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CESifo Working Paper Details

Capital-Skill Complementarity and the Emergence of Labor Emancipation

Quamrul H. Ashraf, Francesco Cinnirella (Website), Oded Galor (Website), Boris Gershman, Erik Hornung (Website)

CESifo Working Paper No. 6423 (March 2017)

Primary CESifo Category: [5] Economics of Education

This paper advances a novel hypothesis regarding the historical roots of labor emancipation. It argues that the decline of coercive labor institutions in the industrial phase of development has been an inevitable by-product of the intensification of capital-skill complementarity in the production process. In light of the growing significance of skilled labor for fostering the return to physical capital, elites in society were induced to relinquish their historically profitable coercion of labor in favor of employing free skilled workers, thereby incentivizing the masses to engage in broad-based human capital acquisition, without fear of losing their skill premium to expropriation. In line with the proposed hypothesis, exploiting a plausibly exogenous source of variation in early industrialization across regions of nineteenth-century Prussia, capital abundance is shown to have contributed to the subsequent intensity of de facto serf emancipation.

Keywords: labor coercion, serfdom, emancipation, industrialization, physical capital accumulation, capital-skill complementarity, demand for human capital, nineteenth-century Prussia

JEL Classification:
[J240] Human Capital; Skills; Occupational Choice; Labor Productivity
[J470] Coercive Labor Markets
[N130] Economic History: Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations: Europe: Pre-1913
[N330] Economic History: Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy: Europe: Pre-1913
[O140] Industrialization; Manufacturing and Service Industries; Choice of Technology
[O150] Economic Development: Human Resources; Human Development; Income Distribution; Migration
[O430] Institutions and Growth

Additional CESifo Category:
[6] Fiscal Policy, Macroeconomics and Growth

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