The first Great Divergence and the evolution of cross-country income inequality during the last millennium: the role of institutions and culture

Abstract

Using a millennium of data for 12 countries in the East and in the West, this article tests the extent to which contracting institutions, property right institutions and culture can explain economic development and the Great Divergence. It is tested whether these theories influence growth through science and technology or through human capital or channels that are independent of these two channels. It is found that culture, contracting institutions and property right institutions have all been relevant for growth and development.

Keywords:

• the Great Divergence
• culture
• institutions

JEL Classification:

• O1
• P16

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Erratum

Acknowledgements

Helpful comments and suggestions from Mac Boot, Pete Klenow, Vinod Maitra, Brian Chi-Ang Lin, Yang-Chien Tsi, David Vines and participants at the joint CEANA-TEA conference, Taipei, the 2010 Conference for Economics and Business at the Australian National University, the Annual Conference of the Taiwanese Economic Association, Taipei, 2010, and Australian Conference for Economists, Australian National University, 2011, and, particularly, a referee are gratefully acknowledged. Olga Paretsky and Stoja Stojanka provided excellent research assistance. Jakob B. Madsen acknowledges financial support from the Australian Research Council Discovery Grant DP110101871.