The Rise of Europe: Atlantic Trade, Institutional Change,
and Economic Growth
By DARON ACEMOGLU, SIMON JOHNSON, AND JAMES ROBINSON*
The rise of Western Europe after 1500 is due largely to growth in countries with
access to the Atlantic Ocean and with substantial trade with the New World, Africa,
and Asia via the Atlantic. This trade and the associated colonialism affected Europe
not only directly, but also indirectly by inducing institutional change. Where
“initial” political institutions (those established before 1500) placed significant
checks on the monarchy, the growth of Atlantic trade strengthened merchant groups
by constraining the power of the monarchy, and helped merchants obtain changes
in institutions to protect property rights. These changes were central to subsequent
economic growth. (JEL F10, N13, O10, P10)
The world we live in was shaped by the rapid
economic growth that took place in nineteenth-
century Western Europe. The origins of this
growth and the associated Industrial Revolution
are generally considered to lie in the economic,
political, and social development of Western
Europe over the preceding centuries. In fact,
between 1500 and 1800, Western Europe expe-
rienced a historically unprecedented period of
sustained growth, perhaps the “First Great Di-
vergence” (i.e., the first major sustained diver-
gence in income per capita across different
regions of the world), making this area substan-
tially richer than Asia and Eastern Europe.
There is little agreement, however, on why this
growth took place in Western Europe and why
it started in the sixteenth century.
This paper establishes the patterns of eco-
nomic growth in Western Europe during this
era, develops a hypothesis on the origins of the
rise of (Western) Europe and provides historical
and econometric evidence supporting some of
the implications of this hypothesis.
We document that the differential growth of
Western Europe during the sixteenth, seven-
teenth, eighteenth, and early nineteenth centu-
ries is almost entirely accounted for by the
growth of nations with access to the Atlantic
Ocean, and of Atlantic traders. Throughout the
paper, the term Atlantic trader refers to Britain,
France, the Netherlands, Portugal, and Spain,
the nations most directly involved in trade and
colonialism in the New World and Asia. Atlan-
tic trade, in turn, means trade with the New
World, as well as trade with Asia via the Atlan-
tic, and includes colonialism- and slavery-
related activities.1 The differential growth of
Atlantic traders suggests a close link between
Atlantic trade and the First Great Divergence. In
fact, it appears that the rise of Europe between
1500 and 1850 is largely the rise of Atlantic
* Acemoglu: Department of Economics, Massachusetts In-
stitute of Technology, E52-371, Cambridge, MA 02142
(e-mail: daron@mit.edu); Johnson: Sloan School of Manage-
ment, Massachusetts Institute of Technology, 50 Memorial
Drive, Cambridge, MA 02139 (e-mail: sjohnson@mit.edu);
Robinson: Department of Government, Harvard University,
1875 Cambridge Street, Cambridge, MA 02138 (e-mail:
jrobinson@gov.harvard.edu). We thank Thomas Becker and
Rui Pedro Esteves for outstanding research assistance and Josh
Angrist, Abhijit Banerjee, Dora Costa, Jan de Vries, Stanley
Engerman, Philip Hoffman, Peter Lindert, Sebastia´n Mazzuca,
Joel Mokyr, Larry Neal, Steve Pincus, Christina Romer, David
Romer, Andrei Shleifer, Alan Taylor, Hans-Joachim Voth, two
anonymous referees, and seminar participants at the University
of California, Berkeley, the Canadian Institute of Advanced
Research, University of Chicago Graduate School of Business
and Department of Political Science, George Mason Univer-
sity, Harvard Business School, the Harvard Economic History
Seminar, the London School of Economics, MIT, the National
Bureau of Economic Research economic history, inequality,
and economic growth groups, New York University, and
Princeton University for comments and suggestions.
1 Atlantic trade opportunities became available only dur-
ing the late fifteenth century, thanks to the discovery of the
New World and the passage to Asia around the Cape of
Good Hope. These discoveries resulted from a series of
innovations in ship technology, primarily pioneered by the
Portuguese, that changed the rigging and hull design of
ships and developed knowledge of oceanic navigation.
