Working Paper

Dynamics of Deterrence: A Macroeconomic Perspective on Punitive Justice Policy

Abstract: We argue that transitional dynamics play a critical role in evaluating the effects of punitive incarceration reform on crime, inequality, and labor markets. Individuals’ past choices regarding crime and employment under previous policies have persistent consequences that limit their responsiveness to policy changes. We provide novel cohort evidence supporting this mechanism. A quantitative model of this theory, calibrated using restricted administrative data, predicts nuanced dynamics of crime and incarceration that are distinct across property and violent crime and similar to the U.S. experience after 1980. Increased inequality and declining employment accompany these changes, with unequal impacts across generations.

Keywords: Inequality trends; incarceration; Dynamic policy evaluation;

JEL Classification: E24; E69;

https://doi.org/10.21034/iwp.101

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Opportunity and Inclusive Growth Institute Working Papers

Publication Date: 2024-10-15

Number: 101