Institutions and Incarceration: The Role of Economic Freedom at the MSA Level

Abstract

A large literature details the causes and consequences of incarceration. This study evaluates the role of economic freedom in this context using US Metropolitan Statistical Area (MSA) data from 1977 to 2017. To do so, we implement economic freedom scores at the MSA level derived from Stansel (2019). Overall, our evidence suggests that greater economic freedom is associated with lower rates of incarceration in jails for the overall population. The channel tends to be through both the first and second economic freedom components (“size of government” and “taxation,” respectively). Finally, the results for juvenile incarcerated populations are largely driven by labor market freedoms.

Keywords: Jail, Incarceration, Economic Freedom, Institutions, MSA

JEL Classification: D02, D78, H11, H73