American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
The Political Economy of Debt Bondage
American Economic Journal: Microeconomics
vol. 2,
no. 3, August 2010
(pp. 44–84)
Abstract
What are the effects of restricting bonded labor clauses in tenancy or debt contracts? While such restrictions reduce agents' ability to credibly commit ex ante to repay principals in states where they default on their financial obligations, they also generate a pecuniary externality on other principal-agent pairs by reducing the equilibrium profit earned by principals. This turns out to imply that on both political and normative grounds, restrictions on bonded labor become more attractive when borrowers become wealthier or the range of collateral instruments widens. (JEL D82, D86, J82, K12)Citation
von Lilienfeld-Toal, Ulf, and Dilip Mookherjee. 2010. "The Political Economy of Debt Bondage." American Economic Journal: Microeconomics, 2 (3): 44–84. DOI: 10.1257/mic.2.3.44JEL Classification
- D82 Asymmetric and Private Information
- D86 Economics of Contract: Theory
- J82 Labor Standards: Labor Force Composition
- K12 Contract Law
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