Poaching, Courts, and Settlements
Complementarity of Governance in Labor Markets*
ISS Discussion Paper Series
F-145
January 2014
Masaki Nakabayashi†
Institute of Social Science
The University of Tokyo

Abstract
Transition between private governance mechanisms and the state court is not necessarily
unidirectional. This research assumes that non-monotonic changes in governance mechanism comes from complementarity between the private and public mechanisms whenneither of both is sufficiently efficient. Then it studies transition of governance in thelabor market of Japanese silk-reeling industry from the 1890s to the 1920s, which rapidly
grew then and often showed poaching, and ascertains that employers first had recourse to
the court for enforcement of employment contract, they second built private mechanisms
for settlement backed by the court, and third abandoned the private mechanism.
Key words: Employment contract; scope of the state court; complementarity between
judicial and endogenous systems; Japan.
JEL: K12; H11; L14; J42; N65.

* To be presented at the 9th International Conference on Contracts at St. Thomas University School of Law,
Miami, on February 21-22, 2014. This research has been supported by a JSPS Grant-in-Aid (22243022).
†
The author appreciates helpful comments from Hideshi Itoh, Dominik Schober, Akira Wani and the participants at International Industrial Organization Conference 2013, American Law and Economics Association
Annual Meeting 2013, Canadian Law and Economics Association Meetings 2013, Contract Theory Workshop,
Contract Theory Workshop East, Kansai Labor Workshop, Osaka Workshop on Economics of Institutions andOrganizations. Corresponding address: Institute of Social Science, The University of Tokyo, Hongo 7-3-1, Tokyo
103-0033, Japan. Phone: +81 3 5841 4936. E-mail: mn@iss.u-tokyo.ac.jp

1 Introduction: Governance of labor markets
Protection of claim on investment in human capital has been a lasting issue in economic history. Claim on the transportation of cost has been an issue, too. As long as individual workers
themselves finance these costs, there are no problems. Investment level would be set at the
optimal level where its marginal return equals to the cost. However, these costs are not often
covered up to the optimal level by workers’ wealth and imperfect financial markets fail to finance their migration. Then, in order to improve welfare, somebody else has to finance these.
One of the ways in which finance can be facilitated is to make the claim of the party that
finances human capital investment or human mobility transferable without agreement fromthe party whose transportation is financed; that is, to protect the claim such that it satisfies
requirements for perfection. Claim of perfection, typically known as the real right, allows
the claimant to transfer the claim without accordance from the bondee. An agent on whom apermanently perfect claim is placed is called a slave. In some societies, such as Europe andthe US before the early twentieth century, the claim of the indenture holder was also perfect.
Indentured immigrants from Europe were auctioned in American cities—their destinations—and the mechanism indeed facilitated labor mobility between both sides of the Atlantic in the
18–19th centuries (Galenson (1981, 1984) and Grubb (1985, 1986, 1988, 1994, 2001)).
More or less, most agricultural societies experienced a period of utilization of slave, indentured workers, or other similar tradable human workforce. Sooner or later, as the society
and its economy develop, such phenomena vanish. A possible explanation is that slavery canbe a steady state under some land/labor ratio, and is endogenously destabilized with growth(Lagerlöf (2009)). Another possible explanation tells that exclusive contracts such as indenture contracts are more efficient in a thin market, middle thick markets can have multiple
equilibria, and free contracts are more efficient in a thick market (Matouschek and Ramezzana(2007)). Thus, growth and market expansion are expected to favor free contracts. In particular, improved efficiency in the financial market is known to end indenture trades, because thecontract arrangement of indenture was originally invoked due to imperfect financial markets.1
Although relative efficiency of the free labor market system is not clear and multiple equilibria can arise when a society leaves slavery,2 free labor societies experienced faster growth
and the free labor market became a “stationary equilibrium.” On the path toward modernization, developed societies have believed that liberalization of the movement of persons would
contribute to better matching in the labor market and thus facilitate better resource allocation.
First slavery was abandoned, and then indentures came to be contained. During this transition
phase, the protection of claim to human capital emerged as an issue. Liberalization of people
has generally implied weakened claim to human capital investment and human transportation,and inevitably has made the claim to financial assets sunk in human capital tricky.
An extreme approach is legal prohibition of enticement, as seen in the Postbellum US
South. In the case of the United States, mobility of liberalized black workers significantly
fell and wages were contained. The claim to human capital was protected at the expense of
1

See Grubb (1994), pp. 815–818.
See Hicks (1969), pp. 130–137; Lagerlöf (2009), p. 335 and Matouschek and Ramezzana (2007), pp.
364–366.
2

1

welfare potentially to be improved by better matching.3
However, some kinds of labor markets succeed in setting subtle equilibria where employers’ claim is perfected and employees’ mobility is encouraged, as seen in the labor markets
of professional sports.4 There, with quasi-rent belonging to employees, employees are motivated to follow a private governance mechanism setup by employers. Such a mechanism is toprivately run once a modern judicial system that does not allow a claim for an employee tosatisfy requirements for perfection comes into play.
The Japanese Civil Codes effective in 1898 generally did not allow a claim to a person
to be perfection. Furthermore, in the case of employment contract, it has been recognized
as lawful since the 1900s for an entrant (potential) employer to infringe on an incumbent(current) employer’s claim to his/her employee, in order to prompt competition in the labormarket and improve social welfare. The United States prohibited indenture contracts, underwhich the claim to an employee was perfection, as late as in 1917. In a sense, the Japanese
Civil Codes appear to have been more advanced than optimal in terms of economic efficiency.
To improve resource allocation, private institutions where the transfer of claim to an employee
satisfied requirements for perfection was desired to be formed. Indeed, these were formed andutilized in Japan from the 1900s to the early 1920s in the most productive industry then—thesilk-reeling.
Concurrent transitions of governance structure in the labor market in principle depended
on relative transaction costs, in the meaning suggested by Williamson (1985),5 between theprivate governance based on repeated transactions and third-party enforcement by the state
court. The development from private to public governance of trades is typically depicted as
the transition from a private institution when the market is thin and small to a public institution
when the market is thick and large market, because the state court system requires such a large
fixed cost that the volume of trades under the governance mechanism is to be accordingly large
and because the private institution depends on personally repeated interactions to hold a subgame perfect equilibrium strategy of honest trades.6 Development of the public institution istypically assumed to be monotonically increasing in market, and that of the private institution
is expected to be monotonically decreasing in market size.
The case of the Japanese silk-reeling industry is, however, different. In the early phase,manufacturers had recourse to the court for fulfillment of employment contracts when theiremployees were poached, while they privately settled such disputes with closely neighboring
manufacturers. The second phase was interactive coexistence of the court and private mechanisms. This phase can be separated into two sub-phases. First, they indirectly utilized thestate court. The state court did not allow a claim to an employee to satisfy requirements for
perfection, and hence, they would privately negotiate with each other and use the judgementby the court as a bargaining device for settlement. Next, when the industry expanded, they
established a private institution under which claims to employees of member manufacturers
were transferred as if they satisfied requirements for perfection within member manufacturers
3

See Naidu (2010), pp. 420–438.
See Kahn (2000), p.89.
5Williamson (1985), pp. 15–42
6
See Dixit (2004), pp. 1–14, 59–95; and Mulligan and Shleifer (2005), pp. 1451–1464
42and member manufacturers were not allowed to resort to the state court. Finally in the third
phase when the industry was large enough and matured, the private institution was dissolved
and the governance of the labor market was back to the state court.

