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A Microeconomic Analysis of Slavery in Comparison to Free Labor Economies

Author

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  • Haluk Ergin
  • Serdar Sayan
Abstract
In addition to supervision costs, the labor cost of an enterprise (plantation) in the system of slavery consists of the cost of acquiring the slaves and the subsistence compensation given out to the slaves. In this paper, we leave aside the issue of supervision costs previously taken up in the theoretical literature on slavery, and focus on these two peculiar components of labor costs. We analyze the implications of this cost structure on the levels of profitability, efficiency and determination of equilibrium wages, and compare them to systems with free labor markets, along a continuum of demand side Cournotic competition. For this purpose, we first use a model characterized by a decreasing returns to scale technology, and show, parallel to the findings of Vedder, et. al. (1990), that the equilibrium subsistence wage in the system of slavery is strictly lower than the marginal product of labor. We then extend the model, given the same technology and preferences, to free labor markets covering possibilities ranging from monopsony to perfect competition in the limit, and obtain a second and perhaps more striking result: Differently from equilibria in imperfectly competitive free labor markets, slavery and perfect competition equilibria are Pareto optimal. Furthermore, our comparisons across labor market scenarios suggest that the resistance of slaveholders to the abolishment of slavery is directly related to the expected level of demand side competition in the free labor market which would replace slavery. Finally, we show that the conclusions derived from our analysis would remain generally valid under a constant returns to scale technology as well.
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Suggested Citation

  • Haluk Ergin & Serdar Sayan, 1997. "A Microeconomic Analysis of Slavery in Comparison to Free Labor Economies," Working Papers 9708, Department of Economics, Bilkent University.
    • Handle: RePEc:bil:wpaper:9708
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    References listed on IDEAS

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    1. Haskell, Thomas L, 1979. "Explaining the Relative Efficiency of Slave Agriculture in the Antebellum South: A Reply to Fogel-Engerman," American Economic Review, American Economic Association, vol. 69(1), pages 206-207, March.
    2. Wright, Gavin, 1979. "The Efficiency of Slavery: Another Interpretation," American Economic Review, American Economic Association, vol. 69(1), pages 219-226, March.
    3. Fleisig, Heywood, 1976. "Slavery, the Supply of Agricultural Labor, and the Industrialization of the South," The Journal of Economic History, Cambridge University Press, vol. 36(3), pages 572-597, September.
    4. Emmanuel S. de Dios, 1990. "Preliminary Notes on Modes of Production," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 27(1), pages 8-18, June.
    5. Findlay, Ronald, 1975. "Slavery, Incentives, and Manumission: A Theoretical Model," Journal of Political Economy, University of Chicago Press, vol. 83(5), pages 923-933, October.
    6. Graves, Philip E. & Sexton, Robert L. & Vedder, Richard K., 1983. "Slavery, amenities, and factor price equalization: A note on migration and freedom," Explorations in Economic History, Elsevier, vol. 20(2), pages 156-162, April.
    7. Chwe, Michael Suk-Young, 1990. "Why Were Workers Whipped? Pain in a Principal-Agent Model," Economic Journal, Royal Economic Society, vol. 100(403), pages 1109-1121, December.
    8. David, Paul A & Temin, Peter, 1979. "Explaining the Relative Efficiency of Slave Agriculture in the Antebellum South: Comment," American Economic Review, American Economic Association, vol. 69(1), pages 213-218, March.
    9. Fogel, Robert W & Engerman, Stanley L, 1980. "Explaining the Relative Efficiency of Slave Agriculture in the Antebellum South: Reply," American Economic Review, American Economic Association, vol. 70(4), pages 672-690, September.
    10. Roger L. Ransom and Richard Sutch., 1988. "Capitalists Without Capital: The Burden of Slavery and the Impact of Emancipation," Economics Working Papers 8867, University of California at Berkeley.
    11. Fogel, Robert W & Engerman, Stanley L, 1977. "Explaining the Relative Efficiency of Slave Agriculture in the Antebellum South," American Economic Review, American Economic Association, vol. 67(3), pages 275-296, June.
    12. Schaefer, Donald F & Schmitz, Mark D, 1979. "The Relative Efficiency of Slave Agriculture: A Comment," American Economic Review, American Economic Association, vol. 69(1), pages 208-212, March.
    13. Fenoaltea, Stefano, 1984. "Slavery and Supervision in Comparative Perspective: A Model," The Journal of Economic History, Cambridge University Press, vol. 44(3), pages 635-668, September.
    14. Field, Elizabeth B, 1988. "The Relative Efficiency of Slavery Revisited: A Translog Production Function Approach," American Economic Review, American Economic Association, vol. 78(3), pages 543-549, June.
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    Cited by:

    1. Rauscher, Michael & Willert, Bianca, 2020. "Modern slavery, corruption, and hysteresis," European Journal of Political Economy, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    Economics of Slavery vs. Free Labor Systems; Labor Economics; Perfect Competition vs. Oligopsony and Monopsony in Labor Markets;
    All these keywords.

    JEL classification:

    • N31 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: Pre-1913
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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