Mr. Darcy’s Ten Thousand a Year

On popular demand, I’m reviving a reoccurring theme of mine: teaching economic history through the lens of popular culture. Today: bonds, yields and 18th century English financial planning.

In what is probably my favourite piece ever written, I tried to estimate exactly how rich Mr. Darcy was – Mr. Darcy, of course, of Jane Austen’s classic novel Pride & Prejudice. I showed that whatever method you use to translate incomes to the present, all characters in Austen’s captivating story are astonishingly rich. But, as we well know today, there are large differences even among the superrich; compare Bernie Sanders (small-time millionaire) with George Lucas and Steven Spielberg (single-digit billionaires) or Jeff Bezos (wealthiest man alive).

Using Pride & Prejudice to illustrate some economic point is hardly unconventional (Piketty did this in his Capital in the Twenty-First Century), so let me similarly discuss 18th and 19th century British financial markets using the characters in this well-known tale.

The starting point is the following musing, courtesy of former Oxford Economist Martin Slater’s (2017: 52) The National Debt; how come “female characters in nineteenth-century novels always seem to have a suspiciously exact income of ‘so many pounds per year'”? Where does this money come from? Why is it so exact? And what’s the reason Piketty uses this particular literary example to illustrate the permanence and steady stream of income that capital somehow just throws off?

Consols and Financial Markets

Financial markets are truly awesome – not just in their impressive scope or potential devastation, but in the many different needs they simultaneously fulfil for many different people. Slater ably guides us through the confusing mishmash that is the 17th and 18th century English public finance, but what emerges by 1757, after Henry Pelham’s consolidation of government debt, is two main – and for our purposes, equivalent – securities: the Consolidated 3% Annuities (and the ‘Reduced annuities’), affectionately named ‘Consols’. These were permanent government bonds with annual interest payments of 3%. This means that they had no maturity date, i.e. the holder of the security could expect the government to keep paying 3% of the face value for all future (a Churchill-issued subsequent Consol was actually repaid and retired just a few years ago, after almost a century in service).

Two cool things happen. First, the “initial value” – the face value – of debt running in perpetuity becomes almost irrelevant, since all that matters for the issuer is the ability to maintain interest rate payments; there is no presumption of future repayment. Second, creditors – that is, holders of the Consols who receive the regular interest payments – may trade that asset on financial markets. Since the plethora of different debt assets were now condensed into a single, credible, identical and easily-identified asset, the market for 3% Consols in London developed into a very large and liquid market. With such ease of access and predictable and stable payoffs, the Consols became the instrument of saving for well-off families in Austen’s time.

A note on yields

The Consols, essentially a piece of paper with a face value of £100, entitled the owner to a perpetual stream of payments by the government, in this case 3% – or £3. Now, the actual price at which this paper could be sold in London fluctuated extensively depending on the conditions of the financial market and, most prominently in Austen’s lifetime, the Napoleonic wars. As the £3 annual pay was serviced by the British government, and financial strain during the war increased the risk for defaults (through a foreign invasion or British government itself), the price of Consols was chiefly reflecting the military success.

When the market price of a debt falls below its face value, the effective interest rate (the “yield”) that a prospective investor receives increases; paying £50 for a Consol with face value of £100 and a £3 perpetual interest payment, effectively earns the investor 6% interest instead of 3% (3/50 = 0.06). Since the Consols were the most dominant asset on the largest financial market in the world, their price became “the single most important asset price in the world economy” as Klovland (1994: 165) called it. Here’s the yield on Consols during Austen’s life:

JA, yield on 3%

It reached a low of 3.11% in 1792 (almost at par), and a high of 6.22% in 1798 (below £50) after the suspension of the gold standard.

The Bennets and the fortunes of handsome young men

The families of Pride & Prejudice made good use of this thriving financial market – not specifically for trading but for financial planning (others, such as British economist David Ricardo, and the banking families of Rothschild and Barings, made some of their fortune trading Consols).

In the novel, Mr. Bennet – the protagonist Lizzy’s father – has an income of £2,000 a year (again, see my 2016 piece for three different attempts at “translating” these sums into today’s money). It is not clear what his income comes from, but it’s a fair guess that it stems, like many other landed gentry of the time, from renting out farm lands belonging to the family home Longbourne. In addition, we know that Mrs. Bennet’s portion to the family home is a £5,000 contribution which is the sole inheritance the (five) Bennet daughters are entitled to.