2 Underlining framework
2.1 The model
Dixit (2004) and Matouschek and Ramezzana (2007) provided general models to describe
processes of endogenous changes in governance mechanisms. From a nation-wide viewpoint,formation of judicial system is also a part of endogenous process of institutional changes.
Their general approaches present useful perspectives to understand entire pictures of such institutional changes in the very long-term. Meanwhile, it might be a reality-based approachto assume that performance of the judicial system as na exogenous variable and examine potential interactions between the court and private mechanisms in order to disentangle picturesin the mid-term. Thus, we here narrowly focus on interactions between the exogenous state
court and endogenous choices of private mechanisms. Following Choi and Triantis (2008)
who argued for potential complementarity between litigation and relational contracting to selfenforce incomplete contracts, we here explicitly deal with complementarity between the court
and a private governance mechanism.
Non-monotonic trajectory of governance mechanism in Japanese experience is thought tobe not least affected by change in the degree of complementarity between the judicial systemand endogenous governance mechanisms. If they are not complements, a private mechanismor the judical system would dominate governance of trades. If they are complements, theywould co-exist, although the judicial system is not utilized on-the-equilibrium path. The judicial system off-the-equilibrium path as an outside option could reinforce the private governance mechanism on-the-equilibrium path.
First we consider a relational contracting setting without the state court. Suppose thata worker moves between firm A and firm B. When a trade between firm A and firm B issettled, that is, claims related to the movement of the worker are cleared, the trade costs s but
an improved matching provides benefit y s . We assume that the net social surplus y s − s isequally divided between A and B and both A and B have a common discount factor δ. At thesame time, a firm could poach a worker from the other and refuse a trade to compensate themovement. We assume that the pure poaching without trade brings the poaching firm withprofit π p .
Suppose that both A and B play a trigger strategy as follows:First period When a worker moves from one to the other, the firm to which the worker
has moved settles a trade with the other from which the worker moves and each player
receives (y s − s)/2.
From the second period If both players have always settled trades whenever a worker
moved, then both players agree to settle a trade when a worker moves from one to the3other. Otherwise, they never settle a trade.
Then, the incentive compatible constraint such that both players settle a trade when a worker
moves to him/her from the other isπp ≤δ(y s − s).
2(1 − δ)Thus, the least δ ∗ that satisfies the incentive compatible constraint is
δ∗ =

(1)

2π p
2π p + y s − sNext, consider an environment with the sate court. Suppose that the judicial service realizes benefit y c = dy s and costs c/2 to each party. Some relevant information may be observable but not verifiable and hence we assume that efficiency of governance by the court issmaller than the private governance such that d < 1. Assume a trigger strategy as follows:First period When a worker moves from one to the other, the firm to which the worker
has moved privately settles a trade with the other from which the worker moves andeach player receives (y s − s)/2.
From the second period If both players have always settled trades whenever a worker
moved, then both players agree to privately settle a trade when a worker moves from
one to the other. Otherwise, the firm from which a worker moves to the other always
has a recourse to the court for governance of trade whenever a worker moves.
Under this strategy, the incentive constraint not to deviate to the judicial service is,πp ≤δ [(y s − s) − (y c − c)].
2(1 − δ)The least δ ∗∗ that satisfies the incentive compatible constraint above isδ ∗∗ =(2)2π p.
2π p + (1 − d)y s + c − s

Motivated by Itoh (2010, 2011), we focus on the difference between the least discount factorsthat satisfy relevant incentive constraints,(3)δ ∗ − δ ∗∗ =2π p (c − dy s )≡ D.
(2π p + y s − s) [2π p + (1 − d)y s + c − s)]and interpret D > 0 as the degree of complementarity between the judicial system and theprivate governance mechanism.

4

2.2 Complementarity between the court and the private mechanism
Then, we have an implication about institutional choices.
Proposition 1. For the efficiency of the private governance mechanism and the court, we havefollowings.
a. If the benefit from the private governance is sufficiently large, then the judicial systemand the private governance mechanism are substitutes.
b. If the efficiency of the court is sufficiently low, the private governance mechanism basedon relational contracting and the court are complements.
c. As the efficiency of the court is improved, degree of the the complementarity between
two mechanisms decreases.
Proof.

a. If y s is sufficiently large, then D < 0.

b. If c is sufficiently large and/or d is sufficiently small, then D > 0.
c. Furthermore, ∂D/∂d < 0 and ∂D/∂c < 0.
This is a theoretical interpretation of the “shadow of the law” effects (Stevenson and
Wolfers (2006)).

2.3 Non-monotonic history of governance
From Proposition 1, we can predict a historically non-monotonic trajectory as follows:First phase When the labor market is small and hence trading community is small, theprivate governance and the state court are substitutes. Employers may rely on either aprivate mechanism or the state court. In practice, they are expected to rely on relational
contracting in trades with close neighbors where private governance efficiently works
and have recourse to the court when they deal with others.
Second phase When the trading community grows and the efficiency of the private
governance accordingly decreases but the state court is still weak, then employers sustain the private governance mechanism implicitly supported by the court. On-the-pathequilibrium, they do not have recourse to the court, which might make the private governance dominates. In fact, however, the equilibrium is stable due to the existence ofthe court.
Third phase Finally, when the trading community grows more and the state court improves its efficiency, employers dissolve the private governance mechanism and haverecourse to the court.

5

We believe that this narrative is applicable to transitory economies in a broad context.
About the Indian experience, Dixit (2004) assumed the Indian less reliable court as an example
of a substitute to private governance mechanisms.7. In fact, however, dense within-caste private governance mechanisms were rather enhanced from the late nineteenth century, when the
British controlled imperial government found the “Indian common law” from domestic customs, codified it, and implemented tit by the state court (Kanda (2008)). In France, chamberof commerce, once abandoned during the Revolution, was recovered from the mid-nineteenth
century and came to explicitly work as a complement to the centralized but weak judicial system by backing the regional commercial courts. This is why, for instance, we can trust in theregionally controlled quality of French wines (Lemercier (2003)) We ascertain below whether
this narrative is applicable to the experience in Japanese labor markets.

