The fetters of inheritance? Equal partition and regional economic development

Did European regions industrialize first because their institutions fostered urbanization? We argue that culture, precisely an agricultural inheritance tradition that would immobilize the rural population, was no obstacle to economic growth, as commonly thought. Instead, equal partition tied excess labor to the land and fostered the establishment of a low-wage low-skill industry there. Using European data, we document that areas of equal partition areas are today richer than primogeniture areas. With a focus on identification, we conduct fuzzy spatial RDD and IV regressions for the German state of Baden-Württemberg in 1895, the 1950s, and today. We find that inheritance rules caused, in line with our theoretical predictions, higher incomes, population densities, and industrialization levels in areas with equal partition, meanwhile we document that equal partition reduced migration. Results suggest that more than a third of the overall inter-regional difference in average per capita income in present-day Baden Württemberg, or 597 Euro, can be attributed to equal partition. The reasons for Europe’s uniqueness do not lie in the supremacy of primogeniture, and have to be searched elsewhere.