Preindustrial and postwar economic development: Is there a link?

Economic Development and Cultural Change

Volumn 47, Issue 3, 1999, Pages 471-495

  Burkett, John P ^a   Humblet, Catherine ^b   Putterman, Louis ^c  

^a UNIVERSITY OF RHODE ISLAND   (United States)

^b FEDERAL RESERVE BANK OF BOSTON   (United States)

^c BROWN UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ECONOMIC GROWTH; GROWTH DETERMINATION; HISTORICAL PERSPECTIVE; PERFORMANCE ASSESSMENT;

EID: 0032812941     PISSN: 00130079     EISSN: None     Source Type: Journal    
DOI: 10.1086/452416     Document Type: Article

References (55)

1. United Nations Development Programme, Regional Bureau for Africa, and Development Alternatives, Inc., Rethinking Technical Cooperation: Reforms for Capacity Building in Africa, Elliot Berg, coordinator (New York: UNDP, 1993), pp. 59-60.
2. Even W. W. Rostow's well-known Stages of Economic Growth (New York: Cambridge University Press, 1990) dealt only with steps in the transition from a basically undifferentiated "traditional" economy and thus bears no similarity to the multistage conceptions discussed below.
3. Ester Boserup, Conditions of Agricultural Growth: The Economics of Agricultural Change under Population Pressure (New York: Aldine, 1965), and Population and Technology (Oxford: Basil Blackwell, 1981); Elman Service, Cultural Evolutionism: Theory in Practice (New York: Holt, Rinehart & Winston, 1971); Allen Johnson and Timothy Earl, The Evolution of Human Societies: From Foraging Groups to Agrarian State (Stanford, Calif.: Stanford University Press, 1987).
4. Ester Boserup, Conditions of Agricultural Growth: The Economics of Agricultural Change under Population Pressure (New York: Aldine, 1965), and Population and Technology (Oxford: Basil Blackwell, 1981); Elman Service, Cultural Evolutionism: Theory in Practice (New York: Holt, Rinehart & Winston, 1971); Allen Johnson and Timothy Earl, The Evolution of Human Societies: From Foraging Groups to Agrarian State (Stanford, Calif.: Stanford University Press, 1987).
5. Ester Boserup, Conditions of Agricultural Growth: The Economics of Agricultural Change under Population Pressure (New York: Aldine, 1965), and Population and Technology (Oxford: Basil Blackwell, 1981); Elman Service, Cultural Evolutionism: Theory in Practice (New York: Holt, Rinehart & Winston, 1971); Allen Johnson and Timothy Earl, The Evolution of Human Societies: From Foraging Groups to Agrarian State (Stanford, Calif.: Stanford University Press, 1987).
6. Ester Boserup, Conditions of Agricultural Growth: The Economics of Agricultural Change under Population Pressure (New York: Aldine, 1965), and Population and Technology (Oxford: Basil Blackwell, 1981); Elman Service, Cultural Evolutionism: Theory in Practice (New York: Holt, Rinehart & Winston, 1971); Allen Johnson and Timothy Earl, The Evolution of Human Societies: From Foraging Groups to Agrarian State (Stanford, Calif.: Stanford University Press, 1987).
7. Marvin Goodfriend and John McDermott, "Early Development," American Economic Review 85 (March 1995): 116-33, make a similar departure from past economic literature by modeling development as a series of stages, in their case a premarket period, a period of preindustrial market development, and modern industrial growth. Human capital and population density also play crucial roles in their approach, as they do in this article. However, theirs is largely a theoretical exercise, does not posit a continuum of developmental stages, and does not predict a link between stage of preindustrial growth and postwar economic performance.
8. Although hunter-gatherers were already of marginal significance on the eve of the worldwide spread of industry, a good part of that continuum continued to be represented.
9. An earlier exposition of these ideas is found in Louis Putterman, "Social Capital and Development Capacity: The Example of Rural Tanzania," Development Policy Review 13 (March 1995): 5-22. A somewhat expanded treatment of the ideas summarized in the present article is given in John Burkett, Catherine Humblet, and Louis Putterman, "Pre-Industrial and Post-War Economic Development: Is There a Link?" Working Paper no. 96-25 (Brown University, Department of Economics, 1996; revised 1997).
10. An earlier exposition of these ideas is found in Louis Putterman, "Social Capital and Development Capacity: The Example of Rural Tanzania," Development Policy Review 13 (March 1995): 5-22. A somewhat expanded treatment of the ideas summarized in the present article is given in John Burkett, Catherine Humblet, and Louis Putterman, "Pre-Industrial and Post-War Economic Development: Is There a Link?" Working Paper no. 96-25 (Brown University, Department of Economics, 1996; revised 1997).