Now, the way well-off families like the Bennets would make use of Consols was to ensure that non-inheriting children had at least some source of income after the passing of their father. The underlying concern in Pride & Prejudice, causing Mrs. Bennet to worry so about fortunate marriages for her daughters, is that the Bennet estate is entailed away to Mr. Collins – and with it the presumed rental income of £2,000 a year. That would leave the girls homeless, reduced to living off Mrs. Bennet’s inheritance of £5,000.

Austen began writing First Impressions (the initial title for Pride & Prejudice) in October 1796. During the decade leading up to this, the yield on Consols had been firmly within the interval 3.5-4.5%, hovering around 4% for years. It should thus not surprise us that Mrs. Bennet’s fortune of £5,000 presumably consisting of Consols, would have been purchased at around £75, predictably yielding the family an annual return of 4%. Indeed, the characters of Pride & Prejudice seem to be squarely set on 4% being the general norm. For instance, in a desperate attempt to enhance his already-inane proposal to Lizzy, Mr. Collins explicitly says:

“To fortune I am perfectly indifferent, and shall make no demand of that nature on your father, since I am well aware that it could not be complied with; and that one thousand pounds in the 4 per cents, which will not be yours till after your mother’s decease, is all that you may ever be entitled to.”

(Chapter 19, p. 133 in the 2009 HarperCollins edition)

Here we see the great use that Consols offered families like the Bennets. Once the Bennet parents pass away, the £5,000 of Consols could be divided equally among her children; Lizzy’s share would be a thousand pounds, which earns her an annual 4% interest return, or £40 (although maybe several year’s earnings for a regular worker, this was a rather small sum for such rich families – in contemplating Lizzy’s sister Lydia’s imprudent marriage, we learn that Mr. Bennet spent almost £100/year on Lydia’s purchases and pocket money alone). Being liquid financial assets, dividing up the Consols among children was very easy, and their steady income stream ensured that they would have at least some income. Bar Napoleonic conquest, the interest payment on the Consols would reliably show up year after year.

As for the handsome young men, Mr. Bingley’s case is easier than Mr. Darcy’s. We know that Bingley’s income is not agricultural, but investments from a fortune of almost  £100,000 inherited from his father, who had not yet acquired an estate. The fortune was “acquired by trade”, where (being from the North) cotton or shipping are prime candidates, but the slave trade is also a possibility. We also know that the ambiguity of his annual income (£4,000 or £5,000) lies well within the return from a fortune of that size invested in Consols. Indeed, for Bingley to hold that kind of fortune, earn that income and still not have an estate of his own, suggests that his financial wealth consists predominantly of Consols – perhaps complemented with some other stock (Bank of England or East India Company stock are plausible candidates). Clearly, new money.

Mr. Darcy, on the other hand, is plainly old money. And a lot of it. There are subtle hints in the novel that Pemberley has been in the Darcy family for generations. What we don’t know is precisely how his £10,000 a year is earned. When visiting Pemberley in Derbyshire with her aunt and uncle, Lizzy is told by the housekeeper that Mr. Darcy is such a generous and fair man: “ask any of his tenants”, she says, which indicates that Mr. Darcy, has a fair number of them – as one would expect from a sizeable estate like Pemberley. Now, what we don’t know is if the entirety of his £10,000 a year is reaped from rental income; it could be that some of his income is financial – or that either his financial or rental income is excluded from this rumoured number. Beyond a mention of his sister, Georgiana’s, fortune of £30,000 – which for convenience would likely be held in Consols – we know very little about the personal finances of Mr. Darcy.

The use and abuse of Consols

The financial market for government debt in the late-18th and early 19th century was not created with financial planning in mind, but by incremental improvements to previous government funding problems. The outcome, however, was a striking success for Britain, whose thriving financial market in no small part accounted for Britannia’s Century until WWI.

Moreover, as contemporary economists from Ricardo and John Stuart Mill to Malthus and Lauderdale observed, the recurring interest payments, funded by taxes, may have had quite large macroeconomic consequences. Taxing ‘productive’ investments and trade in order to fund ‘unproductive’ holders of government debt was, it was argued, harmful to the country – and in a time where government expenditures largely consisted of the military and debt maintenance, the impacts of funding the debt was of prime political interest.

