Incarceration versus probation? Long-run evidence from an anticipated reform

How do individuals convicted to incarceration fare in terms of later crime and labor market outcomes compared to those who receivea non-custodial sentence? We answerthis questionby takingadvantage of a Danish reform whereby most offenders tried for a drunk-driving crime were placed on probation rather than sentenced to incarceration.Our first key finding is that stakeholders anticipated the consequences of the reform: we observe asignificant selection in the nature of the cases tried before and after the reform. To measure its impact, we resort to a novel instrumental variable approach exploiting quasi-exogenous variation in the probability of beingtried after the reform and thereforeincarcerated, based on the crime date. We find that incarcerated offenders commit more crimesand have weaker ties to the labor market than those placed on probation. The effects are particularly strong among young offenders. Our findings suggest that economic precariousness is an important mechanism explaining subsequent criminal behavior