11. Collective knowledge or capability, including tacit elements maintained and transmitted by active use, is discussed by Richard Nelson and Sidney Winter, An Evolutionary Theory of Economic Change (Cambridge, Mass.: Harvard University Press, 1982).
12. Jonathan Temple and Paul Johnson's "Social Capability and Economic Development," Quarterly Journal of Economics 113, no. 3 (August 1998): 965-90, which investigates the effect of measures of social development of the type studied by Irma Adelman and Cynthia T. Morris (Society, Politics and Economic Development [Baltimore: Johns Hopkins University Press, 1967]), bears a close relationship to our study, if one believes that their social indicators are appropriate measures of the "broad human capital" that we hypothesize to be associated with PID. (See also Moses Abromovitz, "Catching Up, Forging Ahead, and Falling Behind," Journal of Economic History 46 [June 1986]: 385-406.) The differences between their approach and ours are (a) that they provide no economic-historical framework to explain why social development differed among countries in the 1960s, and (b) that we use direct physical measures of PID rather than social development measures, which might be considered more "epiphenomenal" and which are in many cases rather subjective in character.
13. Jonathan Temple and Paul Johnson's "Social Capability and Economic Development," Quarterly Journal of Economics 113, no. 3 (August 1998): 965-90, which investigates the effect of measures of social development of the type studied by Irma Adelman and Cynthia T. Morris (Society, Politics and Economic Development [Baltimore: Johns Hopkins University Press, 1967]), bears a close relationship to our study, if one believes that their social indicators are appropriate measures of the "broad human capital" that we hypothesize to be associated with PID. (See also Moses Abromovitz, "Catching Up, Forging Ahead, and Falling Behind," Journal of Economic History 46 [June 1986]: 385-406.) The differences between their approach and ours are (a) that they provide no economic-historical framework to explain why social development differed among countries in the 1960s, and (b) that we use direct physical measures of PID rather than social development measures, which might be considered more "epiphenomenal" and which are in many cases rather subjective in character.
14. Jonathan Temple and Paul Johnson's "Social Capability and Economic Development," Quarterly Journal of Economics 113, no. 3 (August 1998): 965-90, which investigates the effect of measures of social development of the type studied by Irma Adelman and Cynthia T. Morris (Society, Politics and Economic Development [Baltimore: Johns Hopkins University Press, 1967]), bears a close relationship to our study, if one believes that their social indicators are appropriate measures of the "broad human capital" that we hypothesize to be associated with PID. (See also Moses Abromovitz, "Catching Up, Forging Ahead, and Falling Behind," Journal of Economic History 46 [June 1986]: 385-406.) The differences between their approach and ours are (a) that they provide no economic-historical framework to explain why social development differed among countries in the 1960s, and (b) that we use direct physical measures of PID rather than social development measures, which might be considered more "epiphenomenal" and which are in many cases rather subjective in character.
15. A more ideal measure would be the average population density of a country's regions, provinces, or other subnational units, weighted by regional population. Unfortunately, such detailed information is difficult to obtain for a large sample of countries.
16. Another potential problem is mechanization, which gives rise to lower man-to-land ratios at the industrialized end of the continuum. Fortunately, mechanization would have had next to no impact on farmer-to-land ratios in the developing countries that are the focus of our analysis.
17. Thus a referee (as well as Robert Wade, Brown University, in personal communication, 1997) argued that not irrigating may simply reflect not needing to irrigate. A measure that has an advantage over the irrigation share in this respect is the multiple cropping index, i.e., the average number of crops grown per year per parcel. This has been found to perform extremely well in a paper paralleling this study but in which the cross-sectional units are provinces in China, rather than countries (Ambar Narayan and Louis Putterman, "Pre-Industrial Development and Modern Economic Growth: Evidence from Regional Data for China" [Brown University, Department of Economics, 1998, photocopied]). Unfortunately, we did not find the index in the F.A.O. Yearbooks and other data sources we investigated, and thus we could not use it in this study.
