Sweet diversity: Colonial goods and the welfare gains from global trade after 1492

When did overseas trade start to matter for living standards? Traditional real-wage indices suggest that living standards in Europe stagnated before 1800. This paper argues that welfare may have risen substantially—but quietly—as a result of the influx of new goods.

After 1492, colonial “luxuries” such as tea, coffee, and sugar became highly desirable. Combined with new staple foods like potatoes and tomatoes, overseas goods transformed European diets following the discovery of the Americas and the rounding of the Cape of Good Hope. By the late 18th century, they were household essentials in many countries.

Using two standard methods to calculate welfare gains, the authors estimate the magnitude of increased variety. Although precision is difficult, the findings suggest that gains from greater variety may have boosted European real incomes by 10% or more, depending on assumptions.