Understanding the Prison Business: Quality Provision by Privately Operated Correctional Facilities

Abstract

Private prisons are a rapidly growing part of the criminal justice landscape, but our understanding of their effectiveness and performance is limited. We develop a theoretical model which draws on the Principal-Agent literature as well as the unique facets of private prison contracting to reach conclusions about the quality private prisons will provide. We find that due to regulators' constrained tools and necessarily imperfect monitoring, it is always pro table for private prisons to shirk from regulatory standards and provide suboptimal quality. We also conduct an empirical analysis using the 2005 Census of State and Federal Correctional Facilities and find that low-security private prisons appear to perform worse on a number of metrics than low-security public prisons. Higher-security private facilities, however, perform comparably to their public counterparts.