Criminal Discount Factors and Deterrence

• In Event: Back to the Basics: Specific and General Deterrence

Abstract

The trade-off between the immediate returns from committing a crime and the future costs of punishment depends on the extent to which the offender discounts the future. Despite the resulting importance of discounting for policy, there is very limited empirical evidence on the extent of such discounting. We exploit exogenous variation in sentence length generated by a large collective pardon in Italy to estimate the degree of discounting among criminal offenders. We first provide nonparametric evidence from the raw data on recidivism and sentence length that illustrates the extent of discounting. We then estimate the discount factor directly using a discrete choice model of recidivism. Consistent with the idea that low future time preference is a driver of criminal behavior, we estimate the average annual discount factor for criminals to be 0.74. We also find evidence of heterogeneity in time preference across offenders based on age, educational attainment, crime type, and nationality. Our estimates imply that the majority of the deterrent effect of imprisonment is derived from the first few years in prison. As a result, it may be beneficial to reallocate the costs associated with lengthy prison sentences towards alternative policies.

Authors

• David A. Rivers, University of Western Ontario

• Giovanni Mastrobuoni, University of Essex