Prisons: A Disappointing Development Tool for Small Towns

September 9th, 2003

AMES, Iowa — Small towns that attracted state prisons during the 1990s haven't realized the economic gains they had hoped to attain, according to a national study conducted by Iowa State University.

"In the 1990s small-town leaders wanted to attract new prisons to increase jobs, businesses, housing and population. This study was an attempt to learn if prisons were providing the economic benefit those towns expected," said Terry Besser, an associate professor of sociology at Iowa State University.

Besser was principal investigator for the study, "The Development of Last Resort: The Impact of New Prisons on Small Town Economics." Results were presented at the 2003 meeting of the Rural Sociological Society.

Small towns, those with 10,000 or fewer residents, began to attract prisons as an economic development strategy after the economic downturn of the 1980s. The study evaluated the economic status of 176 small towns that built new prisons in 48 states and compared them to non-prison towns with comparable populations and poverty rates.

In the 1980s, 62 percent of the nation's prison inmates were located in metropolitan areas of more than 50,000 people. In the 1990s, 69 percent were located in prisons built in towns with fewer than 10,000 residents. During that same decade, 190 state prisons were built in 176 small towns; a few towns built two.

"Our results show that small towns that successfully attracted state prisons didn't gain as much as similar towns without prisons," Besser said. "They had less growth in businesses, employment, retail sales, household wages, housing values and housing units. This also applies to towns that started the decade with equivalent poverty rates."

Besser said many towns made sizable investments in infrastructures and tax incentives to bring prisons to their communities. "They've risked public funds and they haven't seen the economic benefits," Besser said.

State prisons don't pay local taxes or purchase goods from local businesses, which may account for the disappointing returns, Besser said. Also, prison employees don't appear to be buying homes or purchasing local products.

Besser said it may be too soon to analyze the long-range economic benefits. In the short term, however, the impact appears to be negative.

"Local leaders searching for economic development opportunities should scrutinize the costs versus the benefits of attracting a prison to their community," Besser said.

The study also compared population changes. Census data includes inmates as residents. The study's researchers found that small towns with new prisons appear to have experienced an increase in population during the 1990s. However, when the inmate populations were subtracted, the towns with new prisons actually lost more population than comparable small towns.


Terry Besser, Sociology, (515) 294-6508
Barbara McManus, Ag Communications, (515) 294-0707
Teddi Barron, News Service, (515) 294-4778

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