The kinds of goods that richer and poorer households consumed differed more strongly in the past than today. Movements in the relative prices of luxury goods versus staples caused the real inequality to oscillate in ways missed by the usual historiography of (nominal) inequality. On both sides of the North Atlantic and in Australia, real inequality rose substantially less in 1800–1914 than the literature on nominal inequality has revealed. The reasons for this relate to the relative decline of food prices, rural–urban price gaps, and the delayed rise of luxury service prices, especially after 1850. Throughout these centuries, the North Americans enjoyed lower living costs than their counterparts in England.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Tax calculation will be finalised during checkout.
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
Tax calculation will be finalised during checkout.
On all data-supplying countries, see Roine and Waldenström (2014) and Moatsos et al. (2014), again with a summary by Scheidel (2016). On the nineteenth-century rise in French wealth inequality, see Piketty et al. (2006) and Piketty (2014, esp. p. 349). On the rise in American income and wealth inequality 1774–1860 or 1774–1914, see Lindert and Williamson (2016, Chapter 5). For England and Wales, Allen (2018, pp. 21–24) finds that inequality, after rising across the eighteenth century, had “moderated” in the mid-nineteenth century. The rise of nominal inequalities in the early modern period has been documented by Van Zanden (1995) and by Alfani and Di Tullio (2019).
In the economic history literature, we note three exceptions that indeed pursued real differences in income inequality. One is Williamson’s (1976) analysis of what different income classes’ cost-of-living movements over time within the urban USA might imply for income inequality. Similarly, social biased price trends played an important part in Hanus’s (2013) study of part of the Low Countries between 1500 and 1650. A broader historical perspective was the study of European cost-of-living movements by income class conducted by Hoffman et al. (2002, 2005). While their historical sweep was broad, covering several Western European countries over the centuries since 1500, their study shared a limitation with that of Williamson: lacking the right units of measurement to compare nations at a point in time, they could only sketch how price movements affected inequality within three European countries over time. We follow in their path, expanding the countries covered and comparing absolute differences in higher-income purchasing power across nations.
By contrast, in France the trends in upper- and lower-class living costs did not differ in any clear way, as we shall note again later.
For a recent study of income-class differences in the effects of inflation, see Hobijn and Lagakos (2005). Some studies have even found that the poor face different prices from the rich even within the same price environment (e.g., Rao 2000, Beatty 2010), due mainly to credit constraints. We cannot pursue this level of detail here, however, due to data limitations.
That is, the inter-class differences in expenditure shares remain roughly similar, even though expenditure shares move over time and space for each income class. For household budgets offering detail on luxury items, see the wide array of consumer household budgets, including several middle- or upper-class budgets, in Williams and Zimmerman (1935), Hoffman et al. (2002, pp. 326–327), http://gpih.ucdavis.edu/global prices and incomes database/consumer bundles, and Brady (1972).
The decision to study only the limited gap between “bare-bones” and “respectability” is one shared by the present authors in other work [e.g., Geloso (2016) and Lindert and Williamson (2016, Appendix D, pp. 304–310).] The respectability budget, like the bare-bones one, is helpfully confined to basic goods for which comparative price data are more abundant. It is still considered a “poverty line basket” by many, such as Humphries (2013) and Hanus (2013).
For the updated income distribution for 1801–03, now more plausibly attributed to the year 1798, see Allen (2018).
By contrast, Broadberry et al. (2015, pp. 333–339) postulate lower fuel shares of total expenditures for Great Britain’s “respectability” budget than for their “bare-bones” budget.
Note that using input prices to proxy the prices of luxury and capital-good outputs requires the assumption that total factor productivity in these luxury and capital-good sectors did not change across countries or over time. Over time, our necessary assumption is likely to bias the trend in luxury and capital-good prices upward.
As the post-1850 data for Canada blends new data (for wages) and old data (for prices), a long discussion is required. This discussion hampers the flow of the article. Thus, we thought it preferable to relegate this to an appendix. .
Starting from back in 1500, for England, and also for France and Holland, the trend was more strongly inegalitarian, as emphasized by Hoffman et al. (2002, Figs. 1, 2, 3). Their cost-of-living indices of the relative costs of living had still not shifted in favor of workers as late as 1815, and behave like the ones reported here, even though they used different expenditure weights.
