The Effects of the “Ban-the-Box” Policy in Frictional Labor Markets

About 40% of employers in the US would like access the criminal records of their employee and make hiring decisions according to their criminal records. To eliminate the difficulty of employment of ex-offenders, the “Ban-the-Box” (BTB) policy has been implemented in most US states since 2010. This paper studies the effects of the BTB policy on labor market outcomes, crime rates, and recidivism rates. We construct a model based on labor search and matching framework with workers’ criminal behavior. Before the BTB policy is implemented, the labor market is segmented into two sub-markets for workers with and without criminal records. Firms that ask about criminal records in the application process exclude workers with criminal records, while firms that do not ask crime-related questions possibly match with both workers with and without criminal records. After the BTB implementation, these two sub-markets merge into one. No firms run background checks after the BTB policy is implemented at the steady state equilibrium. The BTB policy reduces the cost of committing crimes and it only benefits the unemployed ex-offenders. Therefore, the overall crime rate and the recidivism rate increases after the BTB policy implementation. We also extend the model with criminal records that only remain for certain years as a policy alternative. This policy reduces the unemployment rate of workers without criminal records but raises the unemployment rate of ex-offenders and the crime rate. Ex-offenders have fewer incentives to commit crimes and the recidivism rate declines because they may become “normal” by not committing crimes