The Political Economy of Debt Bondage
AbstractWhat are the effects of restricting bonded labor clauses in tenancy or debt contracts? While such restrictions reduce agents' ability to credibly commit ex ante to repay principals in states where they default on their financial obligations, they also generate a pecuniary externality on other principal-agent pairs by reducing the equilibrium profit earned by principals. This turns out to imply that on both political and normative grounds, restrictions on bonded labor become more attractive when borrowers become wealthier or the range of collateral instruments widens. (JEL D82, D86, J82, K12)
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Journal: Microeconomics.
Volume (Year): 2 (2010)
Issue (Month): 3 (August)
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
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