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Mass Incarceration and the Underground Economy in America


  • Brian Sykes

    (University of California-Irvine)

  • Amanda Geller

    (New York University)


With more than 850,000 people returning home from prisons and jails annually during an era of decarceration, understanding the labor market opportunities available to formerly incarcerated people is important for public policy. Yet, the mark of a criminal record has profound impacts on the employment and wage trajectories of disadvantaged men. Correspondence and audit studies routinely find that low-wage, secondary sector employers actively discriminate against those with criminal records, even when firms say they are open to hiring the formerly incarcerated. In this paper, we investigate whether the underground economy provides employment opportunities for men with criminal histories. Specifically, we assess whether formerly incarcerated men are more likely than their never-incarcerated counterparts to work in the underground economy, and how macroeconomic conditions shape the likelihood of working in the informal economy. We find that formerly incarcerated men are indeed more likely to work underground; however, the extent to which the macroeconomy shapes their odds of employment in either the formal or underground economies is significantly different for incarcerated men than their never-incarcerated counterparts. Our results have implications for understanding patterns of employment and wage mobility among disadvantaged men.

Suggested Citation

  • Brian Sykes & Amanda Geller, 2017. "Mass Incarceration and the Underground Economy in America," Working Papers wp17-03-ff, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Research on Child Wellbeing..
  • Handle: RePEc:pri:crcwel:wp17-03-ff

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    3. Amanda Geller & Irwin Garfinkel & Carey E. Cooper & Ronald B. Mincy, 2009. "Parental Incarceration and Child Well‐Being: Implications for Urban Families," Social Science Quarterly, Southwestern Social Science Association, vol. 90(5), pages 1186-1202, December.
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    8. Amanda Geller & Irwin Garfinkel & Bruce Western, 2011. "Paternal Incarceration and Support for Children in Fragile Families," Demography, Springer;Population Association of America (PAA), vol. 48(1), pages 25-47, February.
    9. M. J. Piore, 1972. "Notes for a Theory of Labor Market Stratification," Working papers 95, Massachusetts Institute of Technology (MIT), Department of Economics.
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    Cited by:

    1. Allison Dwyer Emory, 2019. "Unintended Consequences: Protective State Policies and the Employment of Fathers with Criminal Records," Working Papers wp19-04-ff, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Research on Child Wellbeing..
    2. repec:eee:cysrev:v:100:y:2019:i:c:p:362-375 is not listed on IDEAS

    More about this item


    incarceration; dual labor markets; employment stratification; underground economy; informal economy;

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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