The Expansion of the Commercial Sector and the Child Quantity-Quality Transition in a Malthusian World

This paper constructs a simple Malthusian model to explain per capita income differences in the Malthusian era by focusing on regional variations in the expansion of the commercial sector. This paper shows that a larger productivity improvement in the skilled intensive commercial sector relative to the improvement in the unskilled intensive agricultural sector causes a higher per capita income in the Malthusian steady-state equilibrium by enhancing the child quantity-quality transition. From the late Middle Ages, Northwestern Europe (Britain and the Netherlands) was characterized by dramatic growth of both the commercial sector and urbanization, high literacy rates, and a low-pressure demographic regime, and thus, these regions developed very differently from the rest of Europe. Our results are somewhat consistent with the relevant experiences of Northwestern Europe in the preindustrial era.