A Model of the London Coal Trade in the Eighteenth Century

By the eighteenth century Newcastle coal was the primary source of fuel for London. Two major characteristics of the trade were periodic attempts at cartelization by producers and the existence of a substantial per unit tax on the commodity. In order to measure the relative quantitative impact of market structure and tax policy, a linear supply and demand model is estimated using two-stage least squares. The major arguments of the paper are that the cartels were ineffective in restricting supply, that the tax on coal raised its price significantly, and that final consumers bore the greatest share of the tax burden. Upon the cheap and regular acquisition of fossile fuel, our national improvement and prosperity eminently depends. Robert Edington An Essay on the Coal Trade (1803, 7).