DP12822 Capital-Skill Complementarity and the Emergence of Labor Emancipation

Author(s): Quamrul Ashraf, Francesco Cinnirella, Oded Galor, Boris Gershman, Erik Hornung
Publication Date: March 2018
Keyword(s): capital-skill complementarity, demand for human capital, emancipation, Industrialization, Labor coercion, nineteenth-century Prussia, physical capital accumulation, serfdom
JEL(s): J24, J47, N13, N33, O14, O15, O43
Programme Areas: Development Economics, Economic History, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=12822

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 proto-industrialization across regions of nineteenth-century Prussia, the initial abundance of elite-owned physical capital that also came to be associated with skill-intensive industrialization is shown to have contributed to the subsequent intensity of de facto serf emancipation.