546
Europe, and is quite different in nature from the
European growth that took place before 1500.
Not all societies with access to the Atlantic
show the same pattern of growth, however. The
data suggest an important interaction between
medieval political institutions and access to the
Atlantic: the more rapid economic growth took
place in societies with relatively nonabsolutist
initial institutions, most notably in Britain and
the Netherlands. In contrast, countries where the
monarchy was highly absolutist, such as Spain
and Portugal, experienced only limited growth
in the subsequent centuries, while areas lacking
easy access to the Atlantic, even such nonabso-
lutist states as Venice and Genoa, did not expe-
rience any direct or indirect benefits from
Atlantic trade.
Figures 1 and 2 illustrate the central thesis
of this paper. Figure 1, panel A, shows that
urbanization in Western Europe grew sig-
nificantly faster than in Eastern Europe after
1500.2 Figure 1, panel B, shows that these
2 For the purposes of this paper, Western Europe is taken
to be all the countries west of the Elbe, i.e., Austria,
FIGURE 1A. WESTERN EUROPE, EASTERN EUROPE, AND ASIA: URBANIZATION RATES, WEIGHTED BY POPULATION, 1300–1850
FIGURE 1B. ATLANTIC TRADERS, WEST EUROPEAN COUNTRIES NOT ATLANTIC TRADERS, AND EASTERN EUROPE:
URBANIZATION RATES, WEIGHTED BY POPULATION, 1300–1850
547VOL. 95 NO. 3 ACEMOGLU ET AL.: THE RISE OF EUROPE
differential trends are due in large part to
the growth of Atlantic traders. The rest of West-
ern Europe had a relatively high average urban-
ization rate of 10 percent in 1300 (and 11.4
percent in 1500), but grew at approximately the
same rate as Eastern Europe from 1500 to 1850,
by a factor of less than 2, to reach 17 percent by
1850. In contrast, Atlantic traders started with a
lower average urbanization rate of 8 percent in
1300 (and only 10.1 percent in 1500), which
almost tripled in the subsequent 550 years to
reach 24.5 percent in 1850, overtaking average
urbanization in the non-Atlantic parts of West-
ern Europe between 1600 and 1700 (see Table 1).
Panels A and B in Figure 2 show the same
pattern, using Angus Maddison’s (2001) esti-
mates of GDP per capita. While GDP per capita
rose by a factor of almost two among Atlantic
traders between 1500 and 1820, in the rest of
Western Europe it grew at approximately the
same rate as in Eastern Europe, just under 30
percent.
The patterns depicted in Figures 1 and 2 do
Belgium, Britain, Denmark, Finland, France, Germany, Ire-
land, Italy, the Netherlands, Norway, Portugal, Spain, Swe-
den, and Switzerland. Eastern Europe is all European
countries to the east of the Elbe, including Russia and
excluding Turkey. See Section I A for details on urbaniza-
tion and GDP data. All averages are weighted by popula-
tion, using numbers from Colin McEvedy and Richard
Jones (1978).
FIGURE 2B. ATLANTIC TRADERS, WEST EUROPEAN COUNTRIES NOT ATLANTIC TRADERS, AND EASTERN EUROPE: GDP PER
CAPITA, WEIGHTED BY POPULATION, 1500–1870
FIGURE 2A. WESTERN EUROPE, EASTERN EUROPE, AND ASIA: GDP PER CAPITA, WEIGHTED BY POPULATION, 1500–1870
548 THE AMERICAN ECONOMIC REVIEW JUNE 2005
not simply reflect the tendency of more suc-
cessful nations to engage in Atlantic trade.
There is no differential growth of Atlantic
traders before the opening of Atlantic sea
routes, and below we show similar results
using an exogenous measure of access to the
Atlantic—ratio of Atlantic coastline to land
area—instead of the distinction between At-
lantic traders and nontraders. Nor do the re-
sults reflect some post-1500 advantage of
coastal nations: Atlantic ports grew much
faster than other European cities, while Med-
iterranean ports grew at similar rates to inland
cities.
