Idleness, Skill Decay, and Labor Market Outcomes: The Case of Prison Labor in the 1920-40s U.S.

Riccardo Marchingiglio, Northwestern University

This paper studies how working in prison affects the labor market outcomes of ex-convicts after release. Starting from the entire population of inmates in correctional institutions in 1920 and 1930 United States, I link male convicts to the following censuses to observe their labor market outcomes as free workers. Prison work is not randomly assigned, and whether a convict worked in prison is a function of a set of possibly unobserved variables that jointly determine his labor market outcomes upon release. To identify the effect of prison work, I exploit the elasticity of substitution between free workers and inmates. I apply an identification strategy that allows me to compare ex-convicts in the same local labor market after release, who were exposed to different levels of local labor supply in the outside labor market while they were in prison. Given the substitutability between the two labor inputs, a higher supply of outside workers predicts lower demand for convict labor. I find that working during prison time affects labor market outcomes, predominantly at the extensive margin. The absence of a reduced form impact at the intensive margin is shown to be likely due to selection. I provide evidence that the instrument variation satisfies the conditions for identification of a causal impact. I show that the effects are not driven by ex-inmates who work in the same local labor market where they were in prison, and that the decision of moving out of the county of prison is not affected by the treatment of interest. Finally, I link the population of inmates back to the period before they entered the correctional facility, and re-estimate the main specifications replacing post-sentence with pre-sentence labor market outcomes on the left hand side, finding precisely estimated zero placebo effects.

No extended abstract or paper available

 Presented in Session 171. Labor and the Law