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

  • Markus Lampe

    ()

    (Universidad Carlos III Madrid)

  • Paul Sharp

    ()

    (University of Southern Denmark)

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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File URL: http://ehes.org/EHES_No43.pdf
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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
Contact details of provider: Web page: http://www.ehes.org

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  9. 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 10-04, University of Copenhagen. Department of Economics.
  10. 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.
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