Italy in the Great Divergence : What Can We Learn from Engel’s Law

We estimate and internationally compare the evolution of GDP pc in central-northern and, for the first time, southern Italy in 1400-1861. To address concerns on the representativeness of daily wages, we rely on an unconventional demand approach, using a general equilibrium model and occupational data. Our estimates are consistent with an “industrious revolution” in the “long 18th century” (1650-1800). Central-northern Italy stagnated. Southern Italy, though poorer, was growing slowly. Our comparison suggests that the “great divergence” between Europe and Asia in the 18th century was rooted in contingent institutional developments, rather than persistent differences