Relative Costs of Living, for Richer and Poorer, 1688-1914

Abstract

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 significantly 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 Western Europe.

Keywords: Cost of living, inequality, price history, economic history

JEL Classification: N10, N30