18. Thus a referee (as well as Robert Wade, Brown University, in personal communication, 1997) argued that not irrigating may simply reflect not needing to irrigate. A measure that has an advantage over the irrigation share in this respect is the multiple cropping index, i.e., the average number of crops grown per year per parcel. This has been found to perform extremely well in a paper paralleling this study but in which the cross-sectional units are provinces in China, rather than countries (Ambar Narayan and Louis Putterman, "Pre-Industrial Development and Modern Economic Growth: Evidence from Regional Data for China" [Brown University, Department of Economics, 1998, photocopied]). Unfortunately, we did not find the index in the F.A.O. Yearbooks and other data sources we investigated, and thus we could not use it in this study.
19. Ross Levine and David Renelt, "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review 82 (September 1992): 942-63; Robert Barro, "Economic Growth in a Cross-Section of Countries," Quarterly Journal of Economics 106 (May 1991): 407-44; Roger Kormendi and Philip Meguire, "Macroeconomic Determinants of Growth: Cross-Country Evidence," Journal of Monetary Economics 63 (September 1985): 141-63.
20. Ross Levine and David Renelt, "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review 82 (September 1992): 942-63; Robert Barro, "Economic Growth in a Cross-Section of Countries," Quarterly Journal of Economics 106 (May 1991): 407-44; Roger Kormendi and Philip Meguire, "Macroeconomic Determinants of Growth: Cross-Country Evidence," Journal of Monetary Economics 63 (September 1985): 141-63.
21. Ross Levine and David Renelt, "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review 82 (September 1992): 942-63; Robert Barro, "Economic Growth in a Cross-Section of Countries," Quarterly Journal of Economics 106 (May 1991): 407-44; Roger Kormendi and Philip Meguire, "Macroeconomic Determinants of Growth: Cross-Country Evidence," Journal of Monetary Economics 63 (September 1985): 141-63.
22. As will be noted again below, we do not posit any particular relationship between formal education and the types of human capital that one would expect to derive from the nature of the preindustrial economy. Thus, findings about the effects of formal education on growth have no direct bearing on the hypothesis that PID has affected growth through broad characteristics of the human-capital stock.
23. Robert Barro and Jong-Wha Lee, "Sources of Economic Growth," Carnegie-Rochester Conference Series on Public Policy 40 (June 1994): 1-46; Robert Barro, "Democracy and Growth," Journal of Economic Growth 1 (March 1996): 1-27; Roberto Perotti, "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth 1 (June 1996): 149-87.
24. Robert Barro and Jong-Wha Lee, "Sources of Economic Growth," Carnegie-Rochester Conference Series on Public Policy 40 (June 1994): 1-46; Robert Barro, "Democracy and Growth," Journal of Economic Growth 1 (March 1996): 1-27; Roberto Perotti, "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth 1 (June 1996): 149-87.
25. Robert Barro and Jong-Wha Lee, "Sources of Economic Growth," Carnegie-Rochester Conference Series on Public Policy 40 (June 1994): 1-46; Robert Barro, "Democracy and Growth," Journal of Economic Growth 1 (March 1996): 1-27; Roberto Perotti, "Growth, Income Distribution, and Democracy: What the Data Say," Journal of Economic Growth 1 (June 1996): 149-87.
26. Development economists have long argued that many economies operate with greatly reduced economic efficiency because government interventions, e.g., in banking, import controls, and foreign-exchange management led to artificially reduced capital and import costs, higher labor costs, and lower profitability of exports. The black market premium should be an accurate measure of one of these distortions, the degree of currency overvaluation, which is likely to be highly correlated with others. The purchasing power parity of investment goods, the variable favored by Perotti, seems less satisfactory because purchasing power parities tend to be systematically associated with levels of development for reasons that may have little to do with the kinds of price distortion in question here.
27. Food and Agriculture Organization of the United Nations, F.A.O. Production Yearbook (Rome: Food and Agriculture Organization of the United Nations, 1970, 1978). Data on total land area, arable land, and irrigated land in 1960 were taken from the 1978 yearbook; data on agricultural population in 1960 were taken from the 1970 yearbook. The total population data for 1960 were taken from the data used by Barro and Lee.
