Do Privately-Owned Prisons Increase Incarceration Rates?

This article measures the effect of establishing private prisons on incarceration-related outcomes in the United States. We develop a model to show that enforcement authorities faced with capacity constraints or who are more susceptible to bribes set non-optimal sanction levels which increase a total number of incarcerated individuals and each individual’s sentence length. Using instrumental variables regressions at the state and individual levels, we find evidence showing that a rise in private prison beds per capita increases the number of incarcerated individuals per capita and average sentencing lengths. The effect is more likely for crime types when there is more sentencing leeway such as fraud, regulatory, drug or weapons crimes. The effect of private prisons is more pronounced in states where prison capacity constraints are met or exceeded.