German colonists and industrialization in late imperial Russia: the role of human capital

In 1763, the Russian Empress Catherine the Great issued a law that welcomed foreign citizens to establish settlements in far-distant territories of the Russian Empire with a lack of infrastructure and qualified labor force. The  document  offered  a  substantive package  of  privileges  including  tax  exemption  and  religious  freedom. As a result, thousands of colonists - ethnic Germans came to Russia and were settled mostly in the Volga region and the territories of modern Southern Ukraine and Moldova. The paper evaluates the economic consequences of German colonization using Imperial Census of1897, Enterprise Censuses of 1895 and newly constructed data set based on statistical records and archival sources for the period of 1763-1914. My results reveal that German colonists in Russia were associated with a higher level of industrial development at the end  of  the  nineteenth  century:   higher  proportion  of  workers  employed  in  industrial sector, productivity gain and a higher probability of the new technologies adoption for the firms. I show that German communities transferred to a secular education system that  provided  the  basis  for  their  positive  effect  on  industrialization. This  effect  was mostly driven by Protestants as they diminished the role of clergymen in teaching and push  schooling  modernization  to  a  larger  extent  than  other  communities,  including German-Catholic colonists. Difference-in-difference estimates suggest the larger effect of German settlers on the later phase of industrialization characterized by the surge of human capital-intensive industries.