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

Andrew Garin, Dmitri K. Koustas, Carl McPherson, Samuel Norris, Matthew Pecenco, Evan K. Rose, Yotam Shem-Tov and Jeffrey Weaver

No 32747, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: H2 J01 J20 (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-lab, nep-law, nep-pbe and nep-pub
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