Intended and Unintended Consequences of Prison Reform∗

U.S. federal courts have forced states to reduce prison crowding since 1969. We examine states ’ responses to court interventions and show that these interven-tions generate higher per inmate incarceration costs, lower inmate mortality rates, and a reduction in prisoners per capita. If states seek to minimize the cost of crime through deterrence, an increase in prison costs should lead states to shift resources from corrections to other means of deterring crime such as welfare and education spending. However, we find that court interventions that are associated with higher corrections expenditures, lead to lower wel-fare expenditures. Furthermore, states did not increase welfare spending after their release from court order. Thus, our results suggest that states do not respond to prison reform in the manner prescribed by the deterrence model. States ’ responses to prison reform are most consistent with the predictions in the empirical public finance literature that indicate stickiness in expenditure categories and that increases in spending in programs that affect the poor gen-erate declines in expenditures in other program that are also targeted to the poor