This evidence weighs against the most pop-
ular theories for the rise of Europe, which em-
phasize the continuity between pre-1500 and
post-1500 growth and the importance of certain
distinctive European characteristics, such as
culture, religion, geography, and features of the
TABLE 1—DESCRIPTIVE STATISTICS
Whole
sample,
unweighted
Whole
sample,
weighted
Atlantic
Western
Europe
Non-
Atlantic
Western
Europe
Eastern
Europe Asia
Weighted by population
Urbanization in 1300 6.6 9.9 8.0 10.0 4.1 11.0
(5.2) (3.2) (2.8) (6.1) (3.3) (0.7)
Urbanization in 1400 7.6 10.3 8.5 12.1 3.9 11.1
(9.5) (3.6) (2.4) (10.0) (1.5) (0.5)
Urbanization in 1500 8.3 10.6 10.1 11.4 4.0 11.5
(7.6) (3.4) (5.3) (6.8) (1.8) (0.7)
Urbanization in 1600 9.6 11.7 13.6 14.0 4.4 12.0
(7.6) (4.0) (7.6) (8.8) (2.7) (0.7)
Urbanization in 1700 10.7 11.2 14.5 13.1 3.7 11.6
(8.5) (4.1) (6.8) (8.1) (2.2) (0.7)
Urbanization in 1800 14.1 10.3 19.8 16.9 7.0 8.9
(9.1) (4.9) (7.9) (7.5) (3.3) (1.4)
GDP per capita in 1500 627.54 608.3 721.46 850.73 506.94 575.0
(159.3) (118.0) (31.1) (217.1) (78.2) (35.4)
GDP per capita in 1600 740.73 630.5 916.31 908.22 578.29 576.8
(225.6) (144.2) (149.3) (167.3) (112.3) (35.3)
GDP per capita in 1700 862.12 622.2 1079.21 980.82 636.0 574.2
(348.4) (208.1) (321.4) (128.2) (136.1) (35.3)
GDP per capita in 1820 988.00 691.7 1321.95 1095.40 719.5 575.5
(373.6) (264.5) (348.7) (125.3) (174.9) (45.7)
Constraint on executive in 1500 1.67 1.73 1.75 1.99 1.46
(0.76) (0.79) (0.56) (0.99) (0.79)
Constraint on executive in 1600 1.67 1.53 1.62 1.54 1.45
(1.01) (0.84) (1.24) (0.59) (0.79)
Constraint on executive in 1700 1.83 1.52 1.83 1.41 1.30
(1.31) (1.17) (1.76) (0.94) (0.76)
Constraint on executive in 1800 2.25 2.18 4.00 1.90 1.00
(1.82) (1.83) (1.79) (1.78) (0.00)
Atlantic coastline-to-area 0.0057 0.0014 0.0118 0.0026 0.00 0.00
(0.0117) (0.0065) (0.0181) (0.0052)
Notes: First column is unweighted means; other columns are mean values weighted by total population in year indicated, from
McEvedy and Jones (1978). Standard deviation is in parentheses. There are 24 European countries in these data. Atlantic
Western Europe is England, France, the Netherlands, Portugal, and Spain. Non-Atlantic Western Europe is Austria, Belgium,
Denmark, Finland, Germany, Ireland, Italy, Norway, Sweden, and Switzerland. Eastern Europe is Albania, Bulgaria, the
Czech Republic, Greece, Hungary, Poland, Romania, Russia, and Serbia. Asia is India and China. Urbanization for Europe
is percentage of population living in towns with population of at least 5,000 at some time between 800 and 1800, from Paul
Bairoch et al. (1988) for Europe; comparable data for Asia are from Bairoch (1998). GDP per capita is from Maddison (2001).
