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Coercive Contract Enforcement: Law and the Labor Market in 19th Century Industrial Britain

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  • Suresh Naidu
  • Noam Yuchtman

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17051.

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Date of creation: May 2011
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Publication status: published as “Coercive Contract Enforcement : Law and the Labor Market in 19th Century Industrial Britain ” (with Noam Yuchtman) - American Economic Review Vol. 103(1) (February 201 3):107 - 144
Handle: RePEc:nbr:nberwo:17051

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  1. Mukherjee, Anindita & Ray, Debraj, 1995. "Labor tying," Journal of Development Economics, Elsevier, vol. 47(2), pages 207-239, August.
  2. Malcomson, J.M., 1997. "Contracts, hold-up and labor markets," Discussion Paper Series In Economics And Econometrics 9703, Economics Division, School of Social Sciences, University of Southampton.
  3. Huberman,Michael, 2010. "Escape from the Market," Cambridge Books, Cambridge University Press, number 9780521142663, April.
  4. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  5. M. Machina & E. D. Domar, 1982. "On the Profitability of Russian Serfdom," Working papers 307, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-88, August.
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