The Consequences of Radical Reform: The French
Revolution
Daron Acemoglu
Davide Cantoni Simon Johnson
Robinson
James
October 15, 2016
1 / 28
Motivations
Literature
Which institutions are important for growth ?
property rights (North and Thomas (1973), Acemoglu,
Johnson and Robinson (2001), Acemoglu and Johnson (2005))
legal institutions (La Porta et al. (1998))
other barriers, oligarchies (Olson(1982), Acemoglu (2008))
2 / 28
Motivations
Literature
Which institutions are important for growth ?
property rights (North and Thomas (1973), Acemoglu,
Johnson and Robinson (2001), Acemoglu and Johnson (2005))
legal institutions (La Porta et al. (1998))
other barriers, oligarchies (Olson(1982), Acemoglu (2008))
Can institutions be designed/reformed externally ? (Berkowitz,
Pistor and Richard (2003), Rodrik (2007))
amplified if reforms are implemented "Big Bang" style
examples: reforms in Latin America, Africa, former Soviet
Union, Afghanistan, Irak
counterexamples: postwar Germany and Japan
2 / 28
Motivations
This paper
Consequences of a radical, externally imposed reform, French
Revolution, on subsequent growth in Germany
Reforms include : civil code, abolition of guilds, abolition of
serfdom, agrarian reforms, ...
3 / 28
Motivations
This paper
Consequences of a radical, externally imposed reform, French
Revolution, on subsequent growth in Germany
Reforms include : civil code, abolition of guilds, abolition of
serfdom, agrarian reforms, ...
Link with the two questions from previous slide :
Revolutionary reforms weakened oligarchies, entry barriers, ...
Should have a positive effect !
But it was externally imposed ...
Should have a negative effect !
3 / 28
Outline
1
Historical Overview
2
Data
3
Reduced-Form Evidence
4
Institutional Reforms and Economic Growth
5
Conclusion
4 / 28
Historical Overview
Europe Before the Revolution
No more "real" feudalism by the end of 18th Century, rather, two
kinds of oligarchies
5 / 28
Historical Overview
Europe Before the Revolution
No more "real" feudalism by the end of 18th Century, rather, two
kinds of oligarchies
Landed nobility in agriculture
Several forms of unfree labor (serfdom, or other forms of
taxes/tributes to landowners)
Various rights of nobility and clergy
5 / 28
Historical Overview
Europe Before the Revolution
No more "real" feudalism by the end of 18th Century, rather, two
kinds of oligarchies
Landed nobility in agriculture
Several forms of unfree labor (serfdom, or other forms of
taxes/tributes to landowners)
Various rights of nobility and clergy
Urban oligarchy
Major occupations controlled by guilds
Cities controlled by a few families
5 / 28
Historical Overview
Europe Before the Revolution
No more "real" feudalism by the end of 18th Century, rather, two
kinds of oligarchies
Landed nobility in agriculture
Several forms of unfree labor (serfdom, or other forms of
taxes/tributes to landowners)
Various rights of nobility and clergy
Urban oligarchy
Major occupations controlled by guilds
Cities controlled by a few families
=> not the ideal context for industrialization
5 / 28
Historical Overview
The Revolution and its Effect on Europe
War between France and Prussia/Austria starts in 1792. France
borders were expanded during the following years.
By 1795, Rhineland is controlled by France
Plenty of little states and cities were merged to form a string
of buffer states on French northeastern frontier. They become
Confederation of the Rhine in 1806.
Reorganization of territories in Northwest of Germany into
satelite states under Napoleon’s control.