Constraint on executive is on a scale of 1 to 7, where a higher score indicates more constraints; this is coded using the Polity
IV methodology, as explained in the text. We have not coded constraint on the executive for Asia. Atlantic coast-to-area
includes those parts of Germany, Denmark, and Norway that are on the North Sea. For more detailed definitions and sources,
see Appendix, Table 1.
549VOL. 95 NO. 3 ACEMOGLU ET AL.: THE RISE OF EUROPE
European state system.3 Instead, it is consistent
with theories that emphasize the importance of
profits made in Atlantic trade, colonialism, and
slavery.4 Nevertheless, other evidence suggests
that overseas trade and the associated profits
were not large enough to be directly responsible
for the process of growth in Europe. Stanley L.
Engerman (1972) and Patrick K. O’Brien
(1982) demonstrate that the contribution of
profits from slavery and trade with the rest of
the world to European capital accumulation was
modest. O’Brien (1982, p. 2) writes that trans-
oceanic trade “... could in no way be classified
as decisive for economic growth of Western
Europe.” Although recent work by Joseph E.
Inikori (2002) estimates larger trade flows than
those of O’Brien, his estimates are not large
enough to suggest that European growth was
driven solely by the direct impact of Atlantic
trade on profits or resources.
We advance the hypothesis that West Euro-
pean growth during this period resulted, in part,
from the indirect effects of international trade
on institutional development. Although there
were some improvements in economic institu-
tions in the late medieval and early modern
period, rapid economic development did not
begin until the emergence of political institu-
tions providing secure property rights to a
broader segment of society and allowing free
entry into profitable businesses (Douglass C.
North and Robert P. Thomas, 1973; North and
Barry R. Weingast, 1989). The critical political
institutions were those that constrained the
power of the monarchy and allied groups.5
Checks on royal power and prerogatives
emerged only when groups that favored them,
that is commercial interests outside the royal
circle, became sufficiently powerful politically.
From 1500, and especially from 1600, onward,
in countries with nonabsolutist initial institu-
tions and easy access to the Atlantic, the rise in
Atlantic trade enriched and strengthened com-
mercial interests outside the royal circle and
enabled them to demand and obtain the institu-
tional changes necessary for economic growth.
Although profits from Atlantic trade were small
relative to GDP, they were still substantial, and
much larger than previous trading profits. For
example, Figure 3 shows that by the end of the
seventeenth century, the volume of Atlantic
trade was much larger than that of long-distance
Mediterranean trade (see the Appendix for the
construction of these series). The recipients of
these profits became very rich by the standards
of seventeenth- and eighteenth-century Europe,
and typically politically and socially very
powerful.
These changes did not take place in countries
with highly absolutist institutions such as Spain,
3 See, e.g., Max Weber (1905), Eric Jones (1981), John
A. Hall (1985), and David S. Landes (1998).
4 E.g., Eric E. Williams (1944), Andre Gunder Frank
(1978), and Immanuel M. Wallerstein (1974–1980).
5 It is important to note that these new political institu-
tions neither protected the rights of all citizens nor were
democratic. They can best be characterized as oligarchic,
since they increased the political power of wealthy mer-
chants, and at least in the British case, of the gentry and
nascent industrial interests. Nevertheless, they constituted a
distinct improvement over the previous set of institutions,
which placed many fewer checks on the power of the
monarchy.
FIGURE 3. VOLUME OF ATLANTIC AND MEDITERRANEAN TRADE (VOYAGE EQUIVALENTS PER YEAR), 1300–1800
550 THE AMERICAN ECONOMIC REVIEW JUNE 2005
Portugal, and to a large extent France, where the
crown was able to closely control the expansion of
trade. Consequently, in these countries, it was the
monarchy and groups allied with it that were the
main beneficiaries of the early profits from Atlan-
tic trade and plunder, and groups favoring changes
in political institutions did not become powerful
enough to induce them. Our hypothesis, therefore,
predicts an important interaction between initial
institutions and Atlantic trade, which is the pattern
we find in the data.
