Prison Privatization Turns Twenty-Five: The Evolution of a Mature Private Prison Industry in the United States

Abstract:     
This paper examines the current level of competition and innovation in the private prison industry in the US. The author places twenty-five years of private prison business development within an industrial life cycle framework and argues that the realities of the mature prison privatization market do not match the promise of innovation and quality improvements voiced by privatization advocates during the 1980s and early 1990s. Analysis by way of the four firm market concentration ratio and the Herfindahl-Hirschman Index (HHI) at two points in time shows the market to be dominated by decreasingly fewer companies (an oligopoly of producers). At the same time, the number of government jurisdictions buying incarceration services is small and shrinking, resulting in an oligopsony of consumers. The net effect is that any real cost advantages of privatization are marginal at best, private prison programs have become virtually indistinguishable from public prisons, and the promise of innovation remains unfulfilled. The article concludes with a discussion of policy implications, including the idea of increasing the role of the non-profit sector in the operation of secure correctional facilities.

Number of Pages in PDF File: 38

Keywords: prisons, corrections, criminal justice policy, privatization

JEL Classification: D43, E65, L13, L33

working papers series