Piketty’s use of Austen’s England (and Balzac’s France) was used for precisely the same distinction. Wealth, in Piketty’s view, perpetuates itself, and effortlessly earns its return (never mind the work, risk and selection issues involved). By continually paying the interest on its debt, the governments of Austen’s Britain financed the leisurly lifestyles of the rich, just as the “natural” return of the modern-day rich contribute and maintain today’s inequality.

The Consol was a revolutionary invention, but it might not have been part of Mr. Darcy’s Ten Thousand a Year.

Not all GDP measurement errors are greater than zero!

Bryan Caplan is an optimist. He thinks that economists do many errors in estimating GDP (overall well-being). He is right in the sense that we are missing many dimensions of welfare improvements in the last half-century (see here, here and here). These errors in measurements lead us to hold incorrectly pessimistic views (such as those of Robert Gordon). However, Prof. Caplan seems to argue (I may be wrong) that all measurements problems and errors are greater than zero. In other words, they all cut in favor of omitting things. There are no reasons to believe this. Many measurement problems with GDP  data cut the other way – in favor of adding too much (so that the true figures are lower than the reported ones).

Here are two errors of importance (which are in no way exhaustive): household output and adjustments for household size.

Household Output

From the 1910s to the 1940s, married women began to enter moderately the workforce. This trickle became a deluge thereafter. National GDP statistics are really good at capturing the extra output they were hired to produce. However, national GDP statistics cannot net out the production that was foregone: household output.

A married woman in 1940 did produce something: child-rearing, house chores, cooking, allowing the husband to specialize in his work. That output had a value. Once offered the chance to work, married women thought the utility generated from producing “home outputs” was inferior to the utility generated from “market work”. However, the output that is measured is only related to market work. Women entered the labor force and everything they produced was considered a net addition to GDP. In reality, any economist worth his salt is aware that the true improvement in well-being is equal to the increased market output minus the forsaken house output. Thus, in a transition from a “male-labor force” to a “mixed labor force”, you are bound to overestimate output increases.

How big of an issue is this? Well, consider this paper from 1996 in Feminist Economics. In that paper, Barnet Wagman and Nancy Folbre calculate output in both the “household” and “market” sectors. They find that even very small changes in the relative size of these sectors alter growth rates by substantial margins. Another example, which I discussed in this blog post based on articles in the Review of Income and Wealth, is that when you make the adjustment over four decades of available Canadian data, you can find that one quarter of the increase in living standards is eliminated by the proper netting out of the value of non-market output. These are sizable measurement errors that cut in the opposite direction as the one hypothesized by prof. Caplan (and in favor of people like prof. Gordon).

Household Size

Changes in household sizes also create overestimation problems. Larger households have more economies of scale to exploit than smaller households so that an income of $10,000 per capita in a household of six members is superior in purchasing power than an income of $10,000 per capita in a single-person household. If, over time, you move from large households to small households, you will overestimate economic growth. In an article in the Scottish Journal of Political Economy, I showed that making adjustments for household sizes over time yields important changes in growth rates between 1890 and 2000. Notice, in the table below, that GDP per adult equivalent (i.e. GDP per capita adjusted for household size) is massively different than GDP per capita. Indeed, the adjusted growth rates are reduced by close to two-fifths of their original values over the 1945-2000 period and by a third over the 1890 to 2000 period. This is a massive overestimation of actual improvements in well-being.


A large overestimation

If you assemble these two factors together, I hazard a guess that growth rates would be roughly halved (there is some overlap between the two so that we cannot simply sum them up as errors to correct for – hence my “guess”). This is not negligible. True, there are things that we are not counting as Prof. Caplan notes. We ought to find a way to account for them. However, if they simply wash out the overestimation, the sum of errors may equal zero. If so, those who are pessimistic about the future (and recent past) of economic growth have a pretty sound case. Thus, I find myself unable to share Prof. Caplan’s optimism.

Asking questions about women in the academy

Doing the economist’s job well, Nobel Laureate Paul Romer once quipped, “means disagreeing openly when someone makes an assertion that seems wrong.”

Following this inspiration guideline of mine in the constrained, hostile, and fairly anti-intellectual environment that is Twitter sometimes goes astray. That the modern intellectual left is vicious we all know, even if it’s only through observing them from afar. Accidentally engaging with them over the last twenty-four hours provided some hands-on experience for which I’m not sure I’m grateful. Admittedly, most interactions on twitter loses all nuance and (un)intentionally inflammatory tweets spin off even more anger from the opposite tribe. However, this episode was still pretty interesting.

