Between Malthus and the industrial take‐off: regional inequality in Sweden, 1571–1850

Abstract

AbstractThe causes and extent of regional inequality in the process of economic growth are at the core of historical economic research. So far, much attention has been devoted to studying the role of industrialization in driving regional divergence. However, empirical studies on relatively unequal countries such as Italy and Spain show that inequality was already high at the outset of modern industrialization. Using new estimates of Swedish regional GDP, this article looks for the first time at regional inequality in a pre‐industrial European economy. Its findings show that inequality increased dramatically between 1571 and 1750 and stayed high until the mid‐nineteenth century. This result refutes the classical view that the industrial take‐off was the main driver of regional divergence. Decomposing the Theil index for GDP per worker, we find that the bulk of inequality from 1750 onwards was driven by structural differences across sectors rather than different regional productivity within sectors. We show that counties with higher agricultural productivity followed a classic Malthusian pattern when experiencing technological advancement, while those with higher industrial productivity did not. We suggest that institutional factors, such as the creation of the Swedish Empire, Stockholm's trading rights, and a protective industrial policy, amplified this exceptional pattern.