For historical conversions to metric, and some commodity weight/volume ratios, again see the Global Price and Income History site (http://gpih.ucdavis.edu), the International Institute for Social History’s history of prices and wages (http://iisg.nl/hpw), Robert Allen’s homepage, and the further metrological links provided by these sites.
This would include overseas shipping as well as overland shipping which became cheaper as railroads made the frontier parts of Canada, Australia, and the USA more accessible (and thus inciting increases in the supply of food staples) (see notably Hobson 1895: 85; Norrie 1975).
It is also worth pointing out that—in all four countries we considered—prices for manufactured goods such as clothing fell rapidly relative to the price of grains. In the basket using American weights, where clothing constitutes a larger share of expenditures for the poor than the rich, this is particularly important as this contributed to the egalitarian price. However, consistent and comparable series on other (more heterogeneous) manufactured goods are not available.
Unfortunately, for Canada, the first series of income inequality start only around 1920 (Saez and Veall 2005). There are series covering earlier wealth inequality (Di Matteo 2016, 2018) that can be used, but there are none that speak to Canada as a whole, but only regional estimates for different top income shares (1% or 10%) for disparate time periods. However, thanks to recent work by Di Matteo (2018: Appendix 2) which compiles all available estimates of wealth inequality in Canada, we can see that two areas (the province of Manitoba and Wentworth county in the province of Ontario) offer estimates from the early 1870s to the eve of the Great War for the top 1% of wealth holders. In the case of Wentworth county, the increase in real wealth inequality is between 6 and 32% inferior to the increase in nominal wheat inequality between 1872 and 1912. In Manitoba, the changes in real wealth inequality between 1875 and 1912 are 6% to 20% below the changes suggested by nominal figures.
For the Bowley-Stamp-Routh 1911 estimates, see Lindert and Williamson (1983) and gpih/ucdavis.edu/distribution. This finding is drawn from estimates of the distribution of household incomes. For a different presentation of the 1911 distribution among taxpayers, rather than among households, see Scott and Walker (2018).
Adams TM (1944) Prices paid by vermont farmers [1790–1940], Bulletin 507, Burlington. Vermont Agricultural Experiment Station, with Supplement, Vermont
Aizer A, Janet C (2014) The intergenerational transmission of inequality: maternal disadvantage and health at birth. Science 344(6186):856–861
Alfani G (2017) The rich in historical perspective. Evidence for preindustrial Europe (ca. 1300–1800). Cliometrica 11:3
Alfani G (2019) Wealth and income inequality in the long run of history. In: Diebolt C, Haupert M (eds) Handbook of cliometrics. Springer, Berlin
Alfani G, Di Tullio M (2019) The lion’s share: inequality and the rise of the fiscal state in preindustrial Europe. Cambridge University Press, Cambridge
Allen RC (2001) The great divergence in european wages and prices from the middle ages to the first world war. Explor Econ History 38(4):411–447
Allen RC (2009) The British industrial revolution in global perspective. Cambridge University Press
Allen RC (2017) Absolute poverty: when necessity displaces desire. Am Econ Rev 107(12):3690–3721
Allen RC (2018) Class structure and inequality during the industrial revolution: lessons from England’s social tables, 1688–1867. Econ History Rev. https://doi.org/10.1111/ehr.12661
Allen RC, Bassino J-P, Ma D, Moll-Murata C, van Zanden JL (2011) Wages, prices, and living standards in China, 1739–1925: in comparison with Europe, Japan, and India. Econ History Rev 64(S1):8–38
Arkell T (2006) Illuminations and distortions: Gregory King's Scheme calculated for the year 1688 and the social structure of later Stuart England 1. Econ History Rev 59(1):32–69
Arroyo A, Leticia ED, van Zanden JL (2012) Between conquest and independence: real wages and demographic change in Spanish America, 1530–1820. Explor Econ History 49(2):149–166