It started with Noah Smith’s shout-out for economic history. Instead of taking the win for our often neglected and ignored field, some twitterstorians objected to the small number of women scholars highlighted in Noah’s piece. Fair enough, Noah did neglect a number of top economic historians (many of them women) which any brief and uncomprehensive overview of a field would do.

His omission raised a question I’ve been hooked on for a while: why are the authors of the most important publications in my subfields (financial history, banking history, central banking) almost exclusively male?

Maybe, I offered tongue-in-cheek in the exaggerated language of Twitter, because the contribution of women aren’t good enough…?

Being the twenty-first century – and Twitter – this obviously meant “women are inferior – he’s a heretic! GET HIM!”. And so it began: diversity is important in its own right; there are scholarly entry gates guarded by men; your judgment of what’s important is subjective, duped, and oppressive; what I care about “is socially conditioned” and so cannot be trusted; indeed, there is no objectivity and all scholarly contribution are equally valuable.

Now, most of this is just standard postmodern relativism stuff that I couldn’t care less about (though, I am curious as to how it is that the acolytes of this religion came to their supreme knowledge of the world, given that all information and judgments are socially conditioned – the attentive reader recognises the revival of Historical Materialism here). But the “unequal” outcome is worthy of attention, and principally the issue of where to place the blame and to suggest remedies that might prove effective.

On a first-pass analysis we would ask about the sample. Is it really a reflection of gender oppression and sexist bias when the (top) outcome in a field does not conform to 50:50 gender ratios? Of course not. There are countless, perfectly reasonable explanations, from hangover from decades past (when that indeed was the case), the Greater Male Variability hypothesis, or that women – for whatever reason – have been disproportionately interested in some fields rather than others, leaving those others to be annoyingly male.

  • If we believe that revolutionising and top academic contributions have a long production line – meaning that today’s composition of academics is determined by the composition of bright students, say, 30-40 years ago – we should not be surprised that the top-5% (or 10% or whatever) of current academic output is predominantly male. Indeed, there have been many more of them, for longer periods of time: chances are they would have managed to produce the best work.
  • If we believe the Greater Male Variability hypothesis we can model even a perfectly unbiased and equal opportunity setting between men and women and still end up with the top contribution belonging to men. If higher-value research requires smarter people working harder, and both of those characteristics are distributed unequally between sexes (as the Greater Male Variability hypothesis suggests), then it follows naturally that most top contributions would be men.
  • In an extension of the insight above, it may be the case that women – for entirely non-malevolent reasons – have interests that diverge from men’s (establishing precise reasons would be a task for psychology and evolutionary biology, for which I’m highly unqualified to assess). Indeed, this is the entire foundation on which the value of diversity is argued: women (or other identity groups) have different enriching experiences, approach problems differently and can thus uncover research nobody thought to look at. If this is true, then why would we expect that superpower to be applied equally across all fields simultaneously? No, indeed, we’d expect to see some fields or some regions or some parts of society dominated by women before others, leaving other fields to be overwhelmingly male. Indeed, any society that values individual choice will unavoidably see differences in participation rates, academic outcomes and performance for precisely such individual-choice reasons.

Note that none of this excludes the possibility of spiteful sexist oppression, but it means judging academic participation on the basis of surveys responses or that only 2 out of 11 economic historians cited in an op-ed were women, may be premature judgments indeed.


  1. Violent Conflict and Political Development Over the Long Run: China Versus Europe Dincecco & Wang, Annual Review of Political Science
  2. Why was the 20th century not a “Chinese Century”? Brad DeLong, Grasping Reality
  3. Law and border Jacob Levy, Niskanen
  4. The story of Indian magic John Butler, Asian Review of Books

On Robert Allen’s defense of the High-Wage Economy hypothesis

The high-wage economy thesis is a topic I have blogged about many times before as I think it is an important debate among economists and economic historians (see notably here and here, see also this contribution of mine to the Journal of Interdisciplinary History). For those unfamiliar with this thesis, here is a simple summary of the idea advanced by Robert Allen: high wages relative to capital units was a key force in the industrialization of Britain and thus it explains why the Industrial Revolution was British before if was anything else.

