The Deterrence Effect of Prison: Dynamic Theory and Evidence

Using administrative, longitudinal data on felony arrests in Florida, we exploit the doscontinous increase in the punitiveness of criminal sanctions at 18 to estimate the deterence effect of incarceration. Our analysis suggests a 2 percent decline in the logodds of offending at 18, with a standard errors ruling out declines of 11 percent or more. We interpret these magnitudes using a stochastic dynamic extension of Becker's (1968) model of criminal behavior. Calibrating the model to match key empirical moments, we conclude that deterrence elasticities with respect to sentence lengths are no more negitive than -0.13 for young offenders.