Coerced Labor in the Cotton Sector: How Global Commodity Prices (Don't) Transmit to the Poor

79 Pages Posted: 6 Jul 2016

See all articles by Alexander M. Danzer

Alexander M. Danzer

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics; IZA Institute of Labor Economics

Robert Grundke

Ludwig Maximilian University of Munich (LMU)

Multiple version iconThere are 2 versions of this paper

Date Written: June 09, 2016

Abstract

This paper investigates the economic fortunes of coerced vs. free workers in a global supply chain. To identify the differential treatment of otherwise similar workers we resort to a unique exogenous labor demand shock that affects wages in voluntary and involuntary labor relations differently. We identify the wage pass-through by capitalizing on Tajikistan’s geographic variation in the suitability for cotton production combined with a surge in the world market price of cotton in 2010/11 in two types of firms: randomly privatized small farms and not yet privatized parastatal farms, the latter of which command political capital to coerce workers. The expansion in land attributed to cotton production led to increases in labor demand and wages for cotton pickers; however, the price hike benefits only workers on entrepreneurial private farms, whereas coerced workers of parastatal enterprises miss out. The results provide evidence for the political economy of labor coercion and for the dependence of the economic lives of many poor on the competitive structure of local labor markets.

Keywords: coerced labor, export price, price pass-through, cotton, wage, local labor market, Tajikistan

JEL Classification: J470, J430, F160, O130, Q120

Suggested Citation

Danzer, Alexander M. and Grundke, Robert, Coerced Labor in the Cotton Sector: How Global Commodity Prices (Don't) Transmit to the Poor (June 09, 2016). CESifo Working Paper Series No. 5937. Available at SSRN: https://ssrn.com/abstract=2805402

Alexander M. Danzer (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Ludwigstrasse 28
Munich, D-80539
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Robert Grundke

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, Bavaria 80539
Germany

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