0.17) (0.16) (0.16)
Atlantic Port x 1700 0.71 0.62 0.76 0.76 0.297 0.47 0.71 0.74
(0.14) (0.20) (0.13) (0.16) (0.17) (0.17) (0.15) (0.15)
Atlantic Port x 1750 0.70 0.71 0.79 0.89 0.26 0.46 0.7 0.72
(0.14) (0.20) (0.13) (0.16) (0.16) (0.16) (0.15) (0.14)
Atlantic Port x 1800 0.79 0.92 0.95 1.10 0.32 0.57 0.799 0.84
(0.14) (0.20) (0.12) (0.16) (0.15) (0.15) (0.14) (0.14)
Atlantic Port x 1850 1.09 1.00 1.19 1.23 0.48 0.46 1.09 1.10
(0.13) (0.20) (0.12) (0.16) (0.14) (0.14) (0.14) (0.13)
p-value for Mediterranean Port x [0.19]
year dummies, 1500-1850
R-Squared 0.92 0.79 0.92 0.80 0.89 0.95 0.94 0.92
Number of Observations 1544 1544 1544 1544 1528 1544 1624 1544
p-value for Western Europe x [0.23] [0.04] [0.23] [0.10] [0.31] [0.33] [0.20] [0.20]
year dummies, 1600-1850
Volume of Atlantic Trade 0.17 0.16 0.17 0.16 0.065 0.078 0.27 0.17
x Atlantic Port (0.02) (0.02) (0.017) (0.024) (0.019) (0.018) (0.017) (0.017)
p-value for Mediterranean Port x [0.14]
year dummies, 1500-1850
R-Squared 0.92 0.79 0.92 0.79 0.89 0.95 0.88 0.92
Number of Observations 1544 1544 1544 1544 1528 1544 1624 1544
Table 5
Growth of Atlantic Ports
p g p g y y ;g pp y y g pp
Dependent variable is log city population, from Bairoch, Batou, and Chèvre. All columns report balanced panel regressions for 1300, 1400, 1500, 1600, 1700, 1750, 1800 and 1850, using only
cities for which we have data in all 8 time periods. The Atlantic port dummy equals one for a city used as an Atlantic port. Potential Atlantic ports are all ports that could have been used for Atlantic
trade and include Atlantic ports plus ports in Belgium, Germany, and Ireland (there are no potential Atlantic ports in Denmark or Norway in our balanced panel). Volume of Atlantic Trade is log
average voyages per year; this is multiplied by the Atlantic port dummy (or by the potential Atlantic port dummy); the coefficient on this interaction term is multiplied by 100. Year dummies are
included for all years from 1400. Western Europe x year dummies are included for all years from 1600. For a list of Atlantic ports and potential Atlantic ports, see the Appendix of Acemgolu,
Johnson, and Robinson (2002b).
Dependent Variable is log city population
Atlantic Port Potential Atlantic Port Atlantic Port
Panel A: flexible specification
Panel B: structured specification
Panel, 1300-
1850 Panel, 1300-1850
Panel, 1300-
1850
Panel, 1300-
1850,
controlling for
religion
Panel, 1300 to
1850,
controlling for
wars
Panel, 1300 to
1850, controlling
for Roman
heritage
Panel, 1300 to
1850, controlling
for latitude
Panel, 1300 to 1850,
using Atlantic
coastline-to-area
measure of potential
for Atlantic trade
Panel, 1300 to 1850,
using Atlantic
coastline-to-area
measure of potential
for Atlantic trade
(1) (2) (3) (4) (5) (6) (7) (8) (9)
p-value for Western Europe x [0.00] [0.35] [0.00] [0.00] [0.00] [0.26] [0.00] [0.00] [0.00]
year dummies, 1600-1850
Potential for Atlantic Trade x 1500 -0.42 -20.83
(0.47) (22.94)
Potential for Atlantic Trade x 1600 -0.14 10.94
(0.52) (22.91)
Potential for Atlantic Trade x 1700 0.29 62.12
(0.48) (21.14)
Potential for Atlantic Trade x 1750 0.32 81.45
(0.46) (20.78)
Potential for Atlantic Trade x 1800 2.07 79.81
(0.44) (18.97)
Potential for Atlantic Trade x 1850 2.96 72.25
(0.41) (17.13)
Potential for Atlantic Trade x 0.42 0.45 0.43 0.39 0.43 12.99
