The early modern great divergence: wages, prices and economic development

Abstract: Contrary to the claims of Pomeranz, Parthasarathi and other “world historians”, the prosperous parts of Asia between 1500 and 1800 look similar to the stagnating southern, central and eastern parts of Europe rather than the developing northwestern parts. In the advanced parts of India and China, grain wages were comparable to those in northwestern Europe, but silver wages, which conferred purchasing power over tradable goods and services, were substantially lower. The high silver wages of northwestern Europe were not simply a monetary phenomenon, but reflected high productivity in the tradable sector. The “Great Divergence” between Europe and Asia was already well underway before 1800. JEL classification: N10, N30, O1