DP6621 Punishment Without Crime? Prison as a Worker-Discipline Device

Author(s): Marcus Miller , Jennifer C Smith

Publication Date: December 2007

Keyword(s): asymmetric information , efficiency wage , Labour-discipline , Soviet Gulag

JEL(s): D82 , P23 , P26 , P27

Programme Areas: International Macroeconomics

Link to this Page: www.cepr.org/pubs/dps/DP6621.asp.asp

An ‘efficiency wage’ model developed for Western economies is reinterpreted for Soviet Russia assuming that it was the Gulag not unemployment that acted as a ‘worker-discipline device’. Archival data now available allows for a basic account of the dynamics of the Gulag to be estimated. When this is combined with a dictatorship wishing to maximise the ‘investible surplus’ subject to an efficiency wage incentive constraint, what does it imply? That to secure resources for investment or war, consumption must be compressed; and making the Gulag harsher helps reduce incentive problems in the workplace. This is the cruel logic of coercion. But this economic rationale for the Gulag does not, we find, encompass randomised mass terror. Why did Stalin’s system of coercion ultimately fail? The paper concludes with comparisons of Western and Soviet systems from an efficiency wage perspective.