Prices and Real Inequality in Europe since 1500

Abstract

Introducing a concept of real, as opposed to nominal, inequality of income or wealth suggests some historical reinterpretations, buttressed by a closer look at consumption by the rich. The purchasing powers of different income classes depend on how relative prices move. The influence of relative prices on real inequality was greater in the sixteenth through nineteenth centuries than in the twentieth. Between 1500 and about 1800, staple food and fuels became dearer, while luxury goods, especially servants, became cheaper, greatly widening the inequality of lifestyles. Peace, industrialization, and globalization reversed this inegalitarian price effect in the nineteenth century.

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