3 Governance of trade under the judicial system
3.1 Labor markets of the Japanese silk-reeling industry
The silk-reeling industry was a driving force of Japan’s industrialization. After 230 years
of isolating itself from the international market, Japan was forced to come back to the free
trade regime by western powers in 1859. The biggest export then was hand-reeled raw silk
to Europe. In the 1870s, when persistent international deflation that was to last till the 1890s
began, however, export of hand-reeled raw silk from Japan to France decreased while that from
China to France continued to increase. Japanese traditional silk-reeling lost its competitive
advantage over its Chinese counterpart.
In contrast to the stagnant European market, the US market began to grow from the late
1870s, and continued to expand in the 1880s. Moreover, during this period, power looms
prevailed rapidly over the American silk fabric industry. The American silk fabric industry
concentrated on factory-made fabrics for mass consumption, while the silk fabric industry
in Lyon maintained the feature of a luxury industry by using hand looms.8 The US modern
fabric industry exhibited a strong demand for machine-reeled raw silk, called filature raw silk.
Responding to this international shift in demand, the silk-reeling industry industry in Japan
modernized and drastically increased exports to the United States. Japan’s share of the US
raw silk market reached 50 percent by the end of the 1880s, 70 percent by the 1910s, and 80
percent by the 1920s (Nakabayashi (2006, forthcoming)). In addition, raw silk accounted forabout 30 percent of total export of Japan before the Second World War.
The development of the modern silk-reeling industry was led by silk reeling manufacturers
in Suwa county, Nagano prefecture of central Japan. In the county, the demand for female
workers, who operated the reeling machines, increased by over 10 percent annually from the1880s to the 1890s, thereby making labor market highly competitive and tight. Though thedemand on semi-macro level in the long-term was met by the inflow of workers from other7
8

See Dixit (2004), p. 3
See Cottereau (1997) and Federico (1997), pp. 61–78.

6

areas of central Japan,9 In the case of the silk-reeling industry in Japan, wages were higher, andconsequently, the sector absorbed workers of higher productivity from distant regions. Further,and within Suwa county, Nagano prefecture, the core district of the industry, wage payment
was extremely performance-based. Workers, most of whom were unmarried young women,
lived in dormitories at each firm with the room and board being paid for by the firm. The
monetary wage paid by the firm was completely piece-rate and was a tailored 4-dimensional
measure of performance, and the wage differential between the most productive and the least
productive was roughly 6,000–7,000 percent.10 However, the tightness of the labor market
caused a problem on the micro level in the short term wherein this counts dual employment
contracts, or movement of workers from a factory to another factory.
Because it was costly for a manufacturer to recruit workers from distant areas, manufacturers tried to prevent workers from moving by imposing large damages in employment contracts.
If the cost of recruiting had not been compensated at all, no manufacturer would have tried
to recruit any worker from distant areas and the supply of labor would have been less than
optimal; therefore, some compensation was necessary.
However, worker mobility would improve not only between-industry matching,11 but also
within-industry matching by offering very high-powered incentives.12. Hence, governance ofthe labor market to constrain mobility could have worked to deter potentially better matching.
Now that it would have been inefficient to cease movement, the deal for the movement ofworkers should have been conducted under some governance.13

3.2 Transformation of employment contracts
In the early 1890s, competition for workers among silk-reeling manufacturers was getting
fierce. In addition to increased wages and side payments,14 some problems in transaction also
emerged when entering into the contract or after the contract.
Every year, in January, manufacturers sent agents to distant areas to recruit workers. In
the Japanese silk-reeling industry, most workers were young females.15 The manufacturers
entered into contracts with young women in their late teens to their twenties, which were to beendorsed by their fathers or their husbands.16 In Suwa, the term of the employment contract
9

See Saito (1998), pp. 60–61.
See Nakabayashi (2003), pp 241–288 and Nakabayashi (2006), pp.200–203.
11
See Kim (1998), pp. 481–495.
12
See Booth and Frank (1999), pp. 449–461.
13
That is, governance of trade is to maintain the trade between players under asymmetric information where
they can cheat each other, in order to avoid the most inefficient equilibrium—ceasing the trade—such as “prisoners’ dilemma.” See Aoki (2001), pp. 60–61.
14
Most of these side payments were fabric, which were pleased by female workers.
15
The reason why silk-reeling firms stuck to young females instead of continuing to use the services ofmatured and skilled female workers is another question. See Hunter (2003).
16
The Civil Codes of Japan before the Second World War required the agreement of a minor’s guardian whena minor made a contract, and it required the agreement of the head of the household when a woman, even if she
was an adult, made a contract to “restrict” her—typically, for the woman to work in a factory and to live in adormitory.
10

7

was one year or less, and whole wages were paid in one lump sum at the end of the year.
Female workers lived in dormitories through the year and all living expenses including meals
were paid by employers. When a contract was made, agents made an advance on wages.
Thus, by cheating agents, the woman, her father, or her husband could receive advances frommultiple contracts. Contracts other than the one taken by her were not eventually fulfilled. A
local newspaper often reported situation as follows.
Among silk-reeling manufacturers, there are drones who poach female workers
trained by others into their factories and among female workers, there are cunning ones who enter into employment contracts with several silk-reeling manufacturers, and these not only inflict a loss honest silk-reeling manufacturers, butalso would result in lost control of female workers’ society and not least affect thesilk-reeling industry...17
In the Suwa and Ina regions, silk-reeling manufacturers recently offer money tosilk-reeling workers employed by others and try to poach them, or offer piece
good for kimono and other fringe benefits and induce them...18
Silk-reeling manufacturers are now sending their staffs and acutely competing
local silk-reeling manufacturers, as each other saying “we additionally pay somuch” to induce female silk-reeling workers, and so now it is the time workers
get flushed...19
In the Suwa region..., female silk-reeling workers fell in shortage, and most female workers should not be employed by factories that offer lower wages..., skilled
female workers receive offers many factories, and some offer several yen as bribes,
offer piece goods for kimono, send spies, reward recruiting agents, and sought any
possible measure, exactly as representatives compete...20
Even after workers came to the factory, they moved to another factory when offered ahigher wage. In such a case, the female worker usually waived the wage accumulated but
unpaid at this point, and therefore workers moved only in about the first third of the year.
By the means of the employment contract, the employer got a claim for the employee towork at the factory, and the employee got a claim for wages as a return service. The value ofthe employer’s claim was equal to the cost for recruiting the employee such as the cost incurred
17“Seishi kojo yosei no hituyo (Necessity of training of female silk-reeling workers),” Shinano Mainichi
Shimbun (The Shinano Daily Newspaper), April 27, 1892. Shinano is the old name of Nagano prefecture.
18“Seishi kojo yatoiire no seriai (Competition for employing female silk-reeling workers,” Shinano Mainichi
Shimbun (The Shinano Daily Newspaper), June 8, 1892. Wages paid to female workers were generally transferred
their parents after they came back home. Meanwhile, fringe benefits in kind such as piece goods were often
reserved by workers themselves.
19“Kojo no hippariai (Competition for female workers),” emphShinano Mainichi Shimbun (The Shinano
Daily Newspaper), June 23, 1892.
20“Kojono no hippari kyoso ha daigishi no kyoso ni nitari (Competition for female workers resembles competition of representatives), emphShinano Mainichi Shimbun (The Shinano Daily Newspaper), March 7, 1894.

