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

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

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References

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  1. Henriksen, Ingrid & Hviid, Morten & Sharp, Paul, 2012. "Law and Peace: Contracts and the Success of the Danish Dairy Cooperatives," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 72(01), pages 197-224, March.
  2. David E. Weinstein & Christian Broda, 2004. "Globalization And The Gains From Variety," Econometric Society 2004 Latin American Meetings, Econometric Society 327, Econometric Society.
  3. Ingrid Henriksen & Markus Lampe & Paul Sharp, 2010. "The Strange Birth of Liberal Denmark: Danish trade protection and the growth of the dairy industry since the mid-nineteenth century," Discussion Papers, University of Copenhagen. Department of Economics 10-04, University of Copenhagen. Department of Economics.
  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, European Historical Economics Society (EHES) 0001, European Historical Economics Society (EHES).
  5. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, American Economic Association, vol. 84(1), pages 157-77, March.
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  8. KevinH. O'Rourke, 2007. "Culture, Conflict and Cooperation: Irish Dairying Before the Great War," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 117(523), pages 1357-1379, October.
  9. Mette Ejrnæs & Karl Gunnar Persson, 2006. "The Gains from Improved Market Efficiency: Trade Before and After the Transatlantic Telegraph," Discussion Papers, University of Copenhagen. Department of Economics 06-19, University of Copenhagen. Department of Economics.
  10. Uebele, Martin, 2011. "National and international market integration in the 19th century: Evidence from comovement," Explorations in Economic History, Elsevier, Elsevier, vol. 48(2), pages 226-242, April.
  11. David Hummels & Alexandre Skiba, 2002. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," NBER Working Papers 9023, National Bureau of Economic Research, Inc.
  12. Nicholas Crafts, 2005. "Regional Gdp In Britain, 1871-1911: Some Estimates," Scottish Journal of Political Economy, Scottish Economic Society, Scottish Economic Society, vol. 52(1), pages 54-64, 02.
  13. 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, Economic History Society, vol. 58(3), pages 520-554, 08.
  14. 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, Springer, vol. 24(2), pages 195-218, 03.
  15. Hausman, Jerry A & Leonard, Gregory K, 2002. "The Competitive Effects of a New Product Introduction: A Case Study," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 50(3), pages 237-63, September.
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Cited by:
  1. Sofia Teives Henriques & Paul Sharp, 2014. "The Danish Agricultural Revolution in an Energy Perspective: A Case of Development with Few Domestic Energy Sources," Working Papers, European Historical Economics Society (EHES) 0056, European Historical Economics Society (EHES).

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