Volume of Atlantic Trade (0.06) (0.06) (0.06) (0.06) (0.06) (2.31)
p-value for Protestant x year effect [0.00]
Wars per year in preceding century -0.04
(0.20)
p-value for Roman Heritage x Year [0.05]
p-value for Latitude x Year [0.49]
R-Squared 0.75 0.85 0.81 0.84 0.81 0.82 0.81 0.81 0.79
Number of Observations 192 192 192 192 176 192 192 192 192
Table 6
Atlantic Trade and Institutions
Dependent Variable is Constraint on Executive
Standard errors are in parentheses. Weighted panel regressions with full set of country and year dummies. Weights are total population in each
country in each year, from McEvedy and Jones. Dependent variable is constraint on executive, which ranges from 1 to 7 where a higher score
indicates more constraints on arbitary action by the executive. All columns use the Atlantic trader dummy (one for Britain, France, Spain, Portugal
and the Netherlands; zero for all others) as the measure of potential for Atlantic trade, apart from columns 8 and 9 which use the ratio of Atlantic
coastline to area (including Atlantic traders plus Belgium, Denmark, Germany, Ireland and Norway). Volume of Atlantic Trade is the log average
number of voyages per year. Protestant is a dummy for whether country was majority Protestant in 1600. Protestant x Year is the Protestant dummy
interacted with year dummies for 1600 and after. Wars per year are for the preceding century through 1700, 1700-1750 for 1750, 1750-1800 for 1800
and 1800-1850 for 1850. Roman heritage is dummy for whether country was in the Roman empire; this is interacted with year dummies for 1600 and
after. Latitude is distance from the equator for capital city of this country today; this is interacted with year for 1600 and after.
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Panel, 1300-
1850
Panel, 1300-
1850
Panel, 1300-
1850
Panel, 1300-
1850
Panel, 1300-
1850,
unweighted
Panel, 1000-
1850
Panel, 1000-
1850
Panel, 1000-
1850
Panel, 1000-
1850
Panel, 1000-
1850,
unweighted
Atlantic Trader Dummy x 0.011 0.011 -0.0090 -0.0026 0.0082 0.0084 -0.012 -0.009
Volume of Atlantic Trade (0.002) (0.002) (0.0049) (0.0062) (0.0020) (0.0020) (0.004) (0.005)
p-value for Initial Institutions x year [0.61] [0.51] [0.71] [0.85] [0.12] [0.08] [0.42] [0.92]
(1600, 1700, 1750, 1800, 1850)
Volume of Atlantic Trade x Initial Institutions 0.021 0.017 0.021 0.022
x Atlantic Trader Dummy (0.004) (0.005) (0.004) (0.004)
R-Squared 0.87 0.88 0.89 0.90 0.83 0.86 0.86 0.87 0.87 0.81
Number of Observations 192 192 192 192 192 240 240 240 240 240
Panel, 1500-
1820
Panel, 1500-
1820
Panel, 1500-
1820
Panel, 1500-
1820
Panel, 1500-
1820,
unweighted
Panel, 1500-
1870
Panel, 1500-
1870
Panel, 1500-
1870
Panel, 1500-
1870
Panel, 1500-
1870,
unweighted
Atlantic Trader Dummy x 0.069 0.068 -0.068 -0.079 0.004 0.039 -0.122 -0.110
Volume of Atlantic Trade (0.016) (0.016) (0.028) (0.028) (0.017) (0.017) (0.030) (0.028)
p-value for Initial Institutions x year [0.40] [0.31] [0.004] [0.08] [0.66] [0.64] [0.01] [0.58]
(1600, 1700, 1750, 1800, 1850)
Volume of Atlantic Trade x Initial Institutions 0.14 0.12 0.16 0.11
x Atlantic Trader Dummy (0.03) (0.02) (0.03) (0.02)
R-Squared 0.94 0.96 0.96 0.97 0.97 0.95 0.95 0.95 0.96 0.96
Number of Observations 96 96 96 96 96 120 120 120 120 120
Panel, 1300-
1850
Panel, 1300-
1850
Panel, 1300-
1850