28. Robert Summers and Alan Heston, "The Penn World Tables (Mark 5): An Expanded Set of International Comparisons, 1950-1988," Quarterly Journal of Economics 106 (May 1991): 327-68.
29. Ibid.
30. 1 are both negative and statistically significant, suggesting that the expected variance in data quality may in fact exist. However, checks of alternative estimates suggest that the qualitative nature of the results is affected little by whether or not the weights are used.
31. Since the four proxies are positively correlated, we cannot be confident of the signs of the estimated coefficients when more than one proxy is included. We therefore omit such estimates.
32. A country is included in the computations of this table if we have sufficient data to include it in at least one of the regression estimates shown in tables 2, 3, or 4. See table A1.
33. Results for the larger sample of 48 countries are qualitatively similar, but the coefficient on GDP60 becomes significant at the .01 level, and that on BMP not significant at the .05 level. The insignificant negative coefficients on population growth for the 1960-90 period as a whole, both in this and the other columns of the table, are consistent with the positive coefficients for the 1960-75 subperiod and negative coefficients for the 1975-90 subperiod, shown in tables 2 and 3. Note that while our hypothesis stipulates that high population density at the outset of the industrial era would be associated with conditions favorable to modern economic growth, it involves no prediction regarding the effects of population growth after the commencement of the drive for industrialization.
34. Recall that 1960 data were used because these were the earliest we could obtain for a broad subsample of countries. The common use of data for the year 1960 both for the PID measures and for the initial GDP and education variables in the 1960-90 and 1960-75 estimates is strictly coincidental.
35. 2 for this model is .74, suggesting that it explains more of the total variance, as well as of the variance unexplained by model 1, than does the model adding the region dummies only. As mentioned earlier, however, it is difficult to interpret the individual PID coefficients, since the three variables are correlated. Although they pass an F-test for joint significance at the .001 level, only one of them, irrigation, shows a significant coefficient.
36. To provide points of comparison, we note that the β coefficients for GDP60, Sec60, GPOP6090, INV6090, and BMP6090 in model 7 are -.18, -.09, -.06, .32, -.19 .
37. A major gap in coverage is that of the former Communist countries.
38. Hong Kong, a British colony absorbed by China in 1997, is treated as a country in World Bank data up to this writing, by Summers and Heston, and in most of the cross-sectional growth studies referred to above.
39. Our main sample did not include South Korea because the growth rate of GDP per capita of that country in 1985-90 is not given in Barro and Lee. Also missing from that source are data for China. We filled in the missing growth rate for South Korea, using the World Bank's World Tables (published for the World Bank by Johns Hopkins University Press, Baltimore, 1992). Missing data for China were obtained by taking intermediate estimates from those offered by a variety of specialized sources, in consultation with Barry Naughton, University of California, San Diego. Details are provided in John Burkett, Catherine Humblet, Ambar Narayan, and Louis Putterman, "Appendix to Burkett, Humblet and Putterman," unpublished paper (Brown University, 1998; hereafter cited as BHNP).
40. Our main sample did not include South Korea because the growth rate of GDP per capita of that country in 1985-90 is not given in Barro and Lee. Also missing from that source are data for China. We filled in the missing growth rate for South Korea, using the World Bank's World Tables (published for the World Bank by Johns Hopkins University Press, Baltimore, 1992). Missing data for China were obtained by taking intermediate estimates from those offered by a variety of specialized sources, in consultation with Barry Naughton, University of California, San Diego. Details are provided in John Burkett, Catherine Humblet, Ambar Narayan, and Louis Putterman, "Appendix to Burkett, Humblet and Putterman," unpublished paper (Brown University, 1998; hereafter cited as BHNP).
41. The one exception is the 1960-75 period, for which the coefficient is insignificant (but still positive) in the sample that substitutes the former for the latter countries. Results are shown in BHNP.