6 / 28
Historical Overview
Map - 1792
7 / 28
Historical Overview
Map -1806
8 / 28
Historical Overview
Map -1811
9 / 28
Historical Overview
Institutional Changes
Main reforms in Rhineland (1795 to 1798)
Abolition of the seigneurial regime
Abolition of guilds
Creation of commercial courts
10 / 28
Historical Overview
Institutional Changes
Main reforms in Rhineland (1795 to 1798)
Abolition of the seigneurial regime
Abolition of guilds
Creation of commercial courts
Napoleon continued those reforms
Introduction of the civil code
Economic importance of the code
Rhineland from oligarchy to "business friendly" region
After 1815
Rhineland to Prussia => preserved French institutions
Some other places went back to the ancien regime
10 / 28
Historical Overview
Napoleon’s motivations
Napoleon’s motivations to continue those policies
Ideology
Creation of buffer states around France
Undermining existing elites to consolidate his control over
conquered regions
11 / 28
Historical Overview
Napoleon’s motivations
Napoleon’s motivations to continue those policies
Ideology
Creation of buffer states around France
Undermining existing elites to consolidate his control over
conquered regions
Claim : he didn’t target regions with brighter economic future !
Hence, we can consider France occupation as an exogeneous shock
to study long term growth.
11 / 28
Data
Overview
Data from 19 counties
Treated panel (8 counties)
Control panel, west of Elbe (5 counties)
Control panel, east of Elbe (6 counties)
12 / 28
Data
Overview
Data from 19 counties
Treated panel (8 counties)
Control panel, west of Elbe (5 counties)
Control panel, east of Elbe (6 counties)
Outcome variables
economic prosperity measured by urbanization rate
share of employment in industry (not before 1849)
12 / 28
Data
Overview
Data from 19 counties
Treated panel (8 counties)
Control panel, west of Elbe (5 counties)
Control panel, east of Elbe (6 counties)
Outcome variables
economic prosperity measured by urbanization rate
share of employment in industry (not before 1849)
Treatment and reform index
Treatment = number of years under French occupation
Index of reforms at 1850 and 1900
12 / 28
Data
Descriptive statistics
13 / 28
Data
Descriptive statistics
14 / 28
Data
Descriptive statistics
15 / 28
Data
Descriptive statistics
16 / 28
Data
Kopsidis and Bromley (2016)
Acemoglu et al. admit serfdom was already abolished in practice,
so why do they give such a weight in the index to that reform ?
According to them, half of the entries in Table 1 have incorrect
dates.
Recomputing the index with those elements, there are no more
clear difference between the three groups of polities
17 / 28
Data
Kopsidis and Bromley (2016)
18 / 28
Reduced-Form Evidence
Main Results
ujt = dt + δj +
X
ατ dτ Ij +
τ ∈T pre
X
0
ατ dτ Ij + Xjt γ+jt
τ ∈T post
where
Ij is treatment
dt and δj are time and polities effects
ujt are urbanization rates
T pre = {1700, 1750, 1800}
T post = {1850, 1875, 1900}
19 / 28
Reduced-Form Evidence
Main Results
20 / 28
Reduced-Form Evidence
Robustness
21 / 28
Reduced-Form Evidence
Sectoral composition of employment
Data for 64 districts for 1849, 1882, 1895 and 1907
Advantage : sectoral shares closely captures the move out of
agricultural activities => good check on previous results based
on ujt
Disadvantage : cannot check for pretrends before 1800
Cross-sectional regressions:
yjt = dt + αt Ij + jt
22 / 28
Reduced-Form Evidence
Sectoral composition of employment
23 / 28
Institutional Reforms and Economic Growth
2SLS - First stage
First stage :
Rjt = dt + δj + tTt>1800 Ij + ηjt
with
Rj t: the reform index
dt , δj : time and polity effects
t is divided by 1000
tTt>1800 : 0 before 1800, linear after
24 / 28
Institutional Reforms and Economic Growth
2SLS - First stage
25 / 28
Institutional Reforms and Economic Growth
2SLS - Second stage
Second stage :
ujt = dt + δj + Rjt + νjt
26 / 28
Institutional Reforms and Economic Growth
2SLS - Second stage
27 / 28
Conclusion
The authors show that the effects of the reforms was not negative
But we don’t have enough evidence to claim the effects were
significantly positive
Some doubts about the quality of the index
Some doubts about data
28 / 28
Conclusion
The authors show that the effects of the reforms was not negative
But we don’t have enough evidence to claim the effects were
significantly positive
Some doubts about the quality of the index
Some doubts about data
Lack of explanatory power
Role of institutions ?
Externally imposed reforms ?
28 / 28