Unemployment shocks for individuals on the margin: Exploring recidivism effects

This paper analyzes the impact of unemployment on the likelihood of returning to criminal activity for a sample of individuals with criminal records who are actively seeking employment. I use administrative data from the New York State Division of Criminal Justice Services, Department of Labor, and Department of Health, to track unemployment and arrest outcomes for this sample between 2008 and 2014. To identify the unemployment-arrest relationship, I use industry-specific variation in unemployment trends caused by the recession in 2008-2009, along with individual fixed effects to control for time-constant individual heterogeneity. The 2SLS estimates suggest that increased unemployment has large effects on rearrests for individuals with criminal records who are now active in the labor market, with substantial heterogeneity by race and sex. The results suggest larger estimates than those typically found in literature, indicating that targeting employment programs at those “on the margin” could substantially reduce rearrest rates for such individuals.