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Econometrica Vol. 93 No. 2 2025

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

Andrew Garin1,2; Dmitri Koustas3; Carl McPherson4; Samuel Norris5; Matthew Pecenco6; Evan K. Rose7,2; Yotam Shem-Tov8,2; Jeffrey Weaver9

1 Heinz College, Carnegie Mellon University · 2 NBER · 3 Harris Public Policy, University of Chicago · 4 Department of Economics, UC Berkeley · 5 Department of Economics, University of British Columbia · 6 Department of Economics; Brown University · 7 Department of Economics, University of Chicago. · 8 Department of Economics, UCLA · 9 Department of Economics, University of Southern California ,

open access

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.

DOI
10.3982/ecta22028
Volume
93
Issue
2
Pages
503-538
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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