The Crafts–Harley view of German industrialization: an independent estimate of the income side of net national product, 1851–1913

Abstract

Novel information on land rent is used to estimate the income side of German net national product (NNP) in 1851–1913 without recourse to output side aggregates. The new series shows higher values during the initial part of the period of observation, which narrows the wedge that opens up between existing estimates of NNP before the 1880s. The results support a modified Crafts–Harley view of the first phase of German industrialization: despite rapid catch-up growth of industrial leading sectors from the 1840s to the 1870s, the pace of aggregate growth accelerated only gradually. The initially small size of the modern sector and the simultaneity of the first phase of industrialization and the first wave of globalization account for this paradox. The labor share remained largely constant; the decline of the land share in NNP was compensated by a rise of the capital share.