No Credit For Time Served? Incarceration and Credit-Driven Crime Cycles∗

We document that incarceration significantly reduces access to credit, and that in turn leads to substantial increases in recidivism, creating a perverse feedback loop. In the first part of the paper, we use random assignment of criminal cases across judges to document significant post-release reductions in credit outcomes, including credit scores, mortgages, auto loans, and lender assessment of income. In the second part, we use sharp discontinuities in lending based on credit scores to show that this loss of financial access feeds back into future crime. Consequently, the financial distortions that imprisonment creates undermine the crime-reduction goal of incarceration. JEL Classification: D14, G21, K14, E21, K00

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