Panel, 1300-
1850
Panel, 1300-
1850,
unweighted
Panel, 1500-
1850
Panel, 1500-
1850
Panel, 1500-
1850
Panel, 1500-
1850
Panel, 1500-
1850,
unweighted
Atlantic Trader Dummy x 0.42 0.42 -0.001 -0.096 0.35 0.34 -0.11 -0.15
Volume of Atlantic Trade (0.06) (0.06) (0.12) (0.12) (0.05) (0.05) (0.10) (0.09)
p-value for Initial Institutions x year [0.27] [0.14] [0.008] [0.69] [0.43] [0.33] [0.01] [0.95]
(1600, 1700, 1750, 1800, 1850)
Volume of Atlantic Trade x Initial Institutions 0.44 0.26 0.47 0.29
x Atlantic Trader Dummy (0.11) (0.09) (0.09) (0.07)
R-Squared 0.76 0.81 0.82 0.84 0.76 0.72 0.77 0.78 0.70 0.71
Number of Observations 192 192 192 192 192 240 240 240 240 240
Table 7
Interaction Between Initial Institutions and Atlantic Trade
Using Atlantic trader dummy as measure of Atlantic trade
Standard errors are in parentheses. Weighted panel regressions with full set of country and year dummies. Weights are total population in each country in each year,
from McEvedy and Jones. Dependent variable is urbanization in Panel A, log GDP per capita in Panel B, and constraint on the executive in Panel C. Western
Europe dummies interacted with years (from 1600) are included in all columns, but not reported to save space. Urbanization in Europe is from Bairoch, Batou and
Chèvre, and urbanization in Asia is from Bairoch. Log GDP per capita is from Maddison. Constraint on the executive is coded from Langer; initial institutions are
the average of institutions in 1400 and 1500. We use the Atlantic trader dummy as the measure of potential for Atlantic trade. Volume of Atlantic Trade is the log
average number of voyages per year and is demeaned. Main effects are evaluated at initial institutions equal to one. For data definitions and sources see Appendix
Table 1.
Panel A: Dependent Variable is Urbanization
Panel B: Dependent Variable is Log GDP per capita
Panel C: Dependent Variable is Constraint on the Executive
Variable Description Source
Log GDP per capita in 1500, 1600, 1700, 1820 and 1870 Logarithm of GDP per capita. Maddison (2001)
Population in 1000, 1200, 1300, 1400, 1500, 1600, 1700,
1750, 1800, and 1850.
Total population. McEvedy and Jones (1978)
Urban population in 1000, 1200, 1300, 1400, 1500, 1600,
1700, 1750, 1800, and 1850.
Population living in urban areas. Bairoch, Batou and Chèvre (1988), as described in the appendix. We use Bairoch
(1988) for urbanization in Asia and Chandler for Asian city population.
Atlantic and Mediteranean ports City that is on the Atlantic or Mediteranean Bairoch, Batou and Chèvre (1988) for cities; location from DK Publishing (1997).
Ratio of Atlantic coastline to area Length of Atlantic coastline divided by land area. Both assume modern borders. Atlantic coastline includes the
whole coast of Portugal, Ireland, Belgium, the Netherlands, and Britain. It also includes half the coastline of Spain,
two-thirds the coastline of France, half the coastline of Germany, one quarter the coastline of Denmark, and half the
coastline of Norway.
Coastline is from Integrated Coastline Management (on the web.) Land area is from
the World Bank, World Development Indicators, CD-Rom, 1999.
Dummy for Atlantic trader Equals one for Britain, France, the Netherlands, Portugal, and Spain. Coded by authors based on composition of Atlantic trade. See AJR (2002b) for details.
