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Public Finance and Economic Growth: The Case of Holland in the Seventeenth Century

Published online by Cambridge University Press:  02 March 2011

Oscar Gelderblom  and
Joost Jonker
Oscar Gelderblom*
Affiliation:
Associate Professors, Department of History, Utrecht University, Drift 10, Utrecht 3512 BS, The Netherlands. E-mail: o.gelderblom@uu.nl.
Joost Jonker*
Affiliation:
Associate Professors, Department of History, Utrecht University, Drift 10, Utrecht 3512 BS, The Netherlands. E-mail: j.jonker@uu.nl.
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Abstract

The debate over the institutions that link economic growth to public finance tends to disregard the need for savings to finance growing public debt. In seventeenth-century Holland the structure, size, and issuing rates of the debt were determined by investors' preferences, wealth accumulation, and changing private investment opportunities. The growth of savings enabled the creation of a huge debt largely with short-term bills. Issuing rates dropped because savings outstripped private investment alternatives. In Holland, and probably elsewhere as well, credible commitment and efficient fiscal institutions were necessary, but not sufficient to create liquid secondary markets and low costs of capital.

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ARTICLES
Information
The Journal of Economic History , Volume 71 , Issue 1 , March 2011 , pp. 1 - 39
Copyright
Copyright © The Economic History Association 2011

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