GDP per capita or real wages? Making sense of conflicting views on pre-industrial Europe q Luis Angeles Department of Economics, University of Glasgow, Adam Smith Building, Glasgow G12 8RT, UK Received 23 February 2007 Available online 21 September 2007 Abstract This paper studies the apparent inconsistency between the evolution of GDP per capita and real wages in pre-industrial Europe. We show that these two measures will diverge when any of the three following factors are present: changes in income distribution, changes in labour supply per capita and changes in relative prices. We propose a methodology for measuring the effects of these three factors and apply it to the case of 18th century England. For this particular episode the gap between the growth of GDP per capita and real wages can be successfully explained and the main explanatory factor is changes in labour supply per capita. Some further conclusions are drawn from the experience of England during the 19th century and Europe during the early modern period. Ó 2007 Elsevier Inc. All rights reserved. Keywords: GDP per capita; Real wages; Living standards; Pre-industrial Europe; England; 18th century 1. Introduction How are we to regard the evolution of economic well-being over the pre-industrial period? Were pre-indus- trial economies stuck in a long term equilibrium characterized by a level of economic well-being that showed no trend over several centuries? Or did pre-industrial economies experience sustained growth which, despite being at much slower rates than those we are currently used to, led over the course of the centuries to large and significant rises in living standards? These difficult questions have occupied social scientists at least since Adam Smith and Thomas Malthus. Unfortunately, notwithstanding a large and insightful literature, we seem to be as far away from a consensus today as we were two centuries ago. An important reason for this is the fact that different measures of eco- nomic well-being seem to tell surprisingly different stories about pre-industrial economies. Thus, what one believes will inevitably be conditioned by what measure one is inclined to trust. 0014-4983/$ - see front matter Ó 2007 Elsevier Inc. All rights reserved. doi:10.1016/j.eeh.2007.09.002 q I thank two anonymous referees and Anthony Gloyne for invaluable comments and suggestions. All remaining errors are of course mine. E-mail address: l.angeles@lbss.gla.ac.uk Available online at www.sciencedirect.com Explorations in Economic History 45 (2008) 147–163 www.elsevier.com/locate/eeh Explorations in Economic History