IDEAS home Printed from https://ideas.repec.org/a/wly/emetrp/v93y2025i2p503-538.html
   My bibliography  Save this article

The Impact of Incarceration on Employment, Earnings, and Tax Filing

Author

Listed:
  • Andrew Garin
  • Dmitri Koustas
  • Carl McPherson
  • Samuel Norris
  • Matthew Pecenco
  • Evan K. Rose
  • Yotam Shem‐Tov
  • Jeffrey Weaver

Abstract

We study the effect of incarceration on wages, self‐employment, and taxes and transfers in North Carolina and Ohio using two quasi‐experimental research designs: discontinuities in sentencing guidelines and random assignment to judges. Across both states, incarceration generates short‐term drops in economic activity while individuals remain in prison. As a result, a year‐long sentence decreases cumulative earnings over five years by 13%. Beyond five years, however, there is no evidence of lower employment, wage earnings, or self‐employment in either state, as well as among defendants with no prior incarceration history. These results suggest that upstream factors, such as other types of criminal justice interactions or pre‐existing labor market detachment, are more likely to be the cause of low earnings among the previously incarcerated, who we estimate would earn just $5000 per year on average if spared a prison sentence.

Suggested Citation

  • Andrew Garin & Dmitri Koustas & Carl McPherson & Samuel Norris & Matthew Pecenco & Evan K. Rose & Yotam Shem‐Tov & Jeffrey Weaver, 2025. "The Impact of Incarceration on Employment, Earnings, and Tax Filing," Econometrica, Econometric Society, vol. 93(2), pages 503-538, March.
    • Handle: RePEc:wly:emetrp:v:93:y:2025:i:2:p:503-538
    DOI: 10.3982/ECTA22028
    as

