Working Papers

1. Labor Coercion and Trade: Evidence from Colonial Indonesia. SSRN Working Paper 5311080. [pdf]

   • • What determines the use of labor coercion? This paper studies the impact of trade on corvée labor – the payment of taxation in labor – in colonial Indonesia. To do so, I construct a unique database on corvée usage and exports at the residency-product-year level from 1900 to 1940. The results show that trade booms, especially of labor-intensive exports, reduced corvée usage. The effect ran through laborers buying themselves out of corvée. The buy-out option enabled high-productivity laborers to self-select out of corvée without requiring stronger information-collection capabilities of the state. Through such buyouts, the fall in in-kind taxation was mirrored by a rise in monetary taxation. The opposite took place during the trade collapse of the Great Depression. While some studies find a positive relationship between trade and private labor coercion, I argue public labor coercion follows a different logic due to the state's encompassing interest. The nature of the relationship between coercer and coerced is thus key in understanding labor coercion.

       1. • Award: Charles A. Lave Paper Prize Award (UC Irvine).

2. Brain Gain in Late Colonial Indonesia: New Evidence on Chinese Migration and Wages (with Pim de Zwart). CEPR Discussion Paper DP18748. Revise and Resubmit at the Journal of Economic History. [pdf]

   • • During the "Age of Mass Migration", many Chinese migrants came to colonial Indonesia. We propose that these migratory flows included many skilled workers, contrary to the belief that they mostly consisted of unskilled laborers. We construct a new dataset of migration and potential surplus earnings for different types of work for the period ca. 1900-1920. Our analyses show that high earnings for skilled work, but not for unskilled work, strongly incentivized migration. Given the scarcity of skilled labor in Indonesia, the skilled migrants may have significantly contributed to economic growth in general and the growing trade-based sectors in particular.

3. Policy Risk and Financial Markets: Evidence from 1930s China (with Liuyan Zhao). SSRN Working Paper 5386868. Submitted. [pdf]

   • • How does policy risk affect financial markets? To investigate this question, we study the 1930s Chinese silver crisis and construct  a novel dataset of high-frequency financial data and newspaper sentiment data. We show that U.S. silver purchases propelled financial events in China, but not in the ways commonly described by the extant literature. Specifically, we argue that China’s silver policy risk generated massive silver outflows that induced a severe credit crunch and further weakened the government’s perceived commitment to the silver standard. In turn, such weakened perceived commitment made the silver standard unsustainable. Notably, a contemporaneous comparison with Hong Kong reveals that rising global silver prices did not cause persistent silver outflows or a credit crunch in the absence of silver policy risk. These findings underscore the crucial role of policy risk in shaping economic outcomes in developing economies.

4. Tax Farming and State Capacity: Evidence from Colonial Indonesia. SSRN Working Paper 5364767. Revise and Resubmit at the European Review of Economic History. [pdf]

   • • How did centralized fiscal institutions emerge? This study investigates the relationship between state capacity and tax farming – tax collection by private actors – in colonial Indonesia. To do so, I construct a new database that covers the transition from tax farming to state-run tax collection. The results indicate that state capacity expansion reduced reliance on tax farming and that different segments of the state bureaucracy differentially impacted the tax farming transition. Officials from the majority group largely excluded from tax farming (i.e., the indigenous) strongly reduced reliance on tax farming. In contrast, officials from the minority group traditionally wooed as tax farmers (i.e., the non-indigenous Asians) did not reduce such reliance. The findings provide evidence for centralized fiscal institutions emerging when the state becomes less dependent on divide-and-rule strategies that route revenue streams through politically weak intermediaries.

5. International Trade, Commodity Production and the Skill Premium: Evidence from Colonial Indonesia (with Pim de Zwart). CEPR Discussion Paper DP20459. [pdf]

   • • How does the expansion of commodity export production impact the skill premium in a developing colonial economy? In this paper, we examine this question by relating sugar and coffee production – two key exports – to the relative wage of skilled to unskilled workers in early twentieth-century Java, Indonesia. Drawing on a newly-constructed dataset of regionally-disaggregated production figures and wages, we find a positive relationship between sugar production and the skill premium, but no relationship between coffee production and the skill premium. Using several instruments exploiting exogenous variation in global market prices and local production suitability, we find evidence for a causal effect of sugar production on the skill premium. Specifically, we estimate that a 10% increase in sugar production boosted the skill premium by about 10-11%. A substantial amount of skilled labour was involved in commodity production processes, in particular that of sugar, but there was a general scarcity of skilled workers in colonial Indonesia. Whereas increased demand for unskilled workers was easily matched by rising supply, especially in areas well-connected to overland transportation infrastructures, this was not the case for skilled labour, so the skill premium rose.

Work in Progress

1.  Life Annuities and Adverse Selection: The Case of Early Modern Holland.

   • • What determines the type of debt instrument a state uses? While life annuities were main debt instruments in the early 1600s, they were quickly eclipsed by bonds and redeemable annuities. I construct a new dataset of over 1,000 life annuities and find that adverse selection drove this change. The lack of growth in life annuities meant that an important means of insurance had limited availability.

Publications

1. 1. Hup, Mark. (2024). Labor Coercion, Fiscal Modernization, and State Capacity: Evidence from Colonial Indonesia. (2024). Explorations in Economic History, 94, 101632. [journal link] [pdf] [replication package]

      1. • What explains the emergence of centralized fiscal institutions and information-intensive monetary taxation? This is the first study to estimate the effect of state capacity expansion on labor coercion as taxation, a practice known as corvée labor. To do so, I construct a new database covering eighteen Indonesian residencies over thirty-two years (1874-1905) during the period of Dutch colonial rule. I document the wide use of corvée labor and find that national-level policy centralized state finances by gradually replacing corvée with a poll tax. At the same time, a residency-level panel data analysis shows that local state capacity expansion, primarily indigenous officials working as agents for the state, slowed the movement away from corvée. My estimates are supported by an IV strategy which uses effective distance to the capital as an instrument for local state capacity. The relationship between state capacity expansion and fiscal modernization therefore depends on what part of the state is expanding. Opposing interests of different state actors can be key in understanding fiscal modernization and public labor coercion.

           1. • Awards: Vincent and Elinor Ostrom Prize (Public Choice Society), Jan Lucassen Award (European Social Science History Association), A. Kimball Romney Award for Outstanding Graduate Paper (UC Irvine).

   2. Hup, Mark. (2023). Dissertation Summary: Essays on Fiscal Modernization, Labor Coercion, State Capacity and Trade. Journal of Economic History, 83(2), 608-611. [journal link]

   3. Gelderblom, Oscar, Mark Hup, and Joost Jonker. (2018). Public Functions, Private Markets: Credit Registration by Aldermen and Notaries in the Low Countries, 1500-1800.  In: Lorenzini M., Lorandini C., Coffman D. (eds.) Financing in Europe. Palgrave Studies in the History of Finance. Palgrave Macmillan, Cham. [book link] [pdf]