The centuries-long path to German industrialization must be understood as a gradual institutional evolution in response to new circumstances, new opportunities, and new scarcities. Efforts to identify a single deus ex machina—whether Napoleon, Prussian reformers, or some other exogenous driver—do not lead to convincing results. Gradualism offers a plausible account of how a market economy and capitalism took root in German society. Only those German regions that had successfully launched gradual institutional reforms in the eighteenth century were well situated, by the early years of the nineteenth century, to move quickly to an identifiable market economy. Against this background we discuss the role of Prussia and Napoleon in modernizing the institutional framework of the German economy. The Prussian model of agrarian reforms and economic freedom represents a profound event in the history of economic development. A comparable strategic approach was absent in all French-controlled territories before or after 1815. Prussian reformers were the first in history to embrace a multi-sectoral strategy of rural development, enabling them to successfully combine growth with equity.

Le cheminement de l'Allemagne vers l'industrialisation, qui dura plusieurs siècles, doit être compris comme une évolution institutionnelle graduelle qui bénéficia des circonstances et fut une réponse aux pénuries de la fin du xviiie siècle. Les tentatives pour lui trouver un deus ex machina unique – qu'il s'agisse de Napoléon, de réformateurs prussiens ou d'un autre agent exogène – n'ont abouti à aucun résultat convaincant. Le gradualisme explique de manière vraisemblable comment l’économie de marché et le capitalisme se sont implantés dans la société allemande. Seules les régions d'Allemagne qui avaient réussi à lancer des réformes institutionnelles graduelles au xviiie siècle étaient bien placées pour devenir rapidement des économies de marché identifiables au début du xixe siècle. Dans ce contexte, cet article se propose d’étudier le rôle de la Prusse et de Napoléon dans la modernisation de la structure institutionnelle de l’économie allemande. En matière de réformes agraires et de liberté économique, le modèle prussien représente un bouleversement dans l'histoire du développement économique. Une telle stratégie n'existait dans aucun territoire sous domination française, que ce soit avant ou après 1815. Les réformateurs prussiens furent les premiers à adopter une stratégie de développement rural multisectoriel qui leur permit de concilier croissance et équité.

An evidence-based time series on agricultural growth prior to 1850 only exists for very few German territories. Except for Saxony, there is no series available for the pre-1815 period. Based on sharecropping contracts from the estate of Anholt, we reconstruct the development of crop production for western Westphalia and the lower Rhineland c. 1740–1860. Our results show that parallel to Saxony, agricultural growth in this north-west German region was driven entirely by demand from a growing number of households engaged in proto-industrial and early industrial manufacture production. Fully commercialised land tenure systems dominated in Anholt from the beginning of the early modern period, and manorial institutions had little relevance for rural property relations. Hence, the radical French and Prussian agrarian reforms at the beginning of the nineteenth century had no effect on agricultural production. In a north-west European comparison, Anholt's sharecroppers performed rather well during this decisive formation period culminating in early industrialisation.

We challenge the ‘big-bang’ approach to economic history offered by Acemoglu et al. (2011). The creation story in dispute is the French Revolution and the subsequent French occupation of a very small portion of Germany. We show that the four institutional reforms claimed to have spurred German industrialization have been incorrectly dated. These corrections nullify any explanatory power of the ACJR econometric model. Moreover, even with the corrected vintages, their identification strategy is undermined by a flawed ‘explanatory’ variable – ‘years of reform’. We show that this variable simply enters their model as a year trend and explains nothing except the passage of time. We develop a fixed-effects model to capture the overlooked role of coal production that began in several regions shortly after 1840. This model offers a credible account of German industrialization and urbanization. Most economic change is, after all, continuous. Big-bang intrusions are of doubtful efficacy.

This article explores the pattern of land rents and agricultural productivity across nineteenth-century Prussia to gain new insights on the causes of the “Little Divergence” between European regions. We argue that agriculture reacted to urban and industrial development rather than shaping it. In the spirit of Johann von Thünen and Ernst Engel, we develop a theoretical model to test how access to urban demand affected agricultural development. We show that the effect of urban demand is causal and that it is in line with recent findings on a limited degree of interregional market integration in nineteenth-century Prussia.

Most questions about the sources of agricultural growth during the ‘first agricultural revolution’ are still debated. For the Prussian province of Westphalia, we estimated a translog production function to determine the contribution of intensification and technical change from 1830 to 1880. Additionally, we present evidence on the impact that neutral and biased technical change had on growth. Furthermore, we examine whether spatial differences can be identified concerning the sources of agricultural growth and whether they followed a von Thuenen pattern around the demand centre of the rising industrial belt on the Ruhr River. In addition, we explain why, under the conditions of pre-industrial agriculture, regions with the highest output growth did not necessarily have to exhibit the most dynamic TFP-growth, even if they contributed, on average, the most to output growth.