    Download full text from publisher

    File URL: https://doi.org/10.3982/ECTA22028
    Download Restriction: no
    File URL: https://libkey.io/10.3982/ECTA22028?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Devah Pager, 2003. "The mark of a criminal record," Natural Field Experiments 00319, The Field Experiments Website.
    2. Estelle, Sarah M. & Phillips, David C., 2018. "Smart sentencing guidelines: The effect of marginal policy changes on recidivism," Journal of Public Economics, Elsevier, vol. 164(C), pages 270-293.
    3. David Arnold & Will Dobbie & Peter Hull, 2022. "Measuring Racial Discrimination in Bail Decisions," American Economic Review, American Economic Association, vol. 112(9), pages 2992-3038, September.
    4. Samuel Norris & Matthew Pecenco & Jeffrey Weaver, 2021. "The Effects of Parental and Sibling Incarceration: Evidence from Ohio," American Economic Review, American Economic Association, vol. 111(9), pages 2926-2963, September.
    5. Randi Hjalmarsson, 2009. "Juvenile Jails: A Path to the Straight and Narrow or to Hardened Criminality?," Journal of Law and Economics, University of Chicago Press, vol. 52(4), pages 779-809, November.
    6. Megan Stevenson, 2017. "Breaking Bad: Mechanisms of Social Influence and the Path to Criminality in Juvenile Jails," The Review of Economics and Statistics, MIT Press, vol. 99(5), pages 824-838, December.
    7. Raj Chetty & Nathaniel Hendren & Maggie R Jones & Sonya R Porter, 2020. "Race and Economic Opportunity in the United States: an Intergenerational Perspective [“Intergenerational Mobility of Immigrants in the US Over Two Centuries,”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 711-783.
    8. Rasmus Landersø, 2015. "Does Incarceration Length Affect Labor Market Outcomes?," Journal of Law and Economics, University of Chicago Press, vol. 58(1), pages 205-234.
    9. Angrist, Joshua D, 1990. "Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records," American Economic Review, American Economic Association, vol. 80(3), pages 313-336, June.
    10. Jeffrey Grogger, 1995. "The Effect of Arrests on the Employment and Earnings of Young Men," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 51-71.
    11. Kornfeld, Robert & Bloom, Howard S, 1999. "Measuring Program Impacts on Earnings and Employment: Do Unemployment Insurance Wage Reports from Employers Agree with Surveys of Individuals?," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 168-197, January.
    12. Daniel A. Ackerberg & Paul J. Devereux, 2009. "Improved JIVE Estimators for Overidentified Linear Models with and without Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 351-362, May.
    13. Bekker, Paul A, 1994. "Alternative Approximations to the Distributions of Instrumental Variable Estimators," Econometrica, Econometric Society, vol. 62(3), pages 657-681, May.
    14. Anna Aizer & Joseph J. Doyle, 2015. "Juvenile Incarceration, Human Capital, and Future Crime: Evidence from Randomly Assigned Judges," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(2), pages 759-803.
    15. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    16. Patrick Bayer & Kerwin Kofi Charles, 2018. "Divergent Paths: A New Perspective on Earnings Differences Between Black and White Men Since 1940," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(3), pages 1459-1501.
    17. Yotam Shem‐Tov & Steven Raphael & Alissa Skog, 2024. "Can Restorative Justice Conferencing Reduce Recidivism? Evidence From the Make‐it‐Right Program," Econometrica, Econometric Society, vol. 92(1), pages 61-78, January.
    18. Megan T Stevenson, 2018. "Distortion of Justice: How the Inability to Pay Bail Affects Case Outcomes," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 34(4), pages 511-542.
    19. Evan K Rose, 2021. "Who Gets a Second Chance? Effectiveness and Equity in Supervision of Criminal Offenders," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(2), pages 1199-1253.
    20. Ilyana Kuziemko, 2013. "How should inmates be released from prison? An assessment of parole versus fixed-sentence regimes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(1), pages 371-424.
    21. Holzer, Harry J & Raphael, Steven & Stoll, Michael A, 2006. "Perceived Criminality, Criminal Background Checks, and the Racial Hiring Practices of Employers," Journal of Law and Economics, University of Chicago Press, vol. 49(2), pages 451-480, October.
    22. Derek Neal & Armin Rick, 2016. "The Prison Boom and Sentencing Policy," The Journal of Legal Studies, University of Chicago Press, vol. 45(1), pages 1-41.
    23. Jeffrey R. Kling, 2006. "Incarceration Length, Employment, and Earnings," American Economic Review, American Economic Association, vol. 96(3), pages 863-876, June.
    24. Evan K. Rose & Yotam Shem-Tov, 2021. "How Does Incarceration Affect Reoffending? Estimating the Dose-Response Function," Journal of Political Economy, University of Chicago Press, vol. 129(12), pages 3302-3356.
