A Microeconomic Analysis of Slavery in Comparison to Free Labor Economies

Haluk I. Ergin and Serdar Sayan ()
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Haluk I. Ergin: Bilkent University

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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.

Keywords: Economics; of; Slavery; vs.; Free; Labor; Systems; Labor; Economics; Perfect; Competition; vs.; Oligopsony; and; Monopsony; in; Labor; Markets. (search for similar items in EconPapers)
JEL-codes: N31 J31 P51 J42 L13 (search for similar items in EconPapers)
Date: 1997-10-01
Note: Type of Document - Word for Windows 6.0; prepared on IBM PC ; to print on HP Laser Jet IV; pages: 26 ; figures: Request from Author. On line version of Bilkent University Economics Department Discussion Paper No. 97-08
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Working Paper: A Microeconomic Analysis of Slavery in Comparison to Free Labor Economies (1997)
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