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The Colonial Origins of the Divergence in the Americas: A Labour Market Approach

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  • Robert C. Allen
  • Tommy E. Murphy
  • Eric B. Schneider

Abstract

Part of a long-run project to put together a systematic database of prices and wages for the American continents, this paper takes a first look at standards of living in a series of North American and Latin American cities. From secondary sources we collected price data that –with diverse degrees of quality– covers various years between colonization and independence and, following the methodology now familiar in the literature, we built estimations of price indexes for Boston, Philadelphia, and the Chesapeake Bay region in North America and Bogotá, Mexico, and Potosí in Latin America exploring alternative assumptions on the characteristics of the reference basket. We use these indexes to deflate the (relatively more scarce) figures on wages, and compare the results with each other, and with the now widely known series for various European and Asian cities. We find that real wages were higher in North America than in Latin America from the very early colonial period: four times the World Bank Poverty Line (WBPL) in North America while only two times the WBPL in Latin America. These wages place the North American colonies among the most advanced countries in the world alongside Northwestern European countries and the Latin American colonies among the least developed countries at a similar level to Southern European and Asian countries. These wage differences existed from the early colonial period because wages in the American colonies were determined by wages in the respective metropoles and by the Malthusian population dynamics of indigenous peoples. Settlers would not migrate unless they could maintain their standard of living, so wages in the colonies were set in the metropole. Political institutions, forced labour regimes, economic geography, disease environments and culture shaped the size of the economy of each colony but did not affect income levels.

Suggested Citation

  • Robert C. Allen & Tommy E. Murphy & Eric B. Schneider, 2011. "The Colonial Origins of the Divergence in the Americas: A Labour Market Approach," Working Papers 402, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  • Handle: RePEc:igi:igierp:402
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    Cited by:

    1. Rosenbloom, Joshua L. & Weiss, Thomas, 2014. "Economic growth in the Mid-Atlantic region: Conjectural estimates for 1720 to 1800," Explorations in Economic History, Elsevier, vol. 51(C), pages 41-59.
    2. repec:eee:poleco:v:49:y:2017:i:c:p:108-122 is not listed on IDEAS
    3. Peter H. Lindert & Jeffrey G. Williamson, 2016. "American colonial incomes, 1650–1774," Economic History Review, Economic History Society, vol. 69(1), pages 54-77, February.
    4. Panza, Laura & Williamson, Jeffrey G, 2017. "Australian Exceptionalism? Inequality and Living Standards 1821-1871," CEPR Discussion Papers 11756, C.E.P.R. Discussion Papers.
    5. Andrés Calderón-Fernández & Héctor García-Montero & Enrique Llopis-Agelán, 2017. "New research guidelines for living standards, consumer baskets, and prices in Madrid and Mexico," Working Papers 097, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
    6. Geloso, Vincent & Kufenko, Vadim & Villeneuve, Remy, 2016. "Living standards in Lower Canada, 1831," Violette Reihe: Schriftenreihe des Promotionsschwerpunkts "Globalisierung und Beschäftigung" 50/2016, University of Hohenheim, Carl von Ossietzky University Oldenburg, Evangelisches Studienwerk.
    7. Leonardo Ridolfi, 2017. "L'histoire immobile? Six centuries of real wages in France from Louis IX to Napoleon III: 1250-1860," LEM Papers Series 2017/14, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    8. Humphries, Jane & Weisdorf, Jacob, 2017. "Unreal Wages? Real Income and Economic Growth in England, 1260-1850," CEPR Discussion Papers 11999, C.E.P.R. Discussion Papers.
    9. Trevor Burnard & Laura Panza & Jeffrey G. Williamson, 2017. "The Social Implications of Sugar: Living Costs, Real Incomes and Inequality in Jamaica c1774," NBER Working Papers 23897, National Bureau of Economic Research, Inc.
    10. Robert C. Allen, 2015. "The high wage economy and the industrial revolution: a restatement," Economic History Review, Economic History Society, vol. 68(1), pages 1-22, February.
    11. Nikolova, Elena & Nikolova, Milena, 2017. "Suffrage, labour markets and coalitions in colonial Virginia," European Journal of Political Economy, Elsevier, vol. 49(C), pages 108-122.
    12. Peter H. Lindert, 2016. "Purchasing Power Disparity before 1914," NBER Working Papers 22896, National Bureau of Economic Research, Inc.
    13. Jedwab, Remi & Vollrath, Dietrich, 2015. "Urbanization without growth in historical perspective," Explorations in Economic History, Elsevier, vol. 58(C), pages 1-21.
    14. Ho, Chi Pui, 2016. "GeoPopulation-Institution Hypothesis: Reconciling American Development Process and Reversal of Fortune within a Unified Growth Framework," MPRA Paper 73863, University Library of Munich, Germany.
    15. Jaime Reis, 2016. "The Gross Agricultural Output of Portugal: A Quantitative, Unified Perspective, 1500-1850," Working Papers 0098, European Historical Economics Society (EHES).
    16. Costa, Leonor Freire & Palma, Nuno & Reis, Jaime, 2013. "The great escape? The contribution of the empire to Portugal’s economic growth, 1500-1800," IFCS - Working Papers in Economic History.WH wp13-07, Universidad Carlos III de Madrid. Instituto Figuerola.
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    18. Javier L. Arnaut, 2017. "Was Colonialism Fiscally Sustainable? An Empirical Examination of the Colonial Finances of Spanish America," Documentos de Trabajo (DT-AEHE) 1703, Asociacion Espa–ola de Historia Economica.
    19. Julio Martínez-Galarraga & Marc Prat, 2014. "Wages and prices in early Catalan industrialisation," UB Economics Working Papers 2014/305, Universitat de Barcelona, Facultat d'Economia i Empresa, UB Economics.
    20. repec:eee:ehbiol:v:26:y:2017:i:c:p:126-136 is not listed on IDEAS

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