The Rents from Trade and Coercive Institutions: Removing the Sugar Coating

68 Pages Posted: 6 Nov 2016

See all articles by Christian Dippel

Christian Dippel

University of California, Los Angeles (UCLA) - Anderson School of Management

Avner Greif

Stanford University - Department of Economics; Canadian Institute for Advanced Research (CIFAR)

Daniel Trefler

University of Toronto - Rotman School of Management; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 16, 2016

Abstract

A sustained export price boom may not benefit workers if the resulting rents lead employers to invest in coercive activities that reduce wages. We formalize this idea in a simple model of an agricultural economy with exogenous export price fluctuations and plantation owners who mobilize the power of the state to coerce peasants. Coercion is any action that reduces the value to peasants of working in the non-plantation economy e.g., working as independent smallholders. Using unique data for 14 British West Indies sugar colonies from 1838 to 1913, a period in which sugar prices collapsed, we examine the impact of waning planter elite power on wages, incarceration rates, and peasant-biased taxes. In those colonies where the plantation system declined most, incarceration rates and peasant-biased taxes fell and, remarkably, wages rose.

Keywords: International Trade, Coercive Institutions, Economic Development

JEL Classification: F1, F16, N26

Suggested Citation

Dippel, Christian and Greif, Avner and Trefler, Daniel, The Rents from Trade and Coercive Institutions: Removing the Sugar Coating (June 16, 2016). Rotman School of Management Working Paper No. 2864727. Available at SSRN: https://ssrn.com/abstract=2864727 or http://dx.doi.org/10.2139/ssrn.2864727

Christian Dippel (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

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Avner Greif

Stanford University - Department of Economics ( email )

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Canadian Institute for Advanced Research (CIFAR) ( email )

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Daniel Trefler

University of Toronto - Rotman School of Management ( email )

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416-978-6713 (Fax)

National Bureau of Economic Research (NBER)

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United States

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