Prisons of poverty: U.S. poverty and incarceration at the state level

It is well known that high rates of incarceration are not unusual in the United States of America, which boasts the world's largest prison population. This fact may be subject to the adverse impact of poverty, which the U.S. also has had a resounding issue with historically. Examining and conducting analyses on these two variables provides valuable insight into the effect poverty has on incarceration, which this analysis has sought to uncover. The existing economics literature, both theoretical and empirical, has shown there exists a relationship between poverty and incarceration at the individual level already (Raphael & Stoll, 2013), but less has been said about their macro-level relationship and what exactly it may point to. State level data were collected from the United States Census Bureau and the Department of Justice Statistics over the most recent 36-year period available. Focusing on U.S. States between 1980 and 2016 and using linear, fixed effects, quantile, and fixed effects quantile regression, we examine the relationship between the two variables. In alternate specifications, we include various combinations of state fixed effects, time fixed effects, lagged incarceration rates, spatially lagged dependent and independent variables such as unemployment. Poverty is not only found to increase incarceration rates, but the estimated effect grows several magnitudes larger at the high end of the incarceration distribution. That is, the impact of poverty in each state is found to be significantly more important for states with high incarceration rates. We also provide descriptive and longitudinal analyses of these two macro-level variables. These analyses, along with the regression results, display the relationship between the two variables in order to aid in explaining the volatile conditions states, especially those with high incarceration and poverty rates, face.