Exploring the political economy causes of inequality in preindustrial Germany (c. 1400-1800)

Schaff, Stefan Felix Frederick (2022) Exploring the political economy causes of inequality in preindustrial Germany (c. 1400-1800). PhD thesis, London School of Economics and Political Science.

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Abstract

This thesis addresses a major puzzle in economic history: why was economic inequality already high when industrialisation and modern economic growth began? In the first part of the project (Chapter 2), I collect new data from archival documents to estimate the extent of wealth inequality in a panel of towns and villages, and at a hypothetical “national” level. This new evidence shows that Germany followed a secular trend of inequality growth between the fourteenth and nineteenth centuries, incidentally interrupted by idiosyncratic shocks, such as the Black Death (1350) epidemic and the Thirty Years’ War (1618-48). In the second part of the project, I explore the causal effects of three central facets of the political economy of early modern Europe on inequality: warfare, the Protestant Reformation and closed governmental institutions in cities. My empirical strategies in these chapters employ difference-in-differences and instrumental variable techniques on the newly assembled town and village-level databases created in the first part of the dissertation. In Chapter 3 I document that, contrary to the widely held view that wars were “levelers” in history, the frequent military conflicts happening in preindustrial times constantly reinforced inequality. That was the result of warfare increasing the financial needs of communities in preindustrial times, which induced political elites to extract more resources via inequality promoting channels, such as regressive taxation. In Chapter 4 I study the effect of the Protestant Reformation on inequality. I argue that the Reformation expanded social welfare, but provided it in a particularistic way. This gave Protestantism an ambiguous character in terms of redistribution and its impact on inequality. I model that trade-off theoretically and test its implications empirically. In line with the theoretical framework, I document that the Reformation exacerbated inequality overall, by making marginal poor people relatively poorer. The result is driven by the introduction of 4 new particularistic poor relief policies in Protestant communities. The final chapter investigates the impact of urban political structure on inequality. I document that more closed political institutions were related to higher economic inequality in a panel of early modern German cities. To investigate the mechanisms behind that macrorelationship, I construct an individual-level panel-dataset, containing c.27,000 observations on personal wealth and political office-holding in the city state of Nördlingen from 1585 to 1700. I show that political elites enriched themselves substantially after entering office, but not before. These private gains from public office contributed to economic inequality. Politicians manipulated the crisis of the Thirty Years’ War to enrich themselves further. The results are hard to square with a “civic-mindedness” narrative of urban political elites.

Item Type:	Thesis (PhD)
Additional Information:	© 2022 Stefan Felix Frederick Schaff
Library of Congress subject classification:	D History General and Old World > DD Germany H Social Sciences > HC Economic History and Conditions
Sets:	Departments > Economic History
Supervisor:	Volckart, Oliver and Minns, Chris
URI:	http://etheses.lse.ac.uk/id/eprint/4490

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