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Sweet Diversity: Colonial Goods and the Rise of European Living Standards after 1492

SSRN Electronic Journal 01/2009; DOI: 10.2139/ssrn.1402322
Source: RePEc

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.

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    • "It was shown that during the pre-modern centuries, while Italy and Spain experienced stagnation and even declines (Malanima, 2011; Álvarez-Nogal and De La Escosura, 2013), the per capita GDP of England doubled between 1270 and 1700, and that of the Netherlands almost tripled between 1000 and 1500. Researchers questioned when sustained growth actually started (Hersh and Voth, 2009; Persson, 2010; Fouquet, 2014), but except Wu et al. (2014), none asked whether the Malthusian trap existed or not. The take-home message of most of the research is that living standards fluctuation was much larger than previously thought—the findings disturb Malthusian theory but not the Malthusian fact of long-term stagnation. "
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    ABSTRACT: This paper shows that merely the Malthusian mechanism cannot explain the pre-industrial stagnation of living standards. Technological improvement in luxury production, if faster than improvement in subsistence production, would have kept living standards growing. The Malthusian trap is essentially a puzzle of balanced growth between the luxury sector and the subsistence sector. The author argues that the balanced growth is caused by group selection in the form of biased migration. A tiny bit of bias in migration can suppress a strong tendency of growth. The theory reexplains the Malthusian trap and the prosperity of ancient market economies such as Rome and Song. It also suggests a new perspective on the Industrial Revolution.
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    • "coffee, and tobacco increased the welfare of the English population prior to the nineteenth century (Hersh and Voth 2009). Our finding that potatoes positively affected population starting in the eighteenth century is consistent with the more recent view. "
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    ABSTRACT: In this paper regional variation in suitability for cultivating potatoes, together with time variation arising from their introduction to the Old World from the Americas is being exploited, to estimate the impact of potatoes on Old World population and urbanization. Their results show that the introduction of the potato was responsible for a significant portion of the increase in population and urbanization observed during the 18th and19th centuries. [Working Paper No. 234]
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    ABSTRACT: The welfare gain to consumers from the introduction of personal computers is estimated here. A simple model of consumer demand is formulated that uses a slightly modified version of standard preferences. The modification permits marginal utility, and hence total utility, to be finite when the consumption of computers is zero, implying that the good won't be consumed at a high enough price. It also bounds the consumer surplus derived from the product. The model is calibrated and estimated using standard national income and product account data. The welfare gain from the introduction of personal computers is in the range of 2 percent to 3 percent of consumption expenditure.
    SSRN Electronic Journal 03/2011; DOI:10.2139/ssrn.1800266
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