Was Domar Right? Serfdom and Factor Endowments in Bohemia

Dr Alex Klein

by Alexander Klein and Sheilagh Ogilvie, discussion paper KDPE 1717, October 2017.

Non-technical summary:

What causes labor coercion? It appears informally in most economies, but in some it prevails as a formal system of slavery or serfdom, with wide economic repercussions. Serfdom existed in most European economies for long periods between c. 800 and c. 1860. In many serf economies, most rural families were obliged to do coerced labor for landlords. Since the rural economy produced 80 to 90 percent of pre-industrial GDP, serfdom affected the majority of economic activity. Labor coercion under serfdom reduced labor productivity, human capital investment, innovation, and living standards, so much so that its varying intensity is widely regarded as a major determinant of divergent European economic performance between 1350 and 1861. One well-known explanation is Domar’s (1970) conjecture that coerced labor systems were caused by high land-labor ratios. In economies where wages were high because labor was scarce relative to land, Domar argued, landowners devised institutions such as serfdom and slavery to ensure they could get labor to work their land at a lower cost than would be the case in a non-coerced labor market. To the best of our knowledge, this paper provides the first investigation of coerced labor under serfdom using quantitative evidence and multivariate statistical approaches. We hold constant political-economy variables – power, the state, and the institutional framework legitimizing labor coercion – by analyzing a specific serf society: Bohemia (part of the modern Czech Republic). We calculate quantitative measures of labor coercion, the land-labor ratio, urban potential, and other socio-economic characteristics of over 11,000 serf villages, covering the entirety of Bohemia in 1757. We use these data and the theoretical framework proposed by Acemoglu and Wolitzky (2011) to investigate how the land-labor ratio affected labor coercion, controlling for other causal variables.

We find that where the land-labor ratio was higher, labor coercion was also higher, and thus that the Domar effect outweighed any countervailing outside options effect. The net effect was not huge, but nor was it trivial, and it was magnified when labor coercion included both human and animal energy. The relationship between the land-labor ratio and labor coercion under serfdom displayed a nonlinear shape, arising from the technical limits on coercion in conditions of extreme labor scarcity. We also present evidence which supports Acemoglu and Wolitzky’s conjecture that serfdom was strong in eastern Europe partly because the urban sector was too weak to generate outside options for serfs that reduced the productivity of labor coercion.

Our findings demonstrate that factor proportions affected coercion. Even if political economy factors play a dominant role in explaining differences across countries and many other variables influenced landlord extraction from serfs, the land-labor ratio influenced labor coercion and thus contributed to serfdom as a broader institutional system. This in turn implies that institutions are influenced, at least to some degree, by economic fundamentals.

You can download the complete paper here.