The Effect of Convicton on Income Through the Life Cycle
NBER Working Paper No. 4551
Existing studies of the impact of conviction on income and employment do not consider life cycle issues. We postulate that conviction reduces access to career jobs offering stable, long-term employment. Instead, conviction relegates offenders to spot market jobs, which may have higher pay at the outset of the career but do not offer stable employment or rapidly rising wages. Thus, first-time conviction may increase the wages of young workers while decreasing the wages of older workers. We test our theory with data on federal offenders and find that first-time conviction has a positive and significant effect on income for offenders under age 25 and an increasingly negative and significant impact for offenders over age 30. These results imply that the present value of income lost as a result of conviction varies over the life cycle, reaching a maximum in the middle of the career. We find that the gains sought by these offenders follow similar profiles, suggesting that prospective offenders are deterred by the possibility of lost future income. Because the discounted loss in future income facing young offenders may be small, our results may provide part of an explanation of youth crime.
Published: International Review of Law & Economics, Vol. 18, no. 1 (March 1998), pp. 25-40.