42. William Easterly and Ross Levine, "Africa's Growth Tragedy: Policies and Ethnic Divisions," Quarterly Journal of Economics 112 (November 1997): 1203-50.
43. Societies nearer to the less intensive end of the PID spectrum would have tended to have had smaller units of social integration (e.g., tribes), more of which would thus be included in the boundaries of today's typically larger nation-states.
44. This is an ethnic heterogeneity index constructed by scholars in the then-Soviet Union, as well as the average of that index and of several non-Soviet indexes of ethnic heterogeneity.
45. Only the average ethnic heterogeneity index is significant. Both indices have significant coefficients of the predicted sign for 1960-90, but not for the subperiods, when PC1 is not included, for these samples. Sample sizes are 40, 55, and 46 for 1960-90, 1960-75, and 1975-90, respectively. Results for the 1960-90 period are included in BHNP. Results are similar when China and South Korea are substituted for Hong Kong and Singapore, as in table 6.
46. While life expectancy is a possible proxy for human-health capital, it is also an important measure of well-being and in that respect an outcome of economic performance. To what extent life expectancy or other physical quality of life or human-development measures might be determined by such underlying factors as initial income and legacies of premodern development versus government policies or other factors is an interesting question that we are unable to explore here. (We did some exploratory regressions on our sample and found that about 57% of the variance of life expectancy in 1960 within our sample appears to be explained by a constant term, GDP per capita in 1960, and the three PID measures.) For an exploration of the determinants of the physical quality of life, see John Burkett, "Systemic Influences on the Physical Quality of Life: A Bayesian Analysis of Cross-Sectional Data," Journal of Comparative Economics 9 (June 1985): 145-63.
47. See BHNP.
48. Jeffrey Sachs and Andrew Warner, "Sources of Slow Growth in African Economies," working paper (Harvard Institute for International Development, March 1997). This version differs slightly from that published under the same title in the Journal of African Economics 6, no. 3 (December 1997): 335-76.
49. Jeffrey Sachs and Andrew Warner, "Sources of Slow Growth in African Economies," working paper (Harvard Institute for International Development, March 1997). This version differs slightly from that published under the same title in the Journal of African Economics 6, no. 3 (December 1997): 335-76.
50. For further details and a sample result, see BHNP.
51. These statements apply mainly to Western Europe. Comparable data for former Communist East and Central Europe are not provided in our sources.
52. In our 1997 paper (n. 5 above), we argue that where indigenous population densities were sufficiently low, as in North America and Australia, colonization and subsequent immigration led to substitution of the indigenous PID correlates by the human-capital profile associated with the PID level of the colonizers. We also point out that as the location of the first industrial revolution was probably not predictable on the basis of population density only, PID as we measure it is not a sufficient condition for industrialization. This opens up complex issues for further discussion.
53. The basic result for the sample including both OECD and non-OECD countries is included in BHNP.
54. Our hypothesis with respect to human capital may be viewed as similar to the "social capability" concept that Temple and Johnson (n. 7 above; in research that came to our attention after completing this project) take from Abromovitz (n. 7 above) and other earlier writers. Perhaps the main difference between their approach and ours is that whereas they take "social capability" to be an unexplained variable that is measured directly by an index based on such factors as "extent of dualism," "extent of social mobility," and "degree of modernization of outlook," we carry our analysis back one step to the long historical perspective of economic anthropologists and others, and our tests proceed on the assumption that direct measures of production-system intensity may be superior to measures of consequences, some of which are unavoidably subjective. The relationship between the PID and the social capability concepts deserves investigation in future work.
55. Indeed, formal education fails to show systematic impact in the results obtained here, perhaps due to difficulties of measurement. See also Lant Pritchett, "Where Has All the Education Gone?" unpublished paper (World Bank, Washington, D.C., 1995) and sources cited therein.