Convictions, Incarceration, and Earnings in an Event Studies Framework

There is compelling evidence that convictions and incarceration have negative impacts on labor market outcomes. But research also shows that offenders have relatively low levels of human capital even before any contact with the justice system. Thus, accurately characterizing an offender's employment profile and the plausible impact of the justice system has been challenging due to this population's non-trivial involvement in both formal and informal sectors and the non-linear relationship between criminal justice involvement and economic outcomes (e.g. the first criminal record playing a critical role in life-long employment outcomes). We use high-quality longitudinal criminal justice records through CJARS integrated with extensive labor market data (IRS W-2s and ACS self-reported work) to examine the effect of criminal justice interactions on labor market outcomes in an event study framework. Employment and earnings are tracked in both formal administrative as well as self-reported employment status in survey responses, providing an opportunity to identify informality and its implications. In this research, we highlight the importance of periodicity of criminal justice events and the role of shifts to informal employment, particularly when using event studies and administrative data.