Economic Consequences of the U.S. Convict Labor System

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

Why Aren’t People Leaving Janesville? Industry Persistence, Trade Shocks, and Mobility

“…There are good reasons to think of the instrument as exogenous to either out-migration rates or other omitted variables in our main specification above: First, there is the historical practice of locating prisons solely based on demographic determinants. Second, as shown in Poyker (2018), the exposure to pre-convict-labor prison capacity is uncorrelated with pre-1870 trends in manufacturing wages, either overall or in specific industries. We construct the instrument -exposure to old prisons -as follows:…”

“…We assume linear decay of the exposure to prison capacities; i.e., σ = 1. Trade costs c,k are from Donaldson and Hornbeck (2016) and are measured using the calculated county-to-county lowest-cost freight transportation routes in 1870, and old prison capacity k comes from Poyker (2018). For the SEA-and CZ-level specifications, we aggregate it to the corresponding levels.…”

“…The main concern in our analysis is reverse causality, as industries may be more likely to persist in locations with low out-migration rates, since firms can keep wages lower. We address this concern by using a major labor demand shock (comparable in magnitude to the contemporaneous "China Shock") in the United States that stemmed from the introduction of convict labor in the 1870s, directly after we start recording measurement of industry persistence (Poyker, 2018). Competition with prison-made goods forced affected industries in affected locations to be more productive.…”

Prison Labor: The Price of Prisons and the Lasting Effects of Incarceration

“…First, we add to the literature on the economics of forced labor and coercive labor contracts (Acemoglu and Wolitzky, 2011;Bobonis and Morrow, 2014;Dell, 2010;Gregory and Lazarev, 2013;Juif and Frankema, 2018;Lowes and Montero, 2016;Naidu and Yuchtman, 2013;van Waijenburg, 2018;Saleh, 2019). Previous work has examined the impacts of economic shocks on coercive contract enforcement (Naidu and Yuchtman, 2013), and estimated the share of forced labor in colonial public finance (van Waijenburg, 2018), but there is very little evidence on the economics of prison labor, with most of the research on prison labor concentrated on the United States (Poyker, 2019;Travis, Western, and Redburn, 2014;Cox, 2010) and the Soviet Union (Gregory and Lazarev, 2013).…”