Traditional explanations for Western Europe s demographic growth in the High Middle Ages are unable to explain the rise in per capita income that accompanied observed population changes. Here, we examine the hypothesis that an innovation in information technology changed the optimal structure of contracts and raised the productivity of human capital. We present historical evidence for this thesis, offer a theoretical explanation based on transaction costs, and test the theory s predictions with data on urban demographic growth. We find that the information-technology hypothesis significantly increases the capacity of the neoclassical growth model to explain European economic expansion between 1000 and 1300.
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