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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.

Suggested Citation

  • Dora L. Costa, 1993. "Explaining the Changing Dynamics of Unemployment: Evidence from Civil War Records," NBER Historical Working Papers 0051, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberhi:0051 Note: DAE

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    References listed on IDEAS

    1. Goldin, Claudia, 1979. "Household and market production of families in a late nineteenth century American city," Explorations in Economic History, Elsevier, vol. 16(2), pages 111-131, April.
    2. R. W. Fogel & L. T. Wimmer, 1992. "Early Indicators of Later Work Levels, Disease, and Death," CPE working papers 0008, University of Chicago - Centre for Population Economics.
    3. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters,in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
    4. Stanley Engerman & Claudia Goldin, 1991. "Seasonality in Nineteenth Century Labor Markets," NBER Historical Working Papers 0020, National Bureau of Economic Research, Inc.
    5. Atack, Jeremy & Bateman, Fred, 1992. "How Long Was the Workday in 1880?," The Journal of Economic History, Cambridge University Press, vol. 52(01), pages 129-160, March.
    6. 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.
    7. Feldstein, Martin S, 1978. "The Effect of Unemployment Insurance on Temporary Layoff Unemployment," American Economic Review, American Economic Association, vol. 68(5), pages 834-846, December.
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    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • N31 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: Pre-1913


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