Custodial versus non-custodial sentences: Long-run evidence from an anticipated reform

We study the relative impact of custodial and non-custodial sentences on later convictions and labor-market outcomes in Denmark, a country where detention conditions are particularly good. To do so, we take advantage of a large-scale reform of the Danish legislation implemented in 2000, whereby incarceration was replaced by a non-custodial sentence for most drunk-driving crimes, which represented a quarter of all custodial sentences passed in 1999. Our first key finding is that stakeholders anticipated the consequences of the reform and that trials involving wealthier offenders were more likely to be postponed until after the reform came into force, which in turn reduced the likelihood of incarceration. To measure the relative impact of incarceration, we therefore use a novel instrumental variable approach exploiting quasi-exogenous variation in the probability of being tried after the reform, and therefore incarcerated, based on offenders’ crime date. We follow sampled individuals over a 15-year period and find that incarcerated offenders are convicted of more crimes and have weaker ties to the labor market after release. Additionally, first-time offenders and those with stronger ties to the labor market are more negatively affected.