8

in sending an agent and making an advance payment adding to the expected profit she would
have made. The tightness of the labor market and movement of workers made claim protection
necessary against infringement by other manufacturers under such dual employment contracts.
However, it was not unlawful for an employer to infringe on another employer’s claim
right to an employee by poaching, according to the Civil Codes of Japan, which held the ruleof civil liberties and free competition.21 Therefore, it was impossible for a manufacturer tohave recourse to the court to secure claim right to the employee against other prospective
employers.
Under such a condition, the simplest way to prevent other manufacturers from infringing
was to put a clause on damages on nonfulfillment in the employment contract. Indeed, since
the early 1890s, employment contracts came to typically include a damages clause. The clauseclaimed enough damages to prevent a worker from moving, which was equal to from half tofull of a year’s wage. By such a contract, manufacturers tried to deter the movement of workers
to other factories.
What was the effect of the damages clause? In fact, the Ward Court of Suwa actually
delivered a judgment to impose damages on the defendant (the employee) as claimed by theplaintiff (the employer) when the employee did not fulfill the contract and the employer filed acase. Therefore, the fulfillment of a contract could be enforced by the court through a lawsuit
for damages against an employee.
This, however, means that the court could cease trade between employers, or cease movement of employees between factories because enforcement of either the fulfillment of employment contract or the payment of damages virtually meant to force an employee to continue towork at the first factory. Even if a wage was higher at the factory to which moved than at
the factor from which the worker moved, the large amount of damages definitely cancelled
out the premium from the movement. Though claims gave each employer an option to obtainprotection by ceasing trade, it was not an efficient solution in terms of matching in a frictional
market. A better second-best solution would be allowing the workers to move to a more efficient factory with the claim of the ex-employer secured or compensated by an amount equal
to the recruitment cost. The governance under the court, indeed, evolved in such a direction.

3.3 Indirect governance of trades between employers by the court
In the mid-1890s, two kinds of lawsuits related to employment contracts were brought into theWard Court of Suwa: 1) lawsuits for the fulfillment of employment contract or damages and 2)
lawsuits for damages on the nonfulfillment of employment contract. Regarding the former, thecourt would deliver the judgment ordering the defendant (employee) to fulfill the employment
contract, or to pay the amount covering the damages, as required by the contract. On the other
hand, for the latter, the court would simply order the defendant to pay the amount covering
the damages. Thus, while lawsuits for the fulfillment of employment contract or damages still21

See Ishizaka (1908a, 1908a, 1908b, 1908c); Suehiro (1914), p. 44; and Wagatsuma (1940), pp. 13–14, 79–
80. Though infringement on a claim came to be recognized as wrongful in some cases after the 1910s, affectedby the German law, infringement of a claim on the employment contract has not been recognized as wrongful,according to the rule of individual liberties and free competition, up until now. See Yoshida (1991).

9

had recourse to the court for the enforcement of the fulfillment, lawsuits for damages on the
nonfulfillment of employment contract were just for damages, taking the nonfulfillment of theemployment contract for granted.
In both cases, the court officially governed trades between an employer and an employee.
However, if the court had governed only transactions between an employer and an employee
and consequently the employee would have been forced to pay the damages for herself amounting to half to full of her annual income, then the effect of both kinds of lawsuits would havebeen equivalent: ceasing movement and fulfillment of the employment contract. Because no
premium could be earned from a movement and a worker from a poor peasant family could not
pay the amount equal to the whole yearly wage anyway, only choice would be the fulfillmentof employment contract.
Nevertheless, lawsuits related to employment contract had changed by the end of the
1890s. After 1900, lawsuits for the fulfillment of employment contract or damages disappeared and all related issues turned into lawsuits for damages on the nonfulfillment of employment contract (Table 1). This indicates that there was some change in governance by the
court; Actually, the court virtually began to govern trades between employers.
Among transactions governed by the court as cases officially between an employer andan employee, there were two types of real transactions: actual transactions between an employer and an employee—when a worker would not fulfill the contract because of illness
and consequent withdrawal from the labor market—and virtual transactions between relevant
employers—when a worker moved to another factory.
What a kind of judgment did the court deliver in the first case? The court dismissed
the claim by the plaintiff (an employer), because the Civil Code recognized the immediatecancelation of the employment contract for an “unavoidable reason,” which typically was the
sickness of an employee.22 Therefore, given that employers typically lost in such cases, we
can infer that employers usually sued employees when they moved to another factory.
Then, who did cover the damages equivalent to the whole yearly wage? If the manufacturer
to whom the worker moved did not pay the damages or did not negotiate with the ex-employer,
22

Indeed, in a case of nonfulfillment caused by sickness of a worker, the court denied nonfulfillment of thecontract and recognized the termination of the contract, and dismissed the claim of the manufacturer, which
followed from Clause 628 of the Civil Codes. Case of damages on nonfulfillment of employment contract /Sehei
Hayashi (plaintiff, manufacturer) vs. Kimi Tanaka (defendant worker) / Judge: Naoya Kawachi / Court: The
Ward Court of Suwa / Date: 11/21/1900 / Result: Loss of the plaintiff / The text: Dismissal of the claim /Responsibility for the cost of lawlawsuit: plaintiff. In this case, the defendant did not refer Clause 628 when
she pleaded, probably because she did not know the effect of the clause and was too poor to hire a lawyer.
Nevertheless, the Judge dismissed the claim of the plaintiff, which indicates the strong intent of the court todeliver a loss to the plaintiff. The court might recognize the real transaction between employers in usual cases,in which employees did not need to pay the amount covering damages; therefore the court might be tending todismiss the claim of the plaintiff in this case, which actually claimed for damages against the defendant. Thus,
the court probably came to recognize the transaction between employers in the case of the movement of workers,
and came to prompt such movement according to the “freedom of business.” That is, the court came to indirectly
govern the trade among manufacturers. See, Nakabayashi (2001), pp. 113–115, and Nakabayashi (2003), pp.
297–298. For Clause 628, see Ume (1897), pp. 686–687; and Matsunami, Niho and Niida (1903), pp. 1210–
1214. The Civil Code of Japan was drafted by a French scholar, Gustave Emile Boissonade, was promulgated in1896 and was in force from 1898.

