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

Author

Listed:
  • Andrew Garin
  • Dmitri K. 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 $5,000 per year on average if spared a prison sentence.

Suggested Citation

  • Andrew Garin & Dmitri K. Koustas & Carl McPherson & Samuel Norris & Matthew Pecenco & Evan K. Rose & Yotam Shem-Tov & Jeffrey Weaver, 2024. "The Impact of Incarceration on Employment, Earnings, and Tax Filing," NBER Working Papers 32747, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32747
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    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.
    2. Stephen B. Billings & Michael D. Makowsky & Kevin Schnepel & Adam Soliman, 2025. "Better stealing than dealing: how do felony theft thresholds impact crime?," CEP Discussion Papers dp2130, Centre for Economic Performance, LSE.
    3. Cecilia S. Diaz-Campo, M. Antonella Mancino, Salvador Navarro, 2025. "A Dynamic Factor Model of Skill Formation and Mental Health: Counterfactual Analysis of Interventions for Social Mobility," LCERPA Working Papers jc0160, Laurier Centre for Economic Research and Policy Analysis, revised Aug 2025.
    4. Patrick Bayer & Kerwin Kofi Charles & Ellora Derenoncourt, 2025. "Racial Inequality in the Labor Market," Working Papers 343, Princeton University, Department of Economics, Center for Economic Policy Studies..

    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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