American Economic Review Vol. 103 No. 1 2013

Coercive Contract Enforcement: Law and the Labor Market in Nineteenth Century Industrial Britain

Suresh Naidu¹; Noam Yuchtman²

¹ SIPA and Department of Economics, Columbia University, 420 West 118th Street, New York, NY 10027, and NBER and CIFAR. · ² Haas School of Business, UC-Berkeley 2220 Piedmont Avenue, Berkeley, CA 94720 and NBER.

Abstract

British Master and Servant law made employee contract breach a criminal offense until 1875. We develop a contracting model generating equilibrium contract breach and prosecutions, then exploit exogenous changes in output prices to examine the effects of labor demand shocks on prosecutions. Positive shocks in the textile, iron, and coal industries increased prosecutions. Following the abolition of criminal sanctions, wages differentially rose in counties that had experienced more prosecutions, and wages responded more to labor demand shocks. Coercive contract enforcement was applied in industrial Britain; restricted mobility allowed workers to commit to risk-sharing contracts with lower, but less volatile, wages.

DOI

10.1257/aer.103.1.107

Volume

103

Issue

1

Pages

107-144

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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