Colluding Against Workers

Abstract

How competitive were labor markets during the long 19th century, and how did labor market competition change throughout the industrialization process? To answer these questions, we estimate the `markdown' wedge between the wage and marginal revenue product of labor in 227 Belgian coal firms from 1845 to 1913 using novel production and cost micro-data. We find evidence for moderate wage markdowns prior to the 1890s, and find that these were the result of wage-setting collusion between firms. Around the turn of the century, however, there was a strong and persistent increase in wage markdowns, which coincided with the introduction of a cartel. This had important consequences for the distribution of the productivity gains from industrialization between labor and capital. Before the cartel, wages grew at the same rate as the marginal labor product; afterwards, they grew merely half as fast.

Keywords: Collusion, Industrial Revolution, Labor Exploitation, Monopsony

JEL Classification: N33, J42, L40