Beyond Bars: How Sentence Types Shape Ex-Felons’ Transition into Entrepreneurship and Reintegration

ecent research and policy initiatives suggest that entrepreneurship serves as a pathway for reintegrating ex-felons into the labor market by reducing the stigma they face among prospective employers. However, the long-term outcomes of entrepreneurial careers for individuals with criminal records remain poorly understood. Using Danish administrative data, we investigate how the type of sentences received by individuals convicted of crimes relates to their subsequent labor market trajectories and, particularly, their transition into entrepreneurship. We study how community service sentences, as an alternative to imprisonment, shape ex-felons’ labor market trajectories and long-term outcomes. We find that individuals sentenced with community service are significantly less likely to engage in entrepreneurship than comparable individuals who were incarcerated instead. This aligns with prior research pointing to entrepreneurship as an alternative employment pathway for those stigmatized in the labor market. Importantly, we also find that ex-felons who turn to entrepreneurship - especially after having been incarcerated - suffer a persistent income disadvantage afterwards and exhibit higher rates of recidivism than those who find regular employment. Hence, our findings question how effective entrepreneurship can be as a social mobility and reintegration pathway for individuals with criminal records.