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Greasing the Wheels of Rural Transformation? Margarine and the Competition for the British Butter Market

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Author Info

  • Markus Lampe

    ()
    (Universidad Carlos III Madrid)

  • Paul Sharp

    ()
    (University of Southern Denmark)

Abstract

We consider an example of the impact of a new good on producers of close substitutes: the invention of margarine and its rapid introduction into the British market from the mid-1870s. This presented a challenge to the traditional suppliers of that market, butter producers from different European countries. We argue that the capacity to react quickly to the appearance of this cheap substitute by improving quality and establishing product differentiation was critical for the fortunes of butter producers. We illustrate this by discussing the different reactions to margarine and quality upgrading in Ireland, Denmark and the Netherlands. A statistical analysis using monthly data for Britain from 1881-87 confirms that margarine had a greater impact on the price of poor quality butter than that of high quality butter, presumably because it was a stronger substitute.

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Bibliographic Info

Paper provided by European Historical Economics Society (EHES) in its series Working Papers with number 0043.

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Length: 45 pages
Date of creation: Jul 2013
Date of revision:
Handle: RePEc:hes:wpaper:0043

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Related research

Keywords: Butter; margarine; dairies; new products; quality changes;

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References

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  1. Nicholas Crafts, 2004. "Regional GDP in Britain, 1871-1911: some estimates," Economic History Working Papers 22557, London School of Economics and Political Science, Department of Economic History.
  2. David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," Econometric Society 2004 North American Summer Meetings 508, Econometric Society.
  3. André Bonfrer & Pradeep K. Chintagunta, 2004. "Store Brands: Who Buys Them and What Happens to Retail Prices When They Are Introduced?," Review of Industrial Organization, Springer, vol. 24(2), pages 195-218, 03.
  4. Ingrid Henriksen & Markus Lampe & Paul Sharp, 2011. "The role of technology and institutions for growth: Danish creameries in the late nineteenth century," Working Papers 0001, European Historical Economics Society (EHES).
  5. Ingrid Henriksen & Kevin H. O'Rourke, 2005. "Incentives, technology and the shift to year-round dairying in late nineteenth-century Denmark -super-1 ," Economic History Review, Economic History Society, vol. 58(3), pages 520-554, 08.
  6. Mette Ejrnæs & Karl Gunnar Persson, 2006. "The Gains from Improved Market Efficiency: Trade Before and After the Transatlantic Telegraph," Discussion Papers 06-19, University of Copenhagen. Department of Economics.
  7. Ingrid Henriksen & Markus Lampe & Paul Sharp, 2012. "The strange birth of liberal Denmark: Danish trade protection and the growth of the dairy industry since the mid‐nineteenth century," Economic History Review, Economic History Society, vol. 65(2), pages 770-788, 05.
  8. Uebele, Martin, 2011. "National and international market integration in the 19th century: Evidence from comovement," Explorations in Economic History, Elsevier, vol. 48(2), pages 226-242, April.
  9. Yoram Bauman, 2004. "Shipping the Good Apples Out: A New Perspective," Economic Inquiry, Western Economic Association International, vol. 42(3), pages 534-536, July.
  10. Hausman, Jerry A & Leonard, Gregory K, 2002. "The Competitive Effects of a New Product Introduction: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 237-63, September.
  11. Ingrid Henriksen & Morten Hviid & Paul Sharp, 2011. "Law and Peace: Contracts and the Success of the Danish Dairy Cooperatives," Discussion Papers 11-11, University of Copenhagen. Department of Economics.
  12. Bontemps, Christophe & Orozco, Valérie & Réquillart, Vincent, 2008. "Private Labels, National Brands and Food Prices," IDEI Working Papers 402, Institut d'Économie Industrielle (IDEI), Toulouse.
  13. KevinH. O'Rourke, 2007. "Culture, Conflict and Cooperation: Irish Dairying Before the Great War," Economic Journal, Royal Economic Society, vol. 117(523), pages 1357-1379, October.
  14. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
  15. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-77, March.
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Cited by:
  1. Henriques, Sofia Teives & Sharp, Paul, 2014. "The Danish Agricultural Revolution in an Energy Perspective: A Case of Development with Few Domestic Energy Sources," Discussion Papers of Business and Economics 9/2014, Department of Business and Economics, University of Southern Denmark.

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