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Journal of Law, Economics, and Organization Advance Access originally published online on December 8, 2005
Journal of Law, Economics, and Organization 2006 22(2):442-458; doi:10.1093/jleo/ewj013
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© The Author 2005. Published by Oxford University Press on behalf of Yale University. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Regulating Wages in Kind: Theory and Evidence from Britain

Elaine S. Tan*

University of London, Royal Holloway

* University of London, Royal Holloway, Department of Economics, Egham, Surrey TW20 0EX, United Kingdom. Email: elaine.tan{at}rhul.ac.uk.

Workers in many countries receive part of their wages in kind. The International Labor Organization criticizes this practice by citing the "exploitative" truck system in industrializing Britain, which paid wage advances in cash and company store goods. This article finds that truck did not reduce British wages by as much as is believed, and that employers' ability to earn rents from hiring was limited. Company store premiums are interpreted as the cost of employer credit, and workers benefited from truck because most of the time independent credit cost at least as much. Firms earned rents from riskless loans to employees and avoided holdup by independent outlets at minimal transaction costs. The British truck system was mutually beneficial, and the evidence does not support the call to abolish similar practices today.


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