    25. Angrist, Joshua D, 1990. "Lifetime Earnings and the Vietnam Era Draft Lottery: Evidence from Social Security Administrative Records: Errata," American Economic Review, American Economic Association, vol. 80(5), pages 1284-1286, December.
    26. Amanda Agan & Sonja Starr, 2018. "Ban the Box, Criminal Records, and Racial Discrimination: A Field Experiment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(1), pages 191-235.
    27. Michael Mueller-Smith & Kevin T. Schnepel, 2021. "Diversion in the Criminal Justice System," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(2), pages 883-936.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. John Eric Humphries & CŽcile Macaire & AurŽlie Ouss & Megan T. Stevenson & Winnie van Dijk, 2025. "Revisiting the Lasting Impacts of Incarceration," Cowles Foundation Discussion Papers 2441, Cowles Foundation for Research in Economics, Yale University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hjalmarsson, Randi & Machin, Stephen & Pinotti, Paolo, 2024. "Crime and the labor market," Handbook of Labor Economics,, Elsevier.
    2. Escobar, Maria A. & Tobón, Santiago & Vanegas-Arias, Martín, 2023. "Production and persistence of criminal skills: Evidence from a high-crime context," Journal of Development Economics, Elsevier, vol. 160(C).
    3. Mogstad, Magne & Torgovitsky, Alexander, 2024. "Instrumental variables with unobserved heterogeneity in treatment effects," Handbook of Labor Economics,, Elsevier.
    4. Steeve Marchand & Guy Lacroix & William Arbour, 2023. "Prison rehabilitation programs and recidivism: evidence from variations in availability," Melbourne Institute Working Paper Series wp2023n07, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    5. Bastien Michel & Camille Hémet, 2022. "Custodial versus non-custodial sentences: Long-run evidence from an anticipated reform," PSE Working Papers halshs-03899897, HAL.
    6. Guido W. Imbens, 2022. "Causality in Econometrics: Choice vs Chance," Econometrica, Econometric Society, vol. 90(6), pages 2541-2566, November.
    7. Andrew Jordan & Ezra Karger & Derek Neal, 2021. "Heterogeneous Impacts of Sentencing Decisions," Working Paper Series WP 2022-02, Federal Reserve Bank of Chicago, revised 12 Feb 2022.
    8. Franco, Catalina & Harding, David J. & Bushway, Shawn D. & Morenoff, Jeffrey, 2022. "Failing to Follow the Rules: Can Imprisonment Lead to More Imprisonment Without More Actual Crime?," Discussion Paper Series in Economics 3/2022, Norwegian School of Economics, Department of Economics, revised 01 Oct 2018.
    9. Magnus Lofstrom & Steven Raphael, 2016. "Crime, the Criminal Justice System, and Socioeconomic Inequality," Journal of Economic Perspectives, American Economic Association, vol. 30(2), pages 103-126, Spring.
    10. Anaïs Henneguelle & Benjamin Monnery & Annie Kensey, 2016. "Better at Home than in Prison? The Effects of Electronic Monitoring on Recidivism in France," Journal of Law and Economics, University of Chicago Press, vol. 59(3), pages 629-667.
    11. Arbour, William & Lacroix, Guy & Marchand, Steeve, 2021. "Prison Rehabilitation Programs: Efficiency and Targeting," IZA Discussion Papers 14022, Institute of Labor Economics (IZA).
    12. Julien Grenet & Hans Grönqvist & Susan Niknami, 2024. "The effects of electronic monitoring on offenders and their families," PSE-Ecole d'économie de Paris (Postprint) halshs-04630125, HAL.
    13. John Eric Humphries & CŽcile Macaire & AurŽlie Ouss & Megan T. Stevenson & Winnie van Dijk, 2025. "Revisiting the Lasting Impacts of Incarceration," Cowles Foundation Discussion Papers 2441, Cowles Foundation for Research in Economics, Yale University.
    14. Manudeep Bhuller & Gordon B. Dahl & Katrine V. Løken & Magne Mogstad, 2020. "Incarceration, Recidivism, and Employment," Journal of Political Economy, University of Chicago Press, vol. 128(4), pages 1269-1324.
    15. Santiago Tobón Zapata & Maria Antonia Escobar Bernal & Martin Vanegas Arias, 2021. "Criminal capital persistence: Evidence from 90,000 inmates’ releases," Documentos de Trabajo de Valor Público 19297, Universidad EAFIT.
    16. Jeffrey R. Kling, 2006. "Incarceration Length, Employment, and Earnings," American Economic Review, American Economic Association, vol. 96(3), pages 863-876, June.
    17. Darolia, Rajeev & Mueser, Peter & Cronin, Jacob, 2021. "Labor market returns to a prison GED," Economics of Education Review, Elsevier, vol. 82(C).
    18. William Arbour & Steeve Marchand, 2022. "Parole, Recidivism, and the Role of Supervised Transition," Working Papers tecipa-725, University of Toronto, Department of Economics.
    19. Grenet, Julien & Grönqvist, Hans & Niknami, Susan, 2024. "The effects of electronic monitoring on offenders and their families," Journal of Public Economics, Elsevier, vol. 230(C).
    20. Nicolás Grau & Gonzalo Marivil & Jorge Rivera, 2019. "The Effect of Pretrial Detention on Labor Market Outcomes," Working Papers wp488, University of Chile, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:emetrp:v:93:y:2025:i:2:p:503-538. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/essssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.