Atkinson AB, Piketty T, Saez E (2011) Top incomes in the long run of history. J Econ Lit 49(1):3–71
Beatty TKM (2010) Do the poor pay more for food? Evidence from the United Kingdom. Am J Agric Econ 92(3):608–621
Bezanson A, Gray RD, Hussey M (1936) Wholesale prices in Philadelphia 1784–1861. University of Pennsylvania Press, Philadelphia
Bolt J, van Zanden JL (2014) The Maddison project: collaborative research on historical national accounts. Econ History Rev 67(3):627–651
Brady DS (1972) Consumption and the style of life. In: Davis LE, Easterlin RA et al (eds) American economic growth: an economist’s history of the United States. Harper & Row, New York
Broadberry S, Campbell B, Klein A, Overton M, van Leeuwen B (2015) British economic growth, 1270–1870. Cambridge University Press, Cambridge
Brueckner M, Lederman D (2015) Effects of income inequality on aggregate output. World Bank Group, Latin America and the Caribbean Region, policy research working paper 7317 (June)
Carey M (1833) Appeal to the wealthy of the land, ladies as well as gentlemen, on the character, conduct, situation, and prospects of those whose sole dependence for subsistence is on the labour of their hands, 3rd edn. L. Johnson, Philadelphia
Clark G (2005) The condition of the working class in England, 1209–2004. J Political Econ 113(6):1307–1340
Di Matteo L (2016) Wealth distribution and the Canadian middle class: historical evidence and policy implications. Can Public Policy 42(2):132–151
Di Matteo L (2018) The evolution and determinants of wealth inequality in the north Atlantic Anglo-sphere, 1668–2013: push and pull. Palgrave, New York
Federico G (2005) Feeding the world: an economic history of agriculture, 1800–2000. Princeton University Press, Princeton
Geloso V (2016). The seeds of divergence: the economy of French North America, 1688 to 1760. Ph.D. dissertation, London School of Economics and Political Science
Geloso V (2019a) Distinct within North America: living standards in French Canada, 1688–1775. Cliometrica 13(2):277–321
Geloso V (2019b) A price index for Canada, 1688 to 1850. Can J Econ 52(2):526–560
Hanus J (2013) Real inequality in the early modern low countries: the city’s of-Hertogenbosch, 1500–1660. Econ History Rev 66(3):733–756
Hobijn B, Lagakos D (2005) Inflation Inequality in the United States. Rev Income Wealth 51(4):581–606
Hoffman PT, Jacks DS, Levin PA, Lindert PH (2002) Real inequality in Western Europe since 1500. J Econ History 62(2):322–355
Hoffman PT, Jacks DS, Levin PA, Lindert PH (2005) Sketching the rise of real inequality in early modern Europe. In: Allen RC, Bengtsson T, Dribe M (eds) Living Standards in the Past. Oxford University Press, Oxford, pp 131–172
Humphries J (2013) The lure of aggregates and the pitfalls of the patriarchal perspective: a critique of the high wage economy interpretation of the British industrial revolution. Econ History Rev 66(3):693–714
Lemon JT (1972), re-issued 2002. The best poor man’s country: a geographic study of early Southeastern Pennsylvania. Johns Hopkins University Press, Baltimore
Lindert PH (2016) Purchasing power disparity before 1914. NBER working paper 22896 (December)
Lindert PH, Williamson JG (1982) Revising England's social tables 1688–1812. Explor Econ History 19(4):385–408
Lindert PH, Williamson JG (1983) Reinterpreting Britain’s social tables, 1688–1913. Explor Econ History 20(1):94–109
Lindert PH, Williamson JG (2016) Unequal gains: American growth and inequality since 1700. Princeton University Press, Princeton
McCallum J (1980) Unequal beginnings: agriculture and economic development in Quebec and Ontario until 1870. University of Toronto Press, Toronto
McLean IW (2013) Why Australia prospered: the shifting sources of economic growth. Princeton University Press, Princeton
McLean IW, Woodland SJ (1992) Consumer prices in Australia 1850–1914. Working paper 92-7. University of Adelaide, Adelaide, South Australia
Milanovic B, Lindert PH, Williamson JG (2011) Pre-industrial inequality. Econ J 121(March):255–272