10

no worker would have moved and no lawsuit would have been brought. Thus, it is natural topresume that the manufacturer to whom the worker moved negotiated with the ex-employer.
If a worker moved to another factory that offered a higher wage, it would have been difficult for the ex-employer to get the worker back and it would not have been efficient as an offer
of higher wage should inflect a better matching. What the manufacturer could do was to claim
for damages and then negotiate with the new employer. Indeed lawsuits for the fulfillmentof employment contract or damages disappeared by the end of the 1890s. The court beganaffecting the negotiation between employers.
Moreover, only if such a situation is assumed, some cases can be understood. In quite manycases, defendants (employees) lost damages lawsuits by default; at the same time, in somecases, plaintiffs (employers) also lost by default. Such cases become understandable only if
it is supposed that the relevant manufacturers settled trades out of the court. Thus, damages
were virtually used as a chip for bargaining by the manufacturer from whom the worker had
moved. As for the deal, the recruiting cost or some part of damages could be compensated by
the renunciation of the unpaid wage of the worker. It was observed by contemporary officials
in the early 1900s that most of poaching occurred before the mid August because movement toanother factory implied workers’ waiver of unpaid wages.23 In other words, employers fromwhom workers moved were usually compensated by unpaid wages.
The change in type of lawsuits from the mid-1890s to the early 1900s reflected the change
in trades: from between an employer and an employee to between employers. Moreover, inthe 1900s, the court seemed to recognize the real transaction between manufacturers being
held in parallel with the official transaction between a manufacturer and a worker in the court.
The court did not protect an employer’s claim if it was not thought that the employee waspoached. For example, in the case of a layoff, the court recognized it as the cancelation of
the employment contract by the employer, and dismissed any claim of the employer after thelayoff.24
Therefore, we can consider that the judicial system indirectly governed trades between
employers in the labor market (Figure 1). Let C denote a deal in the court that follows
the Code of Civil Procedure, and S denote a deal outside of the court. Then the process ofnegotiation under this indirect governance could be depicted as follows:25(S − 1) When worker W moves from manufacturer MA to manufacturer MB and does not
23

Noshomusho Shokokyoku Komuka Kojochosakakari (Factory Surveillance Section, Department of Commerce and Manufacturing, Ministry of Agriculture and Commerce), Kiito Shokko Jijo (Conditions of Workers in
the Silk-reeling industry), Tokyo: Ministry of Agriculture and Commerce, 1903 (Edited by Takao Tuchiya andreprinted Tokyo: Shinkigensha, 1976), p. 180.
24
Case of damages on nonfulfillment of employment contract / Katsuhei Ito (plaintiff, manufacturer) vs.
Kiroku Aikawa (defendant, father of the worker) / Judge: Yoshiyuki Ariizumi / the court: The Ward Court of
Suwa / Date: 10/15/1904 / Result: Loss of the plaintiff / The text: Dismissal of the claim / Responsibility forthe cost of lawsuit: plaintiff. See Nakabayashi (2001), pp. 117–120 and Nakabayashi (2003), pp. 299–302. The
Constitutional Law of Japanese Empire was promulgated in 1889, and was in force from 1890. It secured theproperty right, which meant it also secured free competition. In the 1900s, this rule came to be indeed understoodby government officials and judges.
25
See Nakabayashi (2001), pp. 120–123 and Nakabayashi (2003), pp. 302–304.

11

fulfill the employment contract with MA , MA investigates where the factory of MB is
and requires MB to send W back to MA or to compensate the value of MA ’s claim.
(C − 1) MA has recourse to the Ward Court of Suwa for ordering W (or the head of her family) to pay the amount to cover damages on nonfulfillment of the employment contract,following which the court makes a decision to order W to pay the same.
(S − 2) MA and MB negotiate for settlement, by balancing out a part or all of the damages
using the unpaid wage of W held by MA , or by sending W back to MA . If they arrive
at a settlement on this stage, the negotiation finishes. If not, the process goes to the nextstage.
(C − 2) W (actually MB ) files an objection against the decision within 14 days after (C − 1),and then the lawsuit begins.
(S − 3) If they reach a settlement after (C − 2), the negotiation finishes. MA does not require
the court to set a day of oral proceedings, which means the discontinuance of the lawsuit,or MA is absent on the day for the oral proceedings and then loses by default; his claim
is dismissed by the court. If they do not reach any settlement, they go to the next stage.
(C − 3) MA attends and W does not attend the oral proceedings, and then MA wins by default; the court delivers a judgment ordering W to pay amount to cover the damages.
(S − 4) If they reach a settlement, the negotiation finishes. If not, the process goes ahead.
(C − 4) W (MB ) files an objection against the judgment by default within 14 days after(C − 3), and then (C − 3) is repeated. The judgment on this stage is an ultimatum to
MB , because W (MB ) cannot make another objection against the judgment by default.
(S − 5) They reach a settlement. The negotiation is done.
The court systematically governed trades. The primary role of the governance was adjustment of threat point in the Nash bargaining between both manufacturers. A possible enforcement of payment of damages increased disagreement point of MA , and by doing so moved
Nash bargaining solution to the direction favoring MA . If this adjusted a possible solution
such that it satsfies satisfies MA ’, participation constraint, MA comes back to the private settlement with MB and the trade could improve efficiency. Thus, the judicial process supported
the private governance mechanism and the public and private mechanisms here were complements in the sense of Proposition 1. These real practices were a little more complicated thanthe one Proposition 1 assumed. To inquire the reason, recall that we assumed discount factors were common to any player. In practice, they could depend on each market participant.
To average employers to whom workers moved, possibility of lawsuit was sufficient to makethem accept private settlement. On-the-equilibrium path, no real lawsuit happened. However,some participants might have smaller discount factors. In the real legal procedure describedabove, the court prepared technically four stages of legal costs; an order, a lawsuit at the ward
court, a lawsuit at the local court, and an appeal to the court of appeal or the supreme court,
12where the cumulative legal cost discontinuously jumped. In the case period, no case was sent
to the local court, located at a distant city. Given the accumulated legal cost and additionaltransportation, a suit at the local court was off-the-equilibrium path to discount factor level ofany market participant. By changing the transaction cost c, the court could adjust to different
δ and make them be back to private settlement.
Indeed, the number of lawsuits was not large given the number of workers. In 1900,
there were 142 silk-reeling factories. Basins equipped, on each of which a reeling worker
operated, were 10,963.26 For over 10,000 employees, the number of lawsuits in Table 1 looks
rather small though it was not negligible. Real lawsuits seems to have occurred if both parties
failed to communicate relevant information and/or the manufacturer from whom a worker
moved had a discount factor smaller than the equilibrium strategy required. In this sense,
we could assume that a lawsuit was usually off-the-equilibrium path. At the same time, we
can naturally presume that this “shadow” of the court off-the-equilibrium path could affectbargaining powers favoring for employers from whom workers moved (Stevenson and Wolfers(2006)).
This governance, however, was costly. The cost of this standard process was about 7 yensto each party excluding a fee paid for a lawyer and damages.27 In addition, it took a longtime until they reached a settlement. Moreover, MA had to search W by himself and MB may
have to pay a part of damages. Taken into account that the cost to recruit a worker without
an advance was about 0.5 yen and an advance was about 1 to 2 yen in the late 1890s,28 thetransaction cost under indirect governance by the court seems large.
One of the reasons of the high cost under this governance was the indirectness itself. If thecourt had directly governed the claim between MA and MB , some part of the transaction cost
could have been saved. Such direct governance by the court, however, was impossible under
the Japanese Civil Codes that did not allow the claim to an employee to be perfection.29 If the
manufacturers wanted to lower the transaction cost, they had to form a private institution forthe purpose.

