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Economic Consequences of the U.S. Convict Labor System

Author

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  • Michael Poyker

    (Columbia University)

Abstract

Prisoners employed in manufacturing constitute 4.2% of total U.S. manufacturing employment in 2005; they produce cheap goods, creating labor demand shock. I study the economic externalities of convict labor on local labor markets and firms. Using newly collected panel data on U.S. prisons and convict-labor camps from 1886 to 1940, I calculate each county`s exposure to prisons. I exploit quasi-random variation in county`s exposure to capacities of pre-convict-labor prisons as an instrument. I find that competition from cheap prison-made goods led to higher unemployment, lower labor-force participation, and reduced wages (particularly for women) in counties that housed competing manufacturing industries. The introduction of convict labor accounts for 0.5 percentage-point slower annual growth in manufacturing wages during 1880– 1900. At the same time, affected industries had to innovate away from the competition and thus had higher patenting rates. I also document that technological changes in affected industries were capital-biased.

Suggested Citation

  • Michael Poyker, 2019. "Economic Consequences of the U.S. Convict Labor System," Working Papers Series 91, Institute for New Economic Thinking.
    • Handle: RePEc:thk:wpaper:91
    DOI: 10.2139/ssrn.3347300
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    Cited by:

    1. Marchingiglio, Riccardo & Poyker, Michael, 2019. "The Employment Effects of Gender-Specific Minimum Wage," Working Papers 290, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.

    More about this item

    Keywords

    Convict Labor; Labor Competition; Patenting; Technology Adoption;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J47 - Labor and Demographic Economics - - Particular Labor Markets - - - Coercive Labor Markets
    • N31 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: Pre-1913
    • N32 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: 1913-
    • N71 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: Pre-1913
    • N72 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: 1913-
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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