As I have explained in the aforementioned blog posts, I am unsure of where I stand regarding this idea. I tend to be skeptical, but I have stated the evidence needed to convince me of the opposite. In the past year or so, there has been an avalanche of articles on the topic including this article by Humphries and Weisdorf, a follow-up working paper by the same authors, another paper by Judy Stephenson and a working paper by Stephenson (bis). Today, Robert Allen replies to his critics in this working paper.

I find that some of the points are convincing, however I must take issue with a particular point that falls into my ballpark as Allen mentions my work on wages in France (the aforementioned article in Journal of Interdisciplinary History). In my research, I pointed out that Allen’s computations underestimated wages outside Paris. With the correct computations, the rest of France does not appear as poor relative to England as Allen suggests. Allen concedes this point but then goes to state the following:

Geloso (2018) has pointed out that the Strasbourg unskilled wage series for 1702-64 is low in comparison to that of comparable towns, and workers may have received food, which has not been taken into account.  This is a perceptive point, but its implications are limited. The most important use I make of the Strasbourg evidence is in calculating the ratio of the wage to the user cost of capital. If the Strasbourg wage in this calculation is raised to that of neighbouring towns, the wage-capital cost ratio does rise but only by a small degree. The reason for this somewhat surprising result is that the wage is also an argument in the formula for the user cost of capital–building workers have to build the machines and the mills that house them–so the denominator of the ratio increases as well as the numerator, although to a lesser extend.

This is a incorrect characterization of my argument. First, I did not state that wages in Strasbourg did not account for in-kind payment. I stated that in-kind payment was evidence that the wages did not pertain to Strasbourg! The wages from the primary sources were for a city some 70 km away from Strasbourg, they did not concern unskilled workers and they included large in-kind compensation. To correct for this problem, I compared agricultural wages in England with those around Strasbourg that had been collected by Auguste Hanauer. What I found was the the lowest wages in farming were equal to 74% of farm wages in Southern England (as opposed to 64% with Allen’s stated wages). While I did not report this in the article because I had doubts, it is worth pointing out that the high bound of farm wages in Strasbourg is above the level reported for Southern England (which acts a proxy for England – see table 2 in my paper). As Strasbourg is a proxy for living standards outside Paris, my finding suggests a much smaller gap in living standards. It also entails a much more important change in the cost of capital to labor (wages are in the range of 50% above those suggested by Allen and sometimes they are higher by more than 100% which would mean a halving of the relative cost of capital! These are not peanuts to be thrown on the sidewalk!

Second, I ought to point out the nature of my argument. I was not trying to prove/disprove the high-wage hypothesis. My point was much more modest. The mirror of the question as to why the industrial revolution was British is why it was not French. France had a large population offering large returns to scale (in both economic and political organizations) and an array of navigable rivers that facilitated internal trade. It also key pockets of Lancashire-like industrialization such as Normandy (for textile) and Mulhouse (the French Manchester). As such, it is an entirely reasonable endeavor to try to situate living standards in France relative to Britain. If France was massively poorer than England, then Allen has a greater likelihood of being correct. If it was closer to an equal footing (I do not believe that anyone places France above England in circa 1750), then Allen’s critics have a greater likelihood of being correct.* However, regardless of the answer, the data does not infirm/confirm the high-wage hypothesis. It merely situates relative likelihood. As I point out that wages were quite above those postulated by Allen, I am merely stating the extent of the reasonableness of being skeptical of the high-wage hypothesis.

Finally, it is worth pointing out that the work of Leonardo Ridolfi is absent from Allen’s reply. The latter’s work is very important as it echoes (in a much richer manner) my point that wages outside Paris were not as low as cited by Allen.**

*As I assume a greater equality of capital returns across both countries, the smaller the wage gap, the smaller the relative differences in capital/labor costs ratios.
** Ridolfi shows France had incomes equal to 64% of English incomes circa 1700. However, I am skeptical of this figure. This is because, while I trust the index produced by Ridolfi, I am unconvinced about the benchmark year to convert the index into international dollars.

On “strawmanning” some people and inequality

For some years now, I have been interested in the topic of inequality. One of the angles that I have pursued is a purely empirical one in which I attempt to improvement measurements. This angle has yielded two papers (one of which is still in progress while the other is still in want of a home) that reconsider the shape of the U-curve of income inequality in the United States since circa 1900.

