Institutions and incarceration: The role of economic freedom at the MSA level

Abstract

We evaluate the relationship between economic freedom and incarceration at the U.S. metropolitan statistical area level. Method: We use economic freedom data at the metropolitan statistical area unit and local incarceration data from the Vera Institute in 5-year intervals from 1977 through 2017. Results: 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. Conclusion:To the extent that reducing incarceration rates continue to be viewed as a positive outcome in line with recent trends, this study suggests that promoting laws and policies aimed at enhancing economic freedom could be an avenue to advancing that goal. For proponents, this policy implication has the rare advantage of bipartisan appeal.