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

79 Pages Posted: 23 May 2011

See all articles by Suresh Naidu

Suresh Naidu

Columbia University

Noam Yuchtman

University of California, Berkeley - Haas School of Business

Date Written: May 2011

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.

Suggested Citation

Naidu, Suresh and Yuchtman, Noam, Coercive Contract Enforcement: Law and the Labor Market in 19th Century Industrial Britain (May 2011). NBER Working Paper No. w17051. Available at SSRN: https://ssrn.com/abstract=1848573

Suresh Naidu (Contact Author)

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Noam Yuchtman

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

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