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Empirical Evidence on Prisoners’ Discount Rates

Listed author(s):
  • Andrew Torre


Listokin has recently drawn our attention to the fact that virtually nothing is known about the magnitude of prisoners’ discount rates in relation to their foregone income (legal or illegal), which incarceration implies. He argues that since prisoners are likely to exhibit high discount rates, pre sentence delays will impose higher costs on offenders not on bail compared with those who are granted bail by the court. Utilising actual plea choices made by a sample of not on bail prisoners for three different offences in NSW, this study derives convincing estimates of prisoners’ rates of time preference. Prisoners do discount future returns and at high rates, as predicted by criminologists and other scholars, who have addressed this issue theoretically. The modelling technique utilised in this paper (dynamic present value) captures the stochastic movement of the prisoner’s probability of conviction during the delay period. This is a considerable methodological improvement over the standard static present value technique, which is not appropriate to capture the dynamics of the final plea choice.

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Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2009_21.

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Date of creation: 08 Dec 2009
Handle: RePEc:dkn:econwp:eco_2009_21
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