Moatsos M, Baten J, Foldvari P, van Leeuwen B, van Zanden JL (2014) Income inequality since 1820. In: van Zanden JL, Baten J, Mira d’Ercole M, Rijpma A, Smith C, Timmer M (eds) How was life? Global well-being since 1820, Chapter 11. OECD, Paris
Norrie K (1975) The rate of settlement of the Canadian prairies, 1870–1911. J Econ History 35(2):410–427
Panza L, Williamson JG (2017a) Australian exceptionalism? Inequality and living standards 1821–1871. (May)
Panza L, Williamson JG (2017b) Living costs and real incomes: Did australian workers have the highest living standards by the 1870s? (August)
Piketty T (2014). Capital in the twenty-first century (trans: Goldhammer A). Harvard University Press, Cambridge
Piketty T, Postel-Vinay G, Rosenthal J-L (2006) Wealth concentration in a developing economy: paris and France, 1807–1994. Am Econ Rev 96(1):236–256
Piketty T, Saez E, Zucman G (2018) Distributional national accounts: methods and estimates for the United States. Q J Econ 133(2):553–609
Pollak R (1980) Group cost-of-living indexes. Am Econ Rev 70(2):273–278
Pollak R (1981) The social cost of living index. J Public Econ 15(3):311–336
Pomeranz K (2000) The great divergence: China, Europe, and the making of the modern world economy. Princeton University Press, Princeton
Pomeranz K (2011) Ten years after: responses and reconsiderations. Hist Speak 12(4):20–25
Rao V (2000) Price heterogeneity and ‘Real’ inequality: a case study of prices and poverty in rural south India. Rev Income Wealth 46(2):201–211
Roine J, Waldenström D (2014) Long run trends in the distribution of income and wealth. In: Atkinson AB, Bourguignon F (eds) Handbook of income distribution, vol 2. North-Holland, Amsterdam
Russell P (2012) How agriculture made Canada: farming in the nineteenth century. McGill-Queen’s University Press, Montreal and Kingston
Saez E, Veall M (2005) The evolution of high incomes in Northern America: lessons from Canadian evidence. Am Econ Rev 95(3):831–849
Scheidel W (2016) The great leveler: violence and the global history of inequality from the stone age to the present. Princeton University Press, Princeton
Scott PM, Walker JT (2018) The comfortable, the rich, and the super-rich. What really happened to top British incomes during the first half of the twentieth century? Paper presented at the Economic History Association annual meetings in Montreal, (September)
Spagnoli F (2014) Inequality: what’s wrong with it and what’s not. (July 9). https://philpapers.org. Accessed 18 Apr 2018
Underwood E (2014) Can disparities be deadly? Science 344(6186):829–831
Van Zanden JL (1995) Tracing the beginning of the Kuznets curve: Western Europe during the early modern period. Econ History Rev 48(4):643–664
Ward M, Devereux J (2003) Measuring British decline: direct versus long-span income measures. J Econ History 63(3):826–851
Ward M, Devereux J (2004) Relative UK/US output reconsidered: a reply to broadberry. J Econ History 64(3):879–891
Ward M, Devereux J (2006) Relative British and American income levels during the first industrial revolution. Res Econ History 23:249–286
Williams FM, Zimmerman CC (1935) Studies of family living in the United States and other countries: an analysis of material and method. U.S. Dept. of Agriculture, Washington, D.C.
Williamson JG (1976) American prices and urban inequality since 1820. J Econ History 36(2):303–333
Williamson J (2011) Trade and poverty: When the third world fell behind. MIT Press, Cambridge
Woodhouse CG (1929) The standard of living at the professional level, 1816–17 and 1926–27. J Political Econ 37(5):552–572
Wright CD (1885) “Historical review of wages and prices 1752–1860” from the 16th annual report of the Massachusetts bureau of statistics of labor. Wright & Potter, Boston
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Electronic supplementary material
Below is the link to the electronic supplementary material.
About this article
Cite this article
Geloso, V., Lindert, P. Relative costs of living, for richer and poorer, 1688–1914. Cliometrica 14, 417–442 (2020). https://doi.org/10.1007/s11698-019-00197-8
- Real inequality