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