Criminal Discount Factors and Deterrence

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 23.02.2016, 12:15 - 13:30


Presentation by 

Giovanni Mastrobuoni (Collegio Carlo Alberto)


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 provide non-parametric 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 for most offenders the majority of the deterrent effect of imprisonment is derived from the first few years in prison and thus longer sentences provide little additional deterrence. As a result, it may be beneficial to reallocate the costs associated with lengthy prison sentences towards alternative policies, such as those aimed at increasing the certainty of punishment.

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