I examine the economic consequences of prisons on local communities using two complementary approaches. The first uses prison openings during the 1990s across the US and the second exploits the results of the prison site-selection competitions in Texas. Prisons bring substantial and persistent gains in public employment. However, additional jobs at the prisons generate little spillover effects on private sector employment and fail to provide a major boost to local economic activity – overall resulting in approximately a one-for-one increase in local employment. Neighborhoods closest to prisons also experience declines in housing values and demographic shifts towards low-socioeconomic status households.