Labor Market Opportunities and Crime: Evidence from Parolees

Kevin T. Schnepel, University of California, Santa Barbara

Identifying a causal effect of labor market opportunities on crime is difficult given (a) an endogenous relationship between labor markets and crime and (b) the challenge of using aggregate measures to capture employment opportunities for individuals at risk. The institutional structure of the California prison and parole system combined with industry- and skill-specific employment measures in the county of release provide a unique setting to identify the effects of labor market fluctuations on criminal behavior for a large group of recently-released prisoners. Overall, I find between a three to four percent decrease in the probability of returning to prison within one year of release associated with a one percentage point increase in the prevalence of relevant employment opportunities.