It cuts the production boxes in half. Rounded down.
That means that instead of having 10 rows of shields and food you have only five. The AI has the same on Regent, five boxes each. On Monarch and Emperor that will result in only four boxes. Well I didn't look at emperor but I did check Monarch and it was four. I think the tech cost is also halved.
So the game goes fast apparently people are launching in the early Middle Ages.
Everything costs half as much as normal - improvements, units, population, and tech. The maintenence cost of buildings is still the same, IIRC. I'm not sure how the costs of diplomatic actions are affected, if at all.
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