Real wages around the world: Insights from linear programming and accounting for climate differences

We collected the vast majority of price and wage data stemming out of the vibrant historical real wage literature of the last two decades. We applied a consistent methodology across the 86 included markets from around the world, with observations spanning from ca. 1200 to 1965. For computing the cost of living, our methodology accounts for the differences in temperatures across those markets. This adjustment impies higher costs for colder countries, with important ramifications. This approach reveals different levels and trends in relation to the “Little”, “Great” and “Colonial” Divergences. Unfortunately, the coverage is still considerably skewed towards European countries. Further work in the field of global real wages can fill this gap, and improve current estimates, for example by increasing the products covered and reducing the need for imputations that are used widely in the literature.