HISTORICAL ROOTS OF REGIONAL INEQUALITY: Evidence from Sweden, 1750-1850

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Date:
29 Mar 2017

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Regional inequality was already large and persistent a century before Sweden’s take-off into modern economic growth, according to new research by Kerstin Enflo and Anna Missiaia, to be presented at the Economic History Society’s 2017 annual conference. Although the country was predominantly agricultural, there were large productivity differentials among its regions and the industrial sector presented some dynamism even before industrialisation. 

But the study also shows that he pre-industrial geography of economic activity in Sweden is in sharp contrast with the industrial one, in which mining districts failed to develop further and the agricultural south along with the capital became the economic core of the country. This suggests that long-run path dependence carried over from the pre-industrial period is not always decisive in explaining where modern growth will take place. 

The researchers conclude that economic policy – such as opening or closing to international trade and the imposition or removal of protections on manufacturing – can lead to a change in the regional distribution of economic activity. 

More… 

The authors explain the findings of their study in more detail: 

Although inequality across countries can be extremely high, a large share of global inequality originates from differences in incomes within countries. Regional inequality, after a period of decline in the years leading up to the financial crisis of 2008, has made its comeback in the public debate. The nature and causes of regional inequality are much discussed and voters increasingly call for clear policies to address it. 

Economic historians have a long tradition of contributing to the debate by studying patterns of regional inequality in the very long run. In a pioneering article looking at the mid-twentieth century, Jeffrey Williamson (1965) proposed the view that industrialisation led to increasing regional inequality. 

As new datasets of regional GDP starting from around the mid-nineteenth century were being put together, it appeared clear that regional inequality was not at all a novelty brought by industrialisation. For example, recent estimates of regional GDP for Sweden from 1860 to 2010 show that inequality was already high at the outset of the industrial revolution. The same is true for other large European countries such as Italy and Spain. 

Another aspect of the debate is whether ‘path dependency’ from pre-industrial inequality actually dictates the subsequent location of economic activity in later periods, basically leaving little room for equalisation through economic policy. 

To address these issues, our research extends the estimates of GDP per capita for 24 regions in Sweden for the period 1750-1850. 

Sweden provides a unique opportunity as it is currently the only European country for which sufficient empirical evidence for the decades prior to industrialisation is available. By connecting our data to the existing ones for Sweden, we generate the longest series of regional GDP estimates ever produced. 

We show that regional inequality was already large and persistent a century before Sweden’s take-off into modern economic growth. Although Sweden was predominantly agricultural, there were large productivity differentials among its regions and the industrial sector presented some dynamism even before industrialisation. 

Industry was confined either to mining districts or the protected factories mainly in urban areas, especially in Stockholm. As the sectors generated a substantial share of value added in GDP, the regional concentration of early industry drove inequality, even before we could speak of any large-scale take-off into modern economic growth and industrialisation. 

Finally, using our data we see how the capital city of Stockholm was extremely favoured by mercantilist laws before 1750, but as some of them were gradually removed, the city and region stagnated between 1750 and 1850. 

The pre-industrial geography of economic activity in Sweden is in sharp contrast with the industrial one, in which mining districts failed to develop further and the agricultural south along with the capital became the economic core of the country. 

Our study speaks not only to the Swedish historiography, but it also demonstrates that there is not always a clear path dependency between the location of economic activity before and after the take-off of modern economic growth. We therefore question the idea that long-run path dependence carried over from the pre-industrial period is always decisive in explaining where modern growth will take place. 

The case of Sweden suggests that economic policy – such as opening or closing to international trade and the imposition or removal of protections on manufacturing – can indeed lead to a change in the regional distribution of economic activity. 

ENDS 

Kerstin Enflo and Anna Missiaia (Lund University) 

Contact:
anna.missiaia@ekh.lu.se
0046729470587

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