Garance Genicot, Department of Economics, University of California at Irvine, 3151 SSP, , Irvine, CA 92697, USA
Abstract
Among the oldest and most pervasive economic institutions are bonded labor and serfdom. While seemingly exploitative, both bonded labor and serfdom are often not imposed on the laborers but voluntarily chosen. It is generally the lack of suitable alternatives which makes workers opt for a life in servitude. This paper shows that the existence of these voluntary forms of servitude itself may restrain the laborers' opportunities so that they are left with no better alternative than bondage. Under these circumstances, government interventions banning servile institutions, by promoting the development of alternative options for the laborers, have the potential to substantially improve the condition of a large class of laborers.
Keyword(s): Implicit contract; Bonded labor; Interlinkage; Credit; Coercion