Working Paper: CEPR ID: DP7386
Authors: Jonathan Hersh; Hansjoachim Voth
Abstract: Did living standards stagnate before the Industrial Revolution? Traditional real-wage indices typically show broadly constant living standards before 1800. In this paper, we show that living standards rose substantially, but surreptitiously because of the growing availability of new goods. 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 the Greenwood-Kopecky (2009) method to calculate welfare gains based on data about price changes and the rate of adoption of new colonial goods. Our results suggest that by 1850, the average Englishman would have been willing to forego 15% 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.
Keywords: Age of Discoveries; First Divergence; New Goods; Standard of Living Indicators; Unified Growth
JEL Codes: D12; F19; N14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased availability of goods such as tea, coffee, and sugar (L66) | living standards in England (I31) |
| introduction of new colonial goods (F54) | living standards in Europe (O52) |
| increased consumption of these goods (E20) | living standards (I31) |
| availability of colonial luxuries (F54) | improvements in living standards (I31) |