, Volume 7, Issue 1, pp 1–13 | Cite as

Incentives in merchant empires: Portuguese and Dutch compensation schemes

  • Claudia ReiEmail author
Original Paper


The Portuguese and Dutch merchant empires had a similar geographic distribution with outposts all around the Indian Ocean, which they controlled and manned. Both empires faced the same problem of monitoring their agents in remote corners of the world. Each, however, arrived at a different solution to the monitoring problem. I use a principal–agent model to link different monitoring options to the different organizational structures of the two empires. I further investigate the implications of the model with archival data on labor compensation for Portuguese and Dutch workers overseas.


Merchant empires Labor compensation Monitoring 

JEL classification

J33 N33 



I am grateful to Bob Margo and Andy Newman, for motivation and guidance, to Jeremy Atack, Andrea Moro and Bill Collins for detailed suggestions on earlier drafts, and to Jeremy Atack for kindly generating Fig. 1 in GIS. I also thank Andy Daughety, Yanqin Fan, Tong Li, Stephan Litschig, Debin Ma, Claudia Olivetti, Daniele Paserman, Jaime Reis, Thijs van Rens, Joachim Voth, two anonymous referees, the participants at the Clio meeting in Gettysburg, the World Economic History Congress in Utrecht, and the Labor workshop at Universitat Pompeu Fabra for helpful comments.


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Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  1. 1.Vanderbilt UniversityNashvilleUSA

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