How poor was 18th century France? Steps towards testing the High-Wage Hypothesis (HWE)

A few days ago, one of my articles came online at the Journal of Interdisciplinary HistoryIt is a research note, but as far as notes go this one is (I think) an important step forwards with regards to the High-Wage Hypothesis (henceforth HWE for high-wage economy) of industrialization.

In the past, I explained my outlook on this theory which proposes that high wages relative to energy was a key driver of industrialization. As wages were high while energy was cheap, firms had incentives to innovate and develop labor-saving technologies.  I argued that I was not convinced by the proposition because there were missing elements to properly test its validity. In that post I argued that to answer why the industrial revolution was British we had to ask why it was not French (a likely competitor). For the HWE to be a valid proposition, wages had to be higher in England than in France by a substantial margin. This is why I have been interested in living standards in France.

In his work, Robert Allen showed that Paris was the richest city in France (something confirmed by Phil Hoffman in his own work). It was also poorer than London (and other British cities). The other cities of France were far behind. In fact, by the 18th century, Allen’s work suggests that Strasbourg (the other city for which he had data) was one of the poorest in Europe.

In the process of assembling comparisons between Canada and France during the colonial era (from the late 17th to the mid-18th centuries), I went to the original sources that Allen used and found that the level of living standards is understated. First, I found out that the wages were not for Strasbourg per se. They applied to a semi-rural community roughly 70km away from Strasbourg.  Urban wages and rural wages tend to differ massively and so they were bound to show lower living standards. Moreover, the prices Allen used for his basket applied to urban settings. This means that the wages used were not comparable to the other cities used. I also found out that the type of work that was reported in the sources may not have belonged to unskilled workers but rather to semi-skilled or even skilled workers and that the wages probably included substantial in-kind payments.

Unfortunately, I could not find a direct solution to correct the series proposed by Allen. However, there were two ways to circumvent the issue. The most convincing of those two methods relies on using the reported wages for agricultural workers. While this breaks with the convention established by Allen (a justifiable convention in my opinion) of using urban wages and prices, it is not a problem if we compare with similar types of wage work. We do have similar data to compare with in the form of Gregory Clark’s farm wages in England. The wage rates computed by Allen placed Strasbourg at 64% of the level of wages for agricultural workers in England between 1702 and 1775. In comparison, the lowest of the agricultural wage rates for the Alsatian region places the ratio at 74%. The other wage rates are much closer to wages in England.  The less convincing methods relies on semi-skilled construction workers – which is not ideal. However, when these are compared to English wages, they are also substantially higher.

Overall, my research note attempts a modest contribution: properly measure the extent to which wages were lower in France than in Britain. I am not trying to solve the HWE debate with this. However, it does come one step closer to providing the information to do so. Now that we know that the rest of France was not as poor as believed (something which is confirmed by the recent works of Leonardo Ridolfi and Judy Stephenson), we can more readily assess if the gap was “big enough” to matter.  If it was not big enough to matter, then we have to move to one of the other five channels that could confirm the HWE (at least that means I have more papers to write).


On How Poor France Was in the 18th Century?

I have recently completed a working paper which has now been submitted (thank you a great many scholars who provided comments notably Judy Stephenson and Mark Koyama). That paper basically went back modestly on one datapoint in the work of Robert Allen which was published in 2001 in Explorations in Economic History. 

Probably one of the greatest ten papers in the field of economic history for the last twenty-five years, Allen’s article has had a tremendous influence. It introduced a new method of comparing real wages at a time when very few goods were traded internationally and most prices were determined at the local level. In using what we now call “welfare ratios” (which are akin to poverty lines), Allen managed to compare many countries before the industrial revolution.

My entire research agenda has been to improve on this stupendous work and to increase the constellation of observations as part of an “uncoordinated” (many scholars are working on this separately) effort to map living standards prior to the mid 19th century. The main part of my agenda is to add Canada and devote more attention to the important issue of relative prices in comparing old world (high labor to land ratios) and new world (high land to labor ratios) economies. In the process of comparing parts of the world, I had to re-examine some data for some established countries. One of my reconsiderations was for Strasbourg in France where I found that Allen might have misclassified wages of skilled workers which included in-kind payments as unskilled workers receiving full compensation in money wages.

When I enacted corrections to the money wage rate, I found that the Alsace region where Strasbourg is located had living standards more or less in line with those observed in Paris (rather than living standards at less than half the level of Paris). If you’re interested, the note is available here.

Note: For those who are interested, I really recommend reading this short article in Cliometrica by Sharp and Weisdorf who also discuss comparisons between France and England (and how it may relate to topics like the French Revolution).