DOES MORE CRIME MEAN MORE PRISONERS? AN INSTRUMENTAL VARIABLES APPROACH*

This paper studies the mechanical theory of crime and incarceration-the notion that changes in imprisonment are partially determined by changes in crime rates. Previous studies found scant evidence supporting the mechanical theory. These stud-ies, however, failed to properly control for simultaneity between incarceration rates and crime rates. While more crime may lead to larger prison populations, rising incarceration rates may deter crime. To address this bias, abortion rates in the 1970s are used as an instrument for crime in later decades. Abortion rates in the 1970s are correlated with crime in the 1990s but are unlikely to be otherwise related to incar-ceration or prison admissions rates in the 1990s. The instrumental variables approach finds that the estimated elasticity of prison admissions with respect to crime is ap-proximately 1, in accord with the mechanical theory. This finding has important implications for understanding trends in the U.S. prison population. I