Innovation and the Great Divergence

The Great Divergence of GDP per capita between the leading regions of Europe and China occurred around 1700 as a period of positive growth in Britain and the Netherlands coincided with a period of negative growth in the Yangzi Delta. The positive trend in northwest Europe was a continuation of a process that began in the fourteenth century, while the negative trend in the Yangzi Delta continued a pattern of alternating periods of growing and shrinking, but reaching lower levels of income. TFP growth was strongly positive in Britain after the Black Death, in the Netherlands during the Dutch Golden Age and again in Britain from the mid-seventeenth century. Although TFP growth was positive in China during the Northern Song dynasty, it was predominantly negative during the Ming and Qing dynasties, in the Yangzi Delta as well as in China as a whole.