Outside Options, Coercion, and Wages

Removing the Sugar Coating

Bibliographic Data

ID9715547
AuthorsChristian Dippel (University of California, Los Angeles, and NBER, corresponding author), Avner Greif (Stanford University and ‘Institutions, Organizations and Growth Program’, Canadian Institute for Advanced Research), Daniel Trefler (University of Toronto, NBER and ‘Institutions, Organizations and Growth Program’, Canadian Institute for Advanced Research)
Year2020
Volume130
Issue630
Pages1678-1714
Publication date2020-08-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (PUBLISHER • GB)
DOI10.1093/ej/ueaa030
OpenAlexW3122088401
LanguageEN
Citations received10
References cited47

In economies with a large informal sector firms can increase profits by reducing workers’ outside options in that informal sector. We formalise this idea in a simple model of an agricultural economy with plantation owners who lobby the government to enact coercive policies—e.g., the eviction and incarceration of squatting smallhold farmers—that reduce the value to working outside the formal sector. Using unique data for 14 British West Indies ‘sugar islands’ from 1838 (the year of slave emancipation) until 1913, we examine the impact of plantation owners’ power on wages and coercion-related incarceration. To gain identification, we utilise exogenous variation in the strength of the plantation system in the different islands over time. Where planter power declined we see that incarceration rates dropped, and agricultural wages rose, accompanied by a decline in formal agricultural employment

Agriculture · Business · Coercion (linguistics · Economics · Eviction · Geography · Government (linguistics · Informal sector · Labour economics · Market economy · Political science · Value (mathematics · Culture, Economy, and Development Studies · Law · Microfinance and Financial Inclusion · Taxation and Compliance Studies