Inequality and Economic History

Guido Alfani

DONDENA Centre for Research on Social Dynamics

Bocconi University, Milan, Italy

12 October 2017

EINITE – ERC Starting Grant

• Up until recently, we had very little information about long-term trends in economic inequality in preindustrial Europe. The notable exception was Van Zanden (1995) on Holland in the Low Countries

• The situation has now changed entirely, and for many European regions we now have time series of (mostly wealth) inequality covering the early modern period and part of the Middle Ages

• Most of the new data which has become available is the result of a project funded by the ERC (Starting Research Grant program): EINITE – Economic Inequality across Italy and Europe, 1300-1800 (www.dondena.unibocconi.it/EINITE)

• Including the preindustrial period in the analysis tends to change the way in which we look at recent developments in inequality

12 October 2017

The story so far

12 October 2017

The areas covered by EINITE: Italy…

12 October 2017

…the Low Countries…

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…and other European areas, in particular south France, Catalonia, Germany and England

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The (more or less) common archival sources used: the estimi or property tax records

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The case of Piedmont (wealth inequality, Gini indexes. Propertyless excluded)

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1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800

Carmagnola Cherasco Chieri

Moncalieri Ivrea Saluzzo

Source: Alfani, “Economic inequality in northwestern Italy: A long-term view (fourteenth to eighteenth centuries)”, Journal of Economic History, 2015

12 October 2017

Share of wealth of the top 10% (Piedmont)

0102030405060708090

1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800Carmagnola Cherasco Chieri

Moncalieri Ivrea Saluzzo

Source: Alfani, “Economic inequality in northwestern Italy: A long-term view (fourteenth to eighteenth centuries)”, Journal of Economic History, 2015

12 October 2017

A new method to aggregate local time series in order to produce «regional» time series

Source: Alfani, “Economic inequality in northwestern Italy: A long-term view (fourteenth to eighteenth centuries)”, Journal of Economic History, 2015

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1

1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800

Piedmont Cities Rural areas

00,10,20,30,40,50,60,70,80,9

1

1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800

Castelfiorentino Poggibonsi

St. Godenzo St. Maria Impruneta

Contado of Florence Contado of St. Gimignano

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Economic inequality in the Florentine contado, 1300-1800 (wealth inequality, Gini indexes)

Estimo Catasto Decima

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The impact of the Black Death in Tuscany: Lorenz Curves

Source: Alfani and Ammannati, “Long-term trends in economic inequality: the case of the Florentine State, ca. 1300-1800”, Economic History Review, 2017

12 October 2017

The Tuscan regional reconstruction

00.10.20.30.40.50.60.70.80.9

1

1450 1500 1550 1600 1650 1700 1750 1800

Cities Tuscany Rural areas

Source: Alfani and Ryckbosch, “Growing apart in early modern Europe? A comparison of inequality trends in Italy and the Low Countries, 1500–1800”, Explorations in Economic History, 2016

12 October 2017

Findings from regression analysis (on Tuscany) (1) (2) (3) (4) (5) (6)

Year 0.0007***

(0.0001)

0.0007***

(0.0001)

0.0008***

(0.0001)

0.0008***

(0.0001)

0.0008***

(0.0001)

0.0008***

(0.0001)

Pre-Black Death 0.1089***

(0.0288)

0.1211***

(0.0309)

0.1215***

(0.0309)

0.1303***

(0.0307)

Population (ln) 0.0446***

(0.0068)

0.0465***

(0.0066)

0.0076

(0.0120)

0.0025

(0.0209)

-0.0008

(0.0124)

-0.0157

(0.0228)

Per capita GDP (ln) 0.1431

(0.0902)

0.1750**

(0.0869)

0.1637*

(0.0919)

0.1807*

(0.0913)

0.1761*

(0.0993)

Urban

(ref.: Rural)

0.0884***

(0.0280)

0.0869***

(0.0307)

Estimo

(ref.: Decima)

0.0172

(0.0216)

0.0228

(0.0235)

0.0325

(0.0279)

0.0358

(0.0285)

Catasto

(ref.: Decima)

-0.0243

(0.0205)

-0.0226

(0.0230)

-0.0197

(0.0224)

-0.0235

(0.0249)

Fixed effects

(community dummies)

Yes Yes

F 123.5*** 90.55*** 49.53*** 24.24*** 31.41*** 13.85***

R² 0.6597 0.6674 0.7030 0.7405 0.6490 0.6919

N 130 130 130 130 115 115

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The Republic of Venice

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Economic inequality across the Republic of Venice as a whole (wealth inequality, Gini indexes. Propertyless excluded)

Aggregate series elaborated with the same method introduced in G. Alfani, “Economic inequality in northwestern Italy: A long-term view (fourteenth to eighteenth centuries)”, Journal of Economic History, 2015

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1400 1450 1500 1550 1600 1650 1700 1750

Cities Rural areas Venetian Republic

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Long-term trends in economic inequality (Gini indexes of wealth concentration, including and excluding the propertyless)

0.64

0.66

0.68

0.7

0.72

0.74

0.76

0.78

0.8

0.82

0.84

0.86

1537 1552 1567 1582 1597 1612 1627 1642 1657 1672 1687 1702

Padua Padua (with propertyless)

Bergamo Bergamo (with propertyless)

For the rural areas: in Padua’s contado, where the propertyless were recorded in 1642 and 1694 only, adding them to the distribution increases the Gini index by 1.1% (from 0.728 to 0.736) and by 2.5% (from 0.747 to 0.766) respectively

12 October 2017

Economic inequality across the Republic of Venice as a whole (Gini indexes of wealth concentration)

Aggregate series elaborated with the same method introduced in G. Alfani, “Economic inequality in northwestern Italy: A long-term view (fourteenth to eighteenth centuries)”, Journal of Economic History, 2015

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1500 1550 1600 1650 1700 1750Rural areas (propertyless included)Venetian Republic (propertyless included)Venetian RepublicRural areas

12 October 2017

Comparing regional trends in Italy: Republic of Venice, Sabaudian State, Kingdom of Naples and Florentine state (for now!)

