Sweet diversity: Colonial goods and the rise of European living standards after 1492

Jonathan Hersh and Hans-Joachim Voth

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: When did overseas trade start to matter for living standards? Traditional real-wage indices suggest that living standards in Europe stagnated before 1800. In this paper, we argue that welfare rose substantially, but surreptitiously, because of an influx of new goods as a result of overseas trade. 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 three different methods to calculate welfare gains based on price data and the rate of adoption of these new colonial goods. Our results suggest that by 1800, the average Englishman would have been willing to forego 10% 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: Gains from Variety; Columbian Exchange; Trade; Economics of New Goods; Age of Discovery; Living Standards (search for similar items in EconPapers)
JEL-codes: D12 D60 F10 F15 N33 (search for similar items in EconPapers)
Date: 2009-07, Revised 2011-01
New Economics Papers: this item is included in nep-his
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Working Paper: Sweet Diversity: Colonial Goods and the Rise of European Living Standards after 1492 (2009)
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