The major premise presented in this paper is
consistent with the emphasis of a number of
historians, including, among others, Ralph
Davis (1973a), Jan de Vries (1984), Paul
Bairoch (1988), Fernand Braudel (1992), and de
Vries and Ad van der Woude (1997). Although
this historical literature emphasizes the differ-
ential growth of Atlantic ports and Atlantic na-
tions, to the best of our knowledge, there are no
other studies documenting the quantitative im-
portance of Atlantic traders and Atlantic ports,
or showing that the differential growth of West-
ern Europe is accounted for largely by the
growth of Atlantic traders.
On the theoretical side, our hypothesis builds
on the notion that institutional change, even
when socially beneficial, will be resisted by
social groups that stand to lose economic rents
or political power. Consequently, the process of
institutional change involves significant conflict
between different groups—in the European
context, between the monarchy and its allies,
versus commercial interests outside the royal
circle.6 Our historical account can also be
viewed as a marriage between the Marxist thesis
linking the rise of the bourgeoisie and the de-
velopment of the world economy (e.g., among
others, Williams, 1944; Frank, 1978; and
Wallerstein, 1974–1980) and the neoclassical
emphasis on the development of political insti-
tutions and secure property rights in Western
Europe (e.g., North and Thomas, 1973; Eric L.
Jones, 1981; North, 1981; J. Bradford De Long
and Andrei Shleifer, 1993). Distinct from these
approaches, however, we offer an explanation,
based on the interaction between Atlantic trade
and medieval political institutions, of why
strong private property rights emerged in West-
ern Europe, especially in Britain and the Neth-
erlands, starting in the sixteenth century.
Although some scholars have noted the impor-
tant role of overseas merchants in particular
instances of political change during this period
(most notably Robert Brenner, 2003, and
Steven Pincus, 2002, in the British case), we are
not aware of a theory along the lines developed
in this paper.
The paper is organized as follows. Section I
documents the key premise of the paper, and
shows that the pattern seen in Figures 1 and 2 is
robust. Section II develops our hypothesis for
the rise of Europe and the role played by At-
lantic trade in this process, and provides histor-
ical evidence supporting our interpretation.
Sections III and IV provide evidence on some
implications of our hypothesis (Section III
shows that the evolution of European institu-
tions is closely linked to Atlantic trade, and
Section IV documents an important interaction
between initial institutions and Atlantic trade in
European economic growth). Section V con-
cludes. The Appendix summarizes the construc-
tion of the variables used in the empirical
analysis, and further detail can be found in
Acemoglu et al. (2002b).
I. Atlantic Trade and the Rise of Europe
A. Data
We use three data series to measure economic
development. First, we construct estimates of
urbanization based on the urban population
numbers of Bairoch et al. (1988). This is a
comprehensive dataset with information on all
2,200 European cities that had, at some time
between 800 and 1800, 5,000 or more inhabit-
ants.7 We use these data as our measure of
urban population and divide by the population6 See, for example, North (1981), Mancur Olson (1982),
Per Krusell and Jose-Victor Rios-Rull (1996), Stephen Par-
ente and Edward C. Prescott (1999), Acemoglu and Robin-
son (2000, 2002), and Raghuram G. Rajan and Luigi
Zingales (2003). Ronald Rogowski (1989) is particularly
notable in this context, since he also emphasizes how trade
affects political coalitions via its impact on factor prices,
although he does not focus on how trade might induce
institutional change by strengthening commercial interests.
7 These data begin in 800, and there are estimates for
every 100 years until 1700, then for every 50 years through
1850. Bairoch et al. (1988) emphasize, however, that esti-
mates before 1300 are rough and less reliable (and they skip
the year 1100 due to lack of information). These data were
used previously by De Long and Shleifer (1993).
551VOL. 95 NO. 3 ACEMOGLU ET AL.: THE RISE OF EUROPE
estimates of McEvedy and Jones (1978) to cal-
culate urbanization (percentage of the popula-
tion living in cities with more than 5,000
inhabitants). We also use estimates of urbaniza-
tion rates for Asia from the quantitative and
qualitative assessm