Global Real Wage Inequality in the Long Run: New Insights from Linear Programming and Accounting for Climate Differences

We combine the vast majority of price and wage data stemming out of the vibrant real wage literature of the last 24 years, and apply a single methodology across all the 86 included markets around the world, with observations that span from 1221 to 1965. Our methodology incorporates two main recent innovations: linear programming and controlling for differences in temperatures across the globe. The former allows for the cheapest consumption basket to be drawn straight from the data, and the latter links energy, clothing and light requirements with local climatic conditions. The direction of each of those changes varies per market and part of the world, and its effect is not linear in time. Thereby, we identify different levels and trends in relation to the Little, the Great and the Colonial divergences. Investigating the inequality across unskilled urban wage earners in 1500--1912, we sketch a long-haul U-shaped trajectory at a global level and, even more so, across European countries.