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1450 1500 1550 1600 1650 1700 1750 1800

Sabaudian State Kingdom of Naples (Apulia)

Florentine State Republic of Venice

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Taking the comparison beyond Italy: the Low Countries

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Regional trends in inequality (Gini)

Source: Alfani and Ryckbosch, “Growing apart in early modern Europe? A comparison of inequality trends in Italy and the Low Countries, 1500–1800”, Explorations in Economic History, 2016

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1500 1550 1600 1650 1700 1750 1800

Piedmont Tuscany

Northern Low Countries Southern Low Countries

• Across four different States, on both sides of the Little Divergence, we find empirically a broadly similar path of increase in economic inequality throughout the Early Modern period

• As it seems, no single causal factor can explain all four cases (plus Apulia and Veneto) for the whole period: this means there was no «necessary» condition to have inequality increase, but possibly a range of «sufficient» conditions. We are considering the following: – Economic growth – Demographic factors (urbanization) – Proletarianization – Institutions and politics (extraction of inequality)

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Possible explanations

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GDP per capita

Source: Maddison Project (2014)

0

500

1000

1500

2000

2500

3000

1500 1600 1700 1750 1800

central-northern Italy southern Low Countries

northern Low Countries

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Politics, institutions, & inequality extraction

P2 H2

IPF

GDP per capita

Gini

E2' E1

P1, H1

E2''

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Extraction of inequality: the northern Low Countries…

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… and Tuscany

Converted Gini coefficients (1550 = 76% extraction ratio, as in Northern Low Countries)

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All cases

Converted Gini coefficients (1550 = 76% extraction ratio)

Tuscany Piedmont

northern L.C.

southern L.C.

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Extraction ratios

Converted extraction ratios: 1550 = 76%

70

75

80

85

90

95

100

1500 1550 1600 1650 1700 1750 1800

Northern LC Southern LC Tuscany Piedmont

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Increasing extraction and the rise of the fiscal state in Europe

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2

7

12

17

22

0

5

10

15

20

25

30

35

1500

1530

1560

1590

1620

1650

1680

1710

1740

1770

1800

Lire

per c

apita

(onl

y fo

r Sab

audi

an S

tate

)

Num

ber o

f dai

ly w

ages

of l

abou

rers

in c

onst

ruct

ion

indu

stry

Holland Flanders State of Milan Sabaudian State

Increase in per-capita fiscal burden, ca. 1500-1800

12 October 2017

Politics and institutions

• The fact that although inequality grew everywhere, trends in inequality extraction ratios differed deeply suggests to pay particular attention to political and institutional factors.

• The rise of the fiscal-military state: - Growth of regressive fiscal pressure

Relative exception: Dutch Republic - Inegalitarian Redistribution through interest payments & warfare

And in the opposite direction: poor relief (2016 article by Van Bavel and Rijma, suggesting differences in levels of “social spending” across preindustrial Europe)

• Processes of “proletarianization”

12 October 2017

The share of the top 10%

0102030405060708090

1300 1350 1400 1450 1500 1550 1600 1650 1700 1750 1800Sabaudian State Sabaudian State (cities only)

Florentine State Kingdom of Naples (Apulia)

Southern Low Countries (cities only) Northern Low Countries

In Italy, where the figures refer to wealth (in the Low Countries they refer to income), for 1800 we found shares of the top 10% very close to those proposed by Piketty (2014) for Europe in 1810: about 80%

12 October 2017

Connecting to the present: the share of wealth of the top 10% in Europe, 1300-today

Source: Alfani, The top rich in Europe in the long run of history, Vox, 15 January 2017

30%

40%

50%

60%

70%

80%

90%

100%13

00

1350

1400

1450

1500

1550

1600

1650

1700

1750

1800

1850

1900

1950

2000

series Alfani series Piketty

12 October 2017

Key references • G. Alfani, The top rich in Europe in the long run of history, Vox, 15 January 2017 • G. Alfani, “Economic inequality in northwestern Italy: A long-term view (fourteenth to

eighteenth centuries)”, Journal of Economic History, 2015 • G. Alfani, “The rich in historical perspective. Evidence for preindustrial Europe (ca. 1300-

1800)”, Cliometrica, 11(3), 2017 • G. Alfani and F. Ammannati, “Long-term trends in economic inequality: the case of the

Florentine State, ca. 1300-1800”, Economic History Review, 2017 • G. Alfani and W. Ryckbosch, “Growing apart in early modern Europe? A comparison of

inequality trends in Italy and the Low Countries, 1500–1800”, Explorations in Economic History, 2016

• B. Milanovic, Global Inequality: a new approach for the age of globalization, Harvard University Press, Cambridge 2016

• B. Milanovic, P. Lindert, J.H. Williamson, (2011), “Pre-Industrial Inequality”, The Economic Journal, 2011

• T. Piketty, Capital in the Twenty-First Century, Belknap Press of Harvard University Press, Cambridge 2014

• W. Scheidel, The Great Leveller: Violence and the Global History of Inequality from the Stone Age to the Present, Oxford University Press, Oxford 2017

• G. L. Van Zanden, “Tracing the beginning of the Kuznets curve: western Europe during the early modern period”, Economic History Review, 1995

12 October 2017

Thanks for your attention!