Labor coercion and the accumulation of human capital

This paper examines the effect of labor coercion on human capital accumulation. We use micro data from Puerto Rico, where unskilled laborers were forced to work for landowners during 1849–1874. Using variation in municipality-level suitability for coffee cultivation and international coffee prices, we estimate the response of schooling to exogenous increases in relative demand for unskilled labor in regimes with and without forced labor. During the coercive regime, increased coffee prices had no effect on individuals' literacy rates in coffee growing regions. Following the abolition of forced labor in 1874, similar changes in coffee prices reduced literacy rates by 12%, consistent with a diminished skill premium in the free labor market regime relative to the coercive period. •We examine labor coercion's effect on human capital accumulation in Puerto Rico.•Normally, higher coffee prices lower the skill premium and human capital investment.•Lower unskilled wages under coercion cause workers to invest in human capital.•After removal of coercion, falling coffee prices discourage human capital investment.•Despite more human capital accumulation, workers' welfare is lower under coercion.