Pom Janjala Chirakijja, Monash University - The Local Economic Impacts of Prisons

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Title: The Local Economic Impacts of Prisons

Abstract: This paper examines the local economic consequences of prisons using two complementary approaches. The first uses the openings of 230 prisons during the 1990s across the entire United States, and the second uses a quasi-experimental strategy that compares winning and rejected communities in prison site-selection competitions in Texas. I find that prisons decrease housing values by 2-4 percent and lead to substantial changes in neighborhood composition, specifically towards low socioeconomic status individuals. The negative housing value impacts are localized to the neighborhoods that are closest to the new prisons, while the economic benefits of prisons are spread across broader communities. In particular, counties where prisons opened experienced an increase in total employment driven largely by the jobs at the new prisons. Prisons thus fail to create substantial spillovers to other sectors or provide a major boost to local economies beyond the direct effect of prison employment. Lastly, I find that after the opening of a prison, local labor markets in treated counties are less responsive to macroeconomic shocks, consistent with the view that jobs at prisons are “recession proof.”

Presenter: Pom Janjala Chirakijja, Monash University

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