The other angle that I have pursued is more theoretical and is a spawn of the work of Gordon Tullock on income redistribution. That line of research makes a simple point: there are some inequalities that are, in normative terms, worrisome while others are not. The income inequality stemming from the career choices of a benedictine monk and a hedge fund banker are not worrisome. The income inequality stemming from being a prisoner of one’s birth or from rent-seekers shaping rules in their favor is worrisome.  Moreover, some interventions meant to remedy inequalities might actually make things worse in the long-run (some articles even find that taxing income for the sake of redistribution may increase inequality if certain conditions are present – see here).  I have two articles on this (one forthcoming, the other already published) and a paper still in progress (with Rosolino Candela), but they are merely an extension of the aforementioned Gordon Tullock and some other economists like Randall Holcombe, William Watson and Vito Tanzi. After all, the point that a “first, do no harm” policy to inequality might be more productive is not novel (all that it needs is a deep exploration and a robust exposition).

Notice that there is an implicit assumption in this line of research: inequality is a topic worth studying. This is why I am annoyed by statements like those that Gabriel Zucman made to ProMarket. When asked if he was getting pushback for his research on inequality (which is novel and very important), Zucman answers the following:

Of course, yes. I get pushback, let’s say not as much on the substance oftentimes as on the approach. Some people in economics feel that economics should be only about efficiency, and that talking about distributional issues and inequality is not what economists should be doing, that it’s something that politicians should be doing.

This is “strawmanning“. There is no economist who thinks inequality is not a worthwhile topic. Literally none. True, economists may have waned in their interest towards the topic for some years but it never became a secondary topic. Major articles were published in major journals throughout the 1990s (which is often identified as a low point in the literature) – most of them groundbreaking enough to propel the topic forward a mere decade later. This should not be surprising given the heavy ideological and normative ramifications of studying inequality. The topic is so important to all social sciences that no one disregards it. As such, who are these “some people” that Zucman alludes too?

I assume that “some people” are strawmen substitutes for those who, while agreeing that inequality is an important topic, disagree with the policy prescriptions and the normative implications that Zucman draws from his work. The group most “hostile” to the arguments of Zucman (and others such as Piketty, Saez, Atkinson and Stiglitz) is the one that stems from the public choice tradition. Yet, economists in the public-choice tradition probably give distributional issues a more central role in their research than Zucman does. They care about institutional arrangements and the rules of the game in determining outcomes. The very concept of rent-seeking, so essential to public choice theory, relates to how distributional coalitions can emerge to shape the rules of the game in a way that redistribute wealth from X to Y in ways that are socially counterproductive. As such, rent-seeking is essentially a concept that relates to distributional issues in a way that is intimately related to efficiency.

The argument by Zucman to bolster his own claim is one of the reason why I am cynical towards the times we live in. It denotes a certain tribalism that demonizes the “other side” in order to avoid engaging in them. That tribalism, I believe (but I may be wrong), is more prevalent than in the not-so-distant past. Strawmanning only makes the problem worse.

On Household Size and Economic Convergence

A few days ago, one of my papers was accepted for publication at the Scottish Journal of Political Economy (working paper version here). Co-authored with Vadim Kufenko and Klaus Prettner, this paper makes a simple point which I think should be heeded by economists: household size matter. To be fair, economists are aware of this when they study inequality or poverty. After all, the point is pretty straightforward: larger households command economies of scale so that each dollar goes further than in smaller households. As such, adjustments are necessary to make households comparable.

Yet, economists seem to forget it when times come to consider paths of economic growth and convergence across countries. In the paper, we try to remedy this flaw. We do so because there was a wide heterogeneity of household size throughout history – even within more homogeneous clubs such as the countries composing the OECD.  If we admit, as the economists who study poverty and inequality do, that income per person adjusted for household size is preferable to income per person, then we must recognize that our figures of income per capita will misstate the actual differences between countries. In addition, if households grew homogeneously smaller over a long period of time, figures of income per capita will overstate the actual improvements in living standards. As such, we argue there is value in modifying the figures to reflect changing household sizes.

For OECD countries, we find that the adjusted income figures increased a third less than the unadjusted per capita figures (see table below). This suggests a more modest growth trend. In addition, we also find that up to the structural break in variations between countries (NDLR: divergence between OECD countries increased to around 1950) there was more divergence with the adjusted figures than with the unadjusted figures (see figure below). We also find that since the break point, there has been less convergence than previously estimated.

While the paper is presented as a note, the point is simple and suggests that those who study convergence between regions or countries should consider the role of demography more carefully in their work.