4 Private governance in the shadow of the court
4.1 Formation of a worker registration system
Indeed, major manufacturers began to form an informal organization to settle such disputes
in the mid-1890s.30 They recognized their claims over the workers they employed, and theynegotiated with each other when workers moved between them. This organization, however,restricted its membership to a small group of neighboring manufacturers, and did not emerge
as an institution to govern trades in the whole labor market of Suwa county.
26

Nakabayashi (2006), p. 189.
See Nakabayashi (2003), pp. 303–304. Respective parties had to pay this cost to the court according to theCode of Civil Procedure.
28
See Nakabayashi (1999), p. 16.
29
See Nakabayashi (2001), p. 125 and Nakabayashi (2003), pp. 305–306.
30
See Hiramoto (1985), pp. 3–4.
27

13

A larger body including all manufacturers in Suwa county, The League of Silk-Reeling
Manufacturers of Suwa (Suwa Seishi Domei) was organized in 1900 to realize more efficient
governance. First, the league prohibited its members from filing damage lawsuits against aworker who moved to another member factory. Obviously, the most important objective of theleague was to diminish the transaction cost under indirect governance by the court.31
In turn, in 1903, the league established a worker registration system from 1903. Under
the worker registration system, the league obliged its member manufacturers to register all
employees with the league secretariat while allowing each member employer the exclusive“right” to employ registered workers. This exclusive right was effective against any memberof the league. That is, the right was secured as a kind of “real right” that satisfies requirementsfor perfection, different from just a claim secured under the modern judicial system that was
not always effective against a bystander. If the members did not register their employees,
or unfairly registered them under false names, they were severely punished, and they losttheir “rights.”. Under this system, the head office of the league could recognize all workers
employed by its member manufacturers and could identify dual employment contracts.32
Most previous works assumed that the purpose and effect of this registration system wasto restrict the movement of workers between factories, and that the league was a cartel ofmanufacturers to suppress turnover.33 These works literally interpreted the expressions of anarticle in the “Rules of the League” to secure the rights. The first clause of the rule is,
The First Article Female workers who were employed by other members in the summer
season of the last year should not be employed through the next year. In this regard, fora worker who were employed by more than one members, the member who employed
her for more days has the right of employment.34
This article has been interpreted as it literally prohibited employment of a worker hiredby another member manufacturer within the previous and current years. However, if such aninterpretation is correct, the provisory clause from “in this regard” is redundant. Meanwhile,a following article mentioned above stipulated payment of a contract money and advancement
at double contracting.
The Eleventh Article Between members of this league, a member should not sue against amember relating to an employment contract of a female worker. In this regard, contract
money and advancement should be paid from the member who holds the right to theother member.
31

See Nakabayashi (2000); and Nakabayashi (2003), pp. 306–308.
See Nakabayashi (2001) and Nakabayashi (2003), pp. 309–310.
33
See Iwamoto (1970); Ishii (1972), pp. 277–290; Tojo (1990); Tsurumi (1990), pp. 74–75 and Kambayashi(2007), pp. 48–53.
34“Domei Kiyaku Sho (The Rules of the League), effective in 1902,” December 1901. Included in “Seishikumiai Kankei Kirokurui (Records of silk-reeling association),” held by Okaya Shiritsu Okaya Sanshi Hakubutsukan (Okaya Silk Museum, City of Okaya) and indexed in Okaya Sanshi Hakubutsukan Shiryo Mokuroku(Catalog of Documents and Records of Okaya Silk Museum), No.1.
32

14

Thus, articles of the rule strictly protected the right of a member to employ a specificworker, but did not prohibit trades of the right. Or, the rule was open for trades of the right.
Indeed, a regime to enable such trades was established.
It is true that, meanwhile, at the time when the internal arbitrage began, no-lawsuit against
a worker hired by a member manufacturer was not necessarily stable equilibrium strategy. For
trades of “right,” the league was supposed to supplant the state court, and indeed, the league
recorded every case for which it implemented arbitrage from 1903. In the second case of 1903,
a settlement was hard to reach, and the “plaintiff” manufacturer indicated a possible lawsuit
against the “defendant” manufacturer if his claim was not protected. Then the case was settled
such that the “defendant” compensated the advance paid by the “plaintiff” manufacturer paid
to the worker under dispute who moved to the “defendant” manufacturer.35 The “defendant”
was Kanetaro Katakura, the largest manufacturer not only in the region, but also all overJapan. This case reminded largest member manufacturers of the reservation value of smaller
members to be compensated by larger members. After this case, indication of lawsuit at thestate court disappeared in the records of the league.

4.2 Private governance of trade supported by the court
Major manufacturers had little need to restrain the movement of workers since they could
entice them with the promise of high wages. In fact, the most of workers’ turnover was a resultof enticement by the major manufacturers who dominated the league. Moreover, large partof workers’ movement was between major manufacturers and was balanced between them,and hence, movement mainly was driven by adjustment of mismatching. Indeed the league
did not punish those major manufacturers. Consequently, it is estimated that even after theestablishment of the worker registration system, as many as 50 percent of the workers changed
employers in any given year.36
The worker registration system functioned not to restrict the movement of workers but
rather to decrease the transaction cost incurred when workers moved. When worker W moved
from manufacturer MA to manufacturer MB , the head office of the league recognized a double
booking of the right to employ W . Responding to the request by MA , the head office began toarbitrate between MA and MB . In most of the cases both parties reached settlement smoothly,
and in many cases, especially in cases between major manufacturers, they agreed to “lend”
the right, to “cede” the right, or to “clear” the right using the right lent by MA to MB before.
Thus, the movement of the worker was dealt with by having the employer lay a claim to
the right of hiring registered workers first, and by trading the claims. Even when multiple
workers moved at the same time, only a part of them was sent back to MA in some cases(Table 2). In particular, for major manufacturers among whom net movement of workers wasbalanced, obedience to governance by the league and renouncement of lawsuits could be astable equilibrium.
35

Case 2, 1903, in “Miscellaneous records (Sho kiroku),” The Office of the League of Silk Reeling Manufacturers, assembled in Tohoku University, ed (1970), p. 16.
36
See Ishii (1972), p. 271.

