Economic Consequences of the U.S. Convict Labor System

90 Pages Posted: 14 Mar 2019

See all articles by Michael Poyker

Michael Poyker

University of Nottingham, School of Economics

Date Written: February 1, 2019

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.

Keywords: Convict Labor, Labor Competition, Patenting, Technology Adoption

JEL Classification: J23, J31, J47, N31, N32, N71, N72, O33, R12

Suggested Citation

Poyker, Mikhail, Economic Consequences of the U.S. Convict Labor System (February 1, 2019). Institute for New Economic Thinking Working Paper Series No. 91 (2019), Columbia Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3347300 or http://dx.doi.org/10.2139/ssrn.3347300

Mikhail Poyker (Contact Author)

University of Nottingham, School of Economics ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

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