Full Citation
Title: The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self Reports
Citation Type: Working Paper
Publication Year: 2001
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Abstract: We estimate the effect of high school graduation on participation in criminal activity accounting for endogeneity of schooling. Crime is a negative externality with enormous social costs, so if education reduces crime, then schooling may have large social benefits that are not taken into account by individuals.We begin by analyzing the effect of high school graduation on incarceration using Census data. Instrumental variable estimates using changes in state compulsory attendance laws as an instrument for high school graduation uncover a significant reduction in incarceration for both blacks and whites. The interpretation of the IV estimator is complicated by the fact that our instrument affects schooling progressions at many different grade levels. When estimating the impact of high school graduation only, OLS and IV estimators estimate different weighted sums of the impact of each schooling progression on the probability of incarceration. We clarify the relationship between OLS and IV estimates and show that the ``weights' placed on the impact of each schooling progression are functions of observable quantities. Differences in these ``weights' explain much of the difference between our OLS and IV estimates. Overall, the estimates suggest that completing high school reduces the probability of incarceration by about .76 percentage points for whites and 3.4 percentage points for blacks.We corroborate our findings on incarceration usingFBI data on arrests that distinguish among different types of crimes. The biggest impacts of graduation are associated with murder, assault, and motor vehicle theft. We also examine the effect of drop out on self-reported crime in the NLSY and find that our estimates for imprisonment and arrest are caused by changes in criminal behavior and not educational differences in the probability of arrest or incarceration conditional on crime.Given the consistency of our estimates, we calculate the social savings from crime reduction associated with high school graduation. The externality of education is about 14-26% of the private return to schooling, suggesting that a significant part of the social return to education comes in the form of externalities from crime reduction.
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Authors: Moretti, Enrico; Lochner, Lance
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Publication Number: 8605
Institution: National Bureau of Economic Research
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Publisher Location: Cambridge, MA
Data Collections: IPUMS USA
Topics: Crime and Deviance, Education, Race and Ethnicity
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