15

The primary characteristic of the system was that the claim to an employee was protectedagainst infringement by any bystander and could be traded, exactly as it was under indirectgovernance by the state court, but at a much smaller cost. Protection of the claim and facilitation of workers’ mobility was at least one of the better-second best equilibria. Such a practice
could not be directly introduced into the judicial system, because the modern civil codes do
not allow real rights to be established over human beings.37 However, this does not mean thatthe worker registration system existed irrespective of the state court. Possible lawsuit at the
court made the registration system a stable equilibrium by suppressing the payoff of the outside option. Deviation from the league implied that employees enticed would be sued in the
court by ex-employers, thereby ensuring a larger transaction cost.
Rigorous governance by the state court first made the claim to an employee tradable byits indirect governance. By this institutional invention, the worst equilibrium, no trade, wasavoided. Then, after the registration system was established, the state court made the private
institution of direct governance stable by ensuring a heavier transaction cost as predicted by
Proposition 2. The private institution and the state court were complements, and without thelatter, the former would have found it less stable.

4.3 Abolition of the registration system
The registration system worked well by the end of the boom during the First World War, butbecame less functional after the war and was finally abolished in 1926. A reason for theabolition was the political pressure from labor movement, the prefecture government, local
newspapers, and the police department, all of which recognized the practice of trading theright to hire a female worker immoral. However, these factors only partially reflected changes
that had progressed in depth.
Possible players in interest who could be against the system and call for support fromoutsiders were of two kinds: small- and medium-scale manufacturers, and workers. Fromthe 1900s to the 1920s, concentration of production capacity proceeded and the gap between
large firms and small firms expanded. This resulted in the imbalance of workers’ movement
between large firms and small firms, with the former increasing the net absorption. The larger
the gap, the weaker the incentive for the small firms to follow the system. Further, a particularfeature of the system was that the rights could be traded as if they were real rights and thatthe trade need not necessarily coincide with the workers’ decisions. If wages paid to workers
in Suwa were sufficiently higher than those paid outside, that is, the premium for following
the system was sufficiently high, workers would willingly follow the institution, but would
not otherwise. In the 1900s when the productivity of silk-reeling manufacturers in Suwa in
general was much higher than the manufacturers in other regions and wages were accordingly
much higher, workers had enough incentives to follow the setup. However, in the 1920s, whilea few leading companies still offered good wages, wage levels in Suwa on average were nothigher than those in other areas. This was a factor that motivated workers to call for support
from outsiders.
37

See Wagatsuma (1983), pp. 1–9.

16

Even more essentially, as largest manufactures in Suwa grew the national leading companies, more of their registered employee came to work outside of Suwa county and even out
of Nagano prefecture (Table 3). The double contracting ratio that are movement of workers
recognized and handled by the office of the league, k/j in Table 3, hit the historical highest
4 percent in 1912 and then declined to 2 to 3 percent. It does not seem to imply that double
contracting really declined from 1912, as we see that the ratio of registered basins outside of
Suwa county, (g + h)/i in Table 3, increased from 39 percent in 1912 to 54 percent in 1920
and 59 percent in 1925. Decreasing ratio of double registration recognized by the league appears to just mean that the private mechanism did not reach geographically distant trades ofworkers anymore. In the model above, y s seems to have declined and s to have increased fromthe 1910s.
In addition, while college-level law education drastically expanded due to encouraging
policies of the government in the 1920s. In Japan, college graduates specialized in law were1,431 in 1920 but it jumped up to 12,481 in 1930. While the number of judges was stablearound 1,200 from the 1890 to the 1920s, private attorneys increased from 1,590 in 1900 and
2,008 in 1910 to 3,082 in 1920 and 6,599 in 1930. Accordingly, new civil cases filed that were104,739 in 1900 and 99,900 in 1910 increased to 129,152 in 1920 and 249,980 in 1930. The
public judicial system as a whole came to take a much larger role in the 1920 in the Japanesesociety as a whole.38 Enhanced performance of the judicial system, which is captured bylarger s and smaller c in the model above, predicts a change into the phase where the court
and private mechanisms were substitutes. What happened is consistent to such a prediction.

5 Tentative conclusion and extension to empirical tests
In the labor market of the Japanese silk-reeling industry in the late 19th and the early 20th
centuries, three mechanisms of governance were feasible. First, the state court could exactly
deter turnover and protect am employer’s claim by enforcing the employment contract as
written. This governance mechanism indeed worked in the 1890s, but the strict enforcementof the employment contract and the suppression of labor mobility were not desirable to thesilk-reeling industry in Suwa county as a whole because it might have deterred potentiallybetter match.
Following this, silk-reeling manufacturers moved to a negotiation mechanism that would
run parallel to the lawsuit in the state court, and the court too implicitly recognized the negotiation outside the court. This indirect governance increased the disagreement point of theex-employer, the manufacturer from whom the worker moved, and moved the bargaining solution in a direction favoring the ex-employer, and by doing so, had the ex-employer participate
in the trade to realize a more efficient allocation of labor resource. A shortcoming of thisindirect governance was the high cost. In theory, a private governance mechanism to directly
govern trades between employers could save on the transaction cost, and the manufacturers
did indeed move in this direction.
38

Haley (1991), pp. 96–104.

