What happens when you release people from bonded labor in the Emirates?

It turns out serfdom is not so terrific for workers or the economy.

In 2011, a reform in the UAE allowed any employer to renew a migrant’s visa upon contract expiration without written permission from the initial employer. We find that the reform increased incumbent migrants’ earnings and firm retention of these workers. This occurs despite an increase in employer transitions, and is driven by a fall in country exits. While the outcomes of workers already in the UAE improved, our analysis suggests that the reform decreased demand for new migrant workers and lowered their earnings. These results are consistent with a model in which the reform reduces the monopsony power of firms.

A new paper by Naidu, Nyarko and Wang. Naidu’s other work on labor coercion–both today and in American history–is hugely interesting and important.

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