Dummy for Atlantic port Equals one for a city that was used as an Atlantic port; zero otherwise. Bairoch, Batou and Chèvre (1988) for cities; location from DK Publishing (1997).
Dummy for potential Atlantic port Equals one for a city that is on the Atlantic; zero otherwise. Bairoch, Batou and Chèvre (1988) for cities; location from DK Publishing (1997).
Volume of Atlantic Trade Average voyages per year equivalent. See Appendix. AJR(2002b) provides full details.
Constraint on executive in 1800, 1850, 1960, 1970, 1990 and
intervening years.
A seven category scale, from 1 to 7, with a higher score indicating more constraints. Score of 1 indicates unlimited
authority; score of 3 indicates slight to moderate limitations; score of 5 indicates substantial limitations; score of 7
indicates executive parity or subordination. Scores of 2, 4, and 6 indicate intermediate values.
Polity IV dataset, downloaded from Inter-University Consortium for Political and
Social Research. Variable described in Gurr 1997.
Constraint on executive from 1000 to 1800 A seven category scale, from 1 to 7, with a higher score indicating more constraints. Score of 1 indicates unlimited
authority; score of 3 indicates slight to moderate limitations; score of 5 indicates substantial limitations; score of 7
indicates executive parity or subordination. Scores of 2, 4, and 6 indicate intermediate values.
Coded by authors from Langer (1972); see appendix for more details.
Religion Variables Majority religion of city or country. Coded by authors from Langer (1972).
Roman heritage Coded equal to one for countries that were part of the Roman empire and not subsequently part of the Ottoman
empire.
Coded by authors from Langer (1972).
Wars per year Number of years of war in preceding 50 or 100 years. Civil wars and colonial wars outside Europe are excluded. Coded by authors from Kohn (1999)
Latitude Absolute value of the latitude of the country, scaled to take values between 0 and 1, where 0 is the equator. Country data from La Porta et al (1999). City data from Bairoch, Batou and Chevre
(1988).
Appendix Table 1
Variable Definitions and Sources
Figure 1A
Figure 1B
Urbanization rates
weighted by population
0
5
10
15
20
25
1300 1400 1500 1600 1700 1750 1800 1850
Western Europe Eastern Europe Asia
Urbanization rates
weighted by population
0
5
10
15
20
25
30
1300 1400 1500 1600 1700 1750 1800 1850
Atlantic traders Western Europe not Atlantic traders Eastern Europe
Figure 2A
Figure 2B
GDP per capita from 1500
weighted by population
0
500
1000
1500
2000
2500
1500 1600 1700 1820 1870
Atlantic traders Western Europe not Atlantic traders Eastern Europe
GDP per capita from 1500
weighted by population
0
500
1000
1500
2000
2500
1500 1600 1700 1820 1870
Western Europe Eastern Europe Asia
Figure 3
Vo lume o f Atlantic and Mediterranean Trade
(vo yage equivalents per year)
0
100
200
300
400
500
600
700
800
900
1300 1400 1500 1600 1700 1750 1800
Atlantic voyages per year Mediterranean voyages per year
Figure 4A
Figure 4B
Average of log city population in Atlantic ports, West European cities that are not Atlantic ports, and
Eastern Europe (balanced panel)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
1300 1400 1500 1600 1700 1750 1800 1850
West European cities Atlantic ports East European cities
Average of log population in Atlantic ports, Mediterranean ports, and West European cities that are
not ports (balanced panel)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
1300 1400 1500 1600 1700 1750 1800 1850
Inland West European cities Atlantic ports Mediterranean ports
Figure 5A
Figure 5B
Average of log population in Iberian Atlantic ports and other cities
(balanced panel)
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
1300 1400 1500 1600 1700 1750 1800 1850
Iberian cities, not Atlantic ports
Iberian Atlantic ports
Inland West European cities
Average of log population in British Atlantic ports and other cities
(balanced panel)
0
1
2
3
4
5
6
1300 1400 1500 1600 1700 1750 1800 1850
British cities not Atlantic ports
British Atlantic ports
Inland West European cities