Видеозапись семинара "Land rights, local financial development and industrial activity: evidence from Flanders (19th – 20th century)"

Speaker: Koen Schoors (Professor of Economics, Ghent University)

October 1, Thursday, Myasnitskaya 24, building 3, room 424, 17.30. 

From the middle of the 18th century onwards most countries in North-Western Europe experienced a gradual decline of the importance of the agricultural sector and the ascent of industrial and service sectors. Following the United Kingdom’s industrial development after 1750, Belgium was at the helm of this transition in continental Europe. France, the Netherlands and Germany experienced similar processes, albeit during a later wave of the industrial revolution. Divergence in the adoption rate new mechanized modes of production not only occurred between nation-states, but also within. In Belgium, industrial activity was initially centered in the resource-rich Walloon area, while Flanders retained its rural and proto-industrial character throughout the first half of the 19th century  -bar the textile centers Ghent and Alost-. From the second half of the nineteenth century onwards, the secondary and tertiary sectors became increasingly important in certain areas of Flanders. By 1910, local non-agricultural employment rates had diverged substantially across the Northern half of Belgium. In this paper we investigate the hypothesis that this economic divergence across Flemish localities between 1848 and 1910 is explained by a ‘De Soto effect’; an uneven distribution of rural land prices and access to formal credit institutions. In our paper the ‘De Soto effect’ entails that uniform land rights provided borrowers with an attractive form of collateral that, subject to the presence of local financial development, in casu institutionalized lending facilities (banks), eased access to external finance and fostered non-agricultural economic investment and employment. Studying more than 1200 localities in Flanders we find that the differing availability of local collateral and the variation in local financial development jointly explain a substantial amount of the variation in non-agricultural employment accumulated between 1848 and 1910. Indeed, by 1910 non-rural economic activity was especially elevated in those localities where both early (1848) rural land prices were high and early (1880) local financial development was pronounced, which is in line with the De Soto hypothesis.

Keywords: De Soto, banks & credit, industrial development, land prices, Flanders, 19th - 20th centuries

Working paper: download