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repec.nep.his

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exploit the available primary and secondary sources which reflect the prices and

consumption patterns at the time of early settlement. This is particularly important

because in this way we are able to incorporate the large share of non-tradables

included in the consumption basket of an average household, hence providing more

accurate estimates of living standards. 13 Indeed, before the first globalization wave,

consumer staples were not traded over great distances, hence prices reflected

domestic relative factor endowments, rather than being dictated by exogenous global

factors. In Australia, like the rest of the New World, land was abundant relative to

labor and capital, hence food and fuel were cheaper than in the Old World, thus

providing an advantage in terms of purchasing power.

Our choice of the basket draws on Allen (2009) and reflects consumption

patterns of Australian settlers. The core idea behind this methodology is simple: being

able to construct daily diets delivering a subsistence level of about 1,940 kilocalories

for the “bare bone” basket and 2,420 for the “respectable” basket. The “bare bone”

basket embodies the needs of an average consumer delivering the necessary daily

nutrition at lowest costs, given available local supply.

The main staple foods eaten in Australia were potatoes and meat; the most

consumed grain was wheat, the latter included in the “bare bones” basket, but

replaced by bread in the “respectable” basket. Other sources of protein and fat were

milk, butter, beans (and cheese for the “respectable” basket); tea and rum

(“respectable” basket only) were the main drinks. Soap, linen, candles, lamp oil, fuel

and rent constituted the remainder of working class expenditures (see Table 3). Our

13 Other studies, such as Lindert and Williamson 2016a, Allen et al. 2012, and Arroyo Abad et al. 2012,

have already shown the superiority of this methodology.

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