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Sweet diversity: Colonial goods and the rise of European living standards after 1492

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  • Jonathan Hersh
  • Joachim Voth

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Abstract

When did overseas trade start to matter for living standards? Traditional real-wage indices suggest that living standards in Europe stagnated before 1800. In this paper, we argue that welfare rose substantially, but surreptitiously, because of an influx of new goods as a result of overseas trade. Colonial luxuries such as tea, coffee, and sugar transformed European diets after the discovery of America and the rounding of the Cape of Good Hope. These goods became household items in many countries by the end of the 18th century. We use three different methods to calculate welfare gains based on price data and the rate of adoption of these new colonial goods. Our results suggest that by 1800, the average Englishman would have been willing to forego 10% or more of his income in order to maintain access to sugar and tea alone. These findings are robust to a wide range of alternative assumptions, data series, and valuation methods.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1163.

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Date of creation: Jul 2009
Date of revision: Jan 2011
Handle: RePEc:upf:upfgen:1163

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Web page: http://www.econ.upf.edu/

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Keywords: Gains from Variety; Columbian Exchange; Trade; Economics of New Goods; Age of Discovery; Living Standards;

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Cited by:
  1. Tim Leunig & Joachim Voth, 2011. "Spinning Welfare: the Gains from Process Innovation in Cotton and Car Production," CEP Discussion Papers dp1050, Centre for Economic Performance, LSE.
  2. Meissner, Christopher M., 2014. "Growth from Globalization? A View from the Very Long Run," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 8, pages 1033-1069 Elsevier.
  3. Karen A. Kopecky & Jeremy Greenwood, 2011. "Measuring the welfare gain from personal computers: a macroeconomic approach," Working Paper, Federal Reserve Bank of Atlanta 2011-05, Federal Reserve Bank of Atlanta.
  4. Broadberry, Stephen & Campbell, Bruce M.S. & van Leeuwen, Bas, 2013. "When did Britain industrialise? The sectoral distribution of the labour force and labour productivity in Britain, 1381–1851," Explorations in Economic History, Elsevier, Elsevier, vol. 50(1), pages 16-27.
  5. Koyama, Mark, 2012. "The transformation of labor supply in the pre-industrial world," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 505-523.
  6. Stephen Broadberry & Bruce Campbell & Alexander Klein & Mark Overton & Bas van Leeuwen, 2012. "British Economic Growth, 1270-1870: an output-based approach," Studies in Economics, Department of Economics, University of Kent 1203, Department of Economics, University of Kent.
  7. Nunn, Nathan, 2014. "Historical Development," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 7, pages 347-402 Elsevier.

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