Coercive Contract Enforcement: Law and the Labor Market in 19th Century Industrial Britain
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.
We thank Ryan Bubb, Davide Cantoni, Greg Clark, Melissa Dell, Oeindrila Dube, Stan Engerman, James Fenske, Camilo Garcia, Claudia Goldin, Larry Katz, Peter Lindert, and James Robinson. Research was funded by the Harvard Academy for International and Area studies, Columbia University/SIPA and Berkeley Haas Business School. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
“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