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Explaining the Changing Dynamics of Unemployment: Evidence from Civil War Records

  • Dora L. Costa

I investigate why workers' probability of leaving unemployment has fallen since 1900 by estimating the impact of a large government transfer, the first major pension program in the United States, covering Union Army veterans of the Civil War. The pension, because of the program's rules, was a strict income transfer and these rules create a natural experiment to identify the effects of pensions and health on labor supply. Pensions exerted a large impact on the probability of long-term, but not of short-term unemployment. Estimated hazards suggest that, consistent with a job search model, pensions affected the probability of both entering and exiting unemployment. But, pensions mainly lowered the probability of leaving unemployment. The findings suggest that explanations for the secular rise in long-term unemployment should focus on factors such as the secular increase in wealth and the increased availability and generosity of unemployment benefits.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Historical Working Papers with number 0051.

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Date of creation: Dec 1993
Date of revision:
Handle: RePEc:nbr:nberhi:0051
Note: DAE
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  1. Claudia Goldin, 1978. "Household and Market Production of Families in a Late Nineteenth Century American City," Working Papers 495, Princeton University, Department of Economics, Industrial Relations Section..
  2. Jeremy Atack & Fred Bateman, 1990. "How Long Was the Workday in 1880?," NBER Historical Working Papers 0015, National Bureau of Economic Research, Inc.
  3. Robert W. Fogel & Larry T. Wimmer, 1992. "Early Indicators of Later Work Levels, Disease, and Death," NBER Historical Working Papers 0038, National Bureau of Economic Research, Inc.
  4. Feldstein, Martin S, 1978. "The Effect of Unemployment Insurance on Temporary Layoff Unemployment," American Economic Review, American Economic Association, vol. 68(5), pages 834-46, December.
  5. Thomas S. Coleman, 1989. "Unemployment Behavior: Evidence from the CPS Work Experience Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 1-38.
  6. Stanley Engerman & Claudia Goldin, 1991. "Seasonality in Nineteenth Century Labor Markets," NBER Historical Working Papers 0020, National Bureau of Economic Research, Inc.
  7. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
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