Abstract: Distinguishing the role of coercive labor and political institutions from the effects of economic inequality levels and populations’ ethno-linguistic compositions in explaining the diverging patterns of development across the Americas has remained a challenging task. This paper examines whether the incentives for elite groups to enforce coercive labor and political institutions, holding other factors constant, inhibited economic development by restricting the provision of public schooling. Using 19th-century micro data from municipalities in Puerto Rico, and exploiting variation in the suitability of coffee cultivation across regions and the timing of the nineteenth century coffee boom, we find that coffee-region local governments allocated more public resources to enforce coercive labor measures and repress revolutionary movements, as documented by greater expenditures targeted towards the enforcement of coercive contracts and the size of military and government-backed paramilitary forces. These local governments also allocated fewer resources towards the provision of primary schooling - a decline of 40 percent in the provision of public primary schools and a decline in literacy rates of 25 percent. These findings are consistent with models of factor price manipulation and political repression under elite-controlled non-democratic regimes, in which the returns to labor are depressed as a result of the extraction of rents from peasants’ wages and literacy-based voting rights are restricted through limited access to schooling.
Keywords: labor coercion; political institutions; geography; schooling
JEL Classification: O11; N46