17

Under the worker registration system run by the League of Silk-Reeling Manufacturers ofSuwa, all workers employed by member manufacturers were registered and trades of claim
right to each employee were governed under the system. Member manufacturers were strictly
prohibited to sue an employee poached by another member manufacturer in the state court. In
this sense, an objective of the system was to completely separate the governance of the labormarket from the state court, and to save on the transaction cost. Furthermore, cumulative
stages of the legal costs from an order, judgement given by the ward court, and possibilityof a court to the local court, could adjust to potentially different discount factors of relevant
manufacturers to whom workers moved and satisfied their participant constraint to be back to
the private settlement.
However, the stability of private governance was supported by the existence of the state
court as an outside option. Once a member manufacturer deviated from the system, workers
he poached would be sued in the state court, and the trading cost would increase by much.
This condition provided member manufacturers—particularly, medium-scale ones—with an
incentive to respect ex-employers’ claims. Furthermore, if wanted, an ex-employer could
choose “no trade” by having recourse to the court to enforce the payment of damages for the
nonfulfillment of employment contract. This condition gave large manufacturers an incentive
to respect ex-employers’ claims.
The private institution, which seems to have worked well, were dissolved in the mid-1920s.
A peculiar aspect of our example is in that the transition was not monotonic. Trades were firstgoverned by the state court, then the court-led private governance and the private governancesupported by the court, and finally by the sate court again, as we predict from Proposition
1. From Proposition 1, we interpret the middle phases that the court-led first and then theprivate-mechanism-led second as complementarity regimes between the court and the private
mechanism. Further, this non-monotonic transition is not unique to the Japanese silk-reelingindustry. After the modern state system came into being in the 19 century, similar experiences
seem to have been repeated particularly in growing and profitable sectors.
The silk-reeling industry in Suwa went through three phases: governance by the state
court, complementary governance by the court and the private institution where the former
led and then the latter led, and the governance by the state court. The sector saw the highest
productivity and wages in the first two phases. At the same time, the productivity gap among
the manufacturers was smaller in the first two phases as compared in the third phase. Governance by the private mechanism in the second phases appears to require the wages higher thanoutside options and less concentrated organization of the industry. Then, what was the reason
why manufacturers relied on the state court in the first phase?
The private governance mechanism and the court can be complementary if surplus fromtrades between players is sufficiently large and if neither private governance nor the court isdominantly efficient. Under such a condition, the private governance can be supported by the
court as a costly outside option off-the-equilibrium path, as Proposition 1 predicts. Further,
this transitory complementarity provides a non-monotonic trajectory of historical development
as shown in our case.
In this version, we have only descriptively introduced internal arbitrage under the private
governance by the League of Silk-Reeling Manufacturers. However, the number of cases
18internally settled by the league is sufficient to build a data set to test how the equilibrium ofinternal settlement was stable, and by doing so, to empirically examine whether our theoreticalprediction is relevant. Thus, it is what we are working on to build such a data base. The next
version of this paper will include such an empirical inquiry.

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, Shintei Bukkenho (Minpo Kogi II) (The Law of Real Rights: Lecture on the Civil Codes,
Volume 2, New Edition), Tokyo: Iwanami Shoten, 1983.
Williamson, Oliver E., The Economic Institutions of Capitalism: Firms, Markets, Relational
Contracting, New York: The Free Press, 1985.
Yoshida, Kunihiko, Siaken Shingai Ron Saiko (Rethinking of the Infringement of Claim),
Tokyo: Yuhikaku, 1991.

22

Figure 1 The indirect governance of trade between manufacturers when a worker moves

Official governance of transaction between MA and W
Real transaction between MA and MB
Damages paid by MB through W

The District Court of Suwa
Suit for Damages on

Judgment ordering W to pay

Nonfulfillment of Contract

the amount covering the Damages

Negotiation between MA and MB
Manufacturer MB

Manufacturer MA

Premium
Wage
Employment Contract

Employment Contract
Unpaid wages

Nonfulfillment of contract by W

Worker W

Worker W
W moves to MB from MA†Real amount paid by MB through W to cover damages is determined by the negotiation between MA and MB.
could be compensated with the unpaid Wage of W held by MA.

It

Table 1 Civil lawsuits related to employment contracts brought by silk reeling manufacturers
12/1892- 12/1899- 01/190106/1896 12/1900 12/1901
Lawsuits for fulfillment of employment contract or damages
800
Lawsuits for damages on nonfulfillment of employment contract
5
23
20
Lawsuits for payback of the cost of training in cases
002
Source : "KamisuwaS"K i
kku saibansho
ib h minji
i ji H
Hanketsu
k t genpon ttsuzuri"i" (J(Judgmentsdt off Ci
Civil
il C
Cases, ddeliveredlid bby
the District Court of Suwa).
Notes : All related judgments delivered from December 1892 to December 1901, and kept by the Branchin Suwa of the District Court of Nagano, are covered. Lawsuits for payback of the cost of training was
brought when a young (about 15-year old) worker did not fulfill the apprentice employment contract.

Table 2 Governance of Trade between manufacturers by the League of Silk Reeling Manufacturers in
Suwa: 1904.
Arbitrations of disputes on the trade of the "right" to employ a worker
Settlements
Clear of "rights" Rent of "rights" Cession of "rights" Send back workers
All
Partly
64
63
10
5
5
13
5
Source : Suwa sehisi domei jimusho (Secretary of the League of Silk Reeling Manufacturers in Suwa),"Koshoroku" (The record of negotiations).

Table 3 Scale and activities of the worker registration system.
Numberofyear
membermanufacturers

Number of member factories
Suwa
countyOther
Other
counties
prefecturesin Nagano

Number of member factories' basins
Total

Suwa
countyOther
Other
counties
prefecturesin Nagano

Total

NumberNumberofof double
registeredregistration
workers

1903
31
47
2
7
56
7,127
718
968
8,813
4,125
1904
31
63
2
9
74
8,229
853
1,569
10,651
4,369
1905
31
58
4
13
75
8,550
1,258
2,591
12,399
7,801
96
1906
37
64
3
16
83
9,616
1,281
3,851
14,748
12,222
157
1907
42
75
4
21
100
11,1891,385
5,022
17,596
13,964
253
1908
43
71
5
22
98
12,236
1,999
6,068
20,303
17,874
186
1909
46
75
6
25
106
13,322
2,230
6,525
22,077
19,372
377
1910
80
114
10
29
153
15,8262,600
7,624
26,05023,433
585
1911
89
135
8
32
175
18,4662,758
9,783
31,00728,461
777
1912
104
157
9
31
197
22,2093,166
10,91136,28632,056
1,177
1913
113
169
10
36
215
23,914
3,282
12,431
39,62732,707
726
1914
127
186
9
43
238
26,2353,361
14,607
44,20338,295
804
1915
130
196
8
42
246
26,803
3,259
15,30045,36232,444
554
1916
137
207
9
41
257
28,6003,262
17,53749,39945,046
933
1917
147
220
8
58
286
39,592
3,399
24,357
67,34869,365
1,683
1918
147
218
8
55
281
33,614
3,489
27,02564,12849,992
1,466
1919
149
214
19
59
292
33,641
4,762
29,02367,426
51,173
1,457
1920
138
204
21
67
292
34,417
7,215
32,85674,48866,385
1,675
1921
124
182
21
72
275
33,737
7,206
35,06676,00948,001
967
1922
121
185
20
79
284
33,045
6,932
36,84876,82558,511
1,709
1923
110
172
20
74
266
32,134
6,968
35,43974,541
51,362
1,520
1924
109
173
19
76
268
31,896
6,857
37,32976,082
46,081
1,163
1925
120
169
19
75
263
31,978
7,016
38,29277,28644,752
852
1926
125
183
19
77
279
32,176
6,683
38,61677,47520,758155
Source : Village of Hirano, History of the Village of Hirano, Suwa County, Nagano: Municipal Office of Village of Hirano, 1932, pp.
254-255
Note : Numbers for 1926 are those until the end of February, when the registration system ceased to work.