The Criminal and Labor Market Impacts of Incarceration

This paper investigates the impacts of incarceration on criminal behavior and labor market activity using new data from Harris County, Texas. The research design exploits exogenous variation in incarceration due to defendants’ random courtroom assignment. I show that two factors, multidimensional and non-monotonic sentencing, generate bias and propose a new estimation procedure to address these features. The empirical results indicate that incarceration generates net increases in the frequency and severity of recidivism, worsens labor market outcomes, and strengthens dependence on public assistance. A cost-benefit exercise finds that substantial general deterrence effects are necessary to justify incarceration in the marginal population.