Masters and Slaves: A Matching Model of Forced Labor with Heterogeneous Workers[The Economics of Labor Coercion]

At present, most countries have officially ratified the ILO Convention concerning forced or compulsory labor; however, serfdom is still present in the 21st century. This article addresses how oppressors recruit their victims and how certain mechanisms affect the extent of modern slavery. We use a matching model to analyze this recruitment process, incorporating involuntariness, which is the distinctive factor of employment relationships in modern slavery. In contrast to the standard matching model, not the workers exert effort to find jobs but the employers exert effort to find and hire slaves. Workers are heterogeneous regarding their vulnerability to enslavement, which is ex-ante unknown to the potential employers. The employer’s decision whether and to what extent to engage in forced labor depends on governmental labor protection and on the probability of detection. The model includes the possibility of bribery such that an employer can avoid sanctions if illicit behavior is detected. Solving the model yields that a high probability of detection and strict labor protection decrease slavery. We show that a high share of slaveholders increases the probability of enslavement and thus, the number of slaves. Surprisingly, strict labor protection increases the slaveholder’s effort, but also decreases their profit. (JEL codes: J23, J47, and J71)