Rough Estimates of ‘Real Inequality’ Trends for Early Modern England, France, and Holland

Real-income inequality is an important index-number concept that could be fully formalized with an explicit overall welfare function that combines different people's individual well-being.

combine welfare changes for the poor and the rich into the same overall welfare metric. Here we follow a similar approach, but to avoid the troublesome index-number concept of overall real well-being we will illustrate real inequality movements only in ratios of the real income of higher income ranks to the real-income movements of lower ranks.¹⁹ The ratios of real purchasing power can help answer such questions as ‘What happened to the relative abilities of higher and lower income ranks to buy things in the proportions typical of their lifestyles?' or ‘How did the real incomes of higher and lower income ranks compare with those of their counterparts in earlier generations?'.

The history of real-income movements seems more volatile than that suggested by more conventional measures of nominal income inequality. In England and Wales, both the egalitarian change between Gregory King's 1688 and Joseph Massie's 1759 and the subsequent inegalitarian change from 1759 to Patrick Colquhoun's 1802 (1801—3) were apparently greater in real terms than in nominal terms. This can be illustrated by looking at what happened to the ratio of top-decile income to the income of the bottom two fifths between 1759 and 1802. In nominal terms this ratio rose by 50% (from 14.4 to 21.8).

In the case of eighteenth-century France, too, the price movements amplified the movements in nominal income inequality. The trends were modest in this case, however, and they seemed to reverse at mid-century. The income ratios dividing the rich and the poor may have narrowed a bit between 1700 and 1750, and re-widened between 1750 and 1790. These modest movements are subject to wide ranges of possible error, as Morrisson and Snyder warn us (Morrison and Snyder 2000). For what it is worth, the same shift from a possibly egalitarian trend before 1750 to an inegalitarian trend between 1750 and the Revolutionwas magnified by the movement of relative prices.

For Holland, price movements seem to have magnified a greater and more prolonged rise in inequality. The current price estimates of van Zanden accentuate the inegalitarian drift in his earlier estimates of Holland's nominal income distribution (van Zanden 1995, 2000). Over the entire three centuries from 1500 to 1808, say his estimates, the rich got richer and the poor got poorer, with the gaps widening even more in real terms than in nominal terms.

Would a closer look at other countries and regions also show that relative-price movements accentuated the widening of gaps between the rich and the poor before the early nineteenth century, as they seem to have done when incomes widened in England, France, and Holland?

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