State economic freedom and recidivism

In 2011, 6.98 million people in the United States were currently supervised by a federal, state, or local government correctional office jurisdiction via probation, parole, or incarceration. This amounts to government correctional supervision of some type for 1 in every 34 adults in the United States.  Additionally, at year end 2011, federal, state, and local correctional facilities in the United States housed 2.2 million people. Given this high rate of incarceration, US communities face the release of thousands of prisoners back into their communities each year, many of whom quickly find themselves recidivating.

The objective of this analysis is to examine the relationship between institutions and parolee recidivism rates for states in the US.  Using a panel data set containing all 50 states from 1994-2010, Ordinary Least Squares (OLS) is used to examine this relationship. The measure of institutions employed is the Economic Freedom of North America (EFNA) index, published by the Fraser Institute of Canada. While the entire EFNA index will be employed in the empirical analysis, it will also be broken down into its component parts: size of government, takings and discriminatory taxation, and regulation. Preliminary results suggest that higher levels of economic freedom within a state are associated with lower recidivism rates within that state. This paper provides an exploratory analysis into what factors may contribute to differences across states in recidivism, and the results suggest that economic freedom has a negative relationship with recidivism.  Other results that will be presented examine which components of subnational economic freedom are related to lower recidivism rates, with a special emphasis on regulation of labor.