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«June 24, 2013 Abstract Over 130,000 juveniles are detained in the US each year with 70,000 in detention on any given day, yet little is known whether ...»

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Juvenile Incarceration, Human Capital and Future Crime:

Evidence from Randomly-Assigned Judges

Anna Aizer∗ and Joseph J. Doyle, Jr. †‡

June 24, 2013

Abstract

Over 130,000 juveniles are detained in the US each year with 70,000 in detention on any given

day, yet little is known whether such a penalty deters future crime or interrupts social and

human capital formation in a way that increases the likelihood of later criminal behavior.

This paper uses the incarceration tendency of randomly-assigned judges as an instrumental variable to estimate causal effects of juvenile incarceration on high school completion and adult recidivism. Estimates based on over 35,000 juvenile offenders over a ten-year period from a large urban county in the US suggest that juvenile incarceration results in large decreases in the likelihood of high school completion and large increases in the likelihood of adult incarceration. These results are in stark contrast to the small effects typically found for adult incarceration, but consistent with larger impacts of policies aimed at adolescents.

∗ Brown University and NBER. email: anna aizer@brown.edu † MIT and NBER. email: jjdoyle@mit.edu.

‡ We would like to thank David Autor, Janet Currie, Pedro Dal Bo, Lawrence Grazian, Lawrence Katz, Derek Neal, Roberto Rigobon, Tom Stoker, Tavneet Suri, Heidi Williams and seminar participants at Aarhus University, Harvard University, Institute for Research on Poverty, MIT, NBER Childrens/Labor Studies Summer Institute, and the University of Maryland. We would like to acknowledge the Chapin Hall Center for Children at the University of Chicago for the creation of the Integrated Database on Child and Family Programs in Illinois (IDB) that was used in this study. All findings, interpretations and conclusions based on the use of the IDB are solely our responsibility and do not necessarily represent the views of the Chapin Hall Center for Children.

1 Introduction Crime is a social problem with enormous costs. At the end of 2011, over 2.2 million people were incarcerated in the US, and an additional 4.8 million were under supervision of correctional systems (Glaze and Parks, 2012). Federal, state, and local expenditures on corrections exceed $82 billion annually, with the direct expenditures on the wider justice system totalling over $250 billion (Kennelman, 2012). Meanwhile, private expenditures that aim to prevent the externalities associated with crime are thought to be of a similar magnitude.1 A growing body of empirical research has sought to better understand the consequences of punitive policies by estimating the impact of incarceration on future employment, earnings and criminal activity. In general, researchers have found that incarceration has a minimal impact on future employment and earnings and mixed results with respect to recidivism.

Most of the existing work focuses on adult offenders, however, and estimated effects of incarceration may not apply to juveniles whose incarceration rates have increased even faster than those of adults over the last 20 years. In 2010, the stock of detainees stood at 70,792 juveniles in the US, a rate of 2.3 per 1,000 aged 10-19 (OJJDP, 2011). Including those under correctional supervision, the US has a juvenile corrections rate that is five times higher than the next highest country (Hazel, 2008). In a life-cycle context, incarceration during adolescence may interrupt human and social capital accumulation at a critical moment leading to reduced future wages in the legal sector and greater criminal activity. More generally, interventions during childhood are thought to have greater impacts compared to interventions for young adults due to propagation effects (see, for example, Cunha et al., 2006), and criminal activity is a particularly important context to consider such effects due to the negative externalities associated with it.2 This paper aims to estimate causal effects of juvenile incarceration on human capital accumulation, as measured by high school completion, and recidivism as an adult. Estimation of such Criminal activity has received considerable attention from economists following Becker (1968). Papers and reviews include Levitt (1998, 2004); Freeman (1996); Glaeser and Sacerdote (1999); Jacob and Lefgren (2003); Di Tella and Schargrodsky, forthcoming; Lee and McCrary (2005); Lochner and Moretti (2004), among others.

When considering the determinants of criminal activity dominated by young adults, large effects of juvenile interventions are plausible. See, for example, Currie and Tekin (2006).

relationships is complicated by the fact that juveniles who are incarcerated differ from those who are not. They have likely committed more serious crimes and their underlying propensity to drop out of school and commit a crime in the future may be higher than that of juveniles who were not committed: this would bias OLS estimates of the relationship between juvenile incarceration and both high school completion and adult incarceration upwards (in absolute magnitude). A second complicating factor is that effects for juveniles on the margin of juvenile incarceration may differ from the average juvenile, and it is the former group that is most likely to be affected by policy changes. A third complicating factor is the dearth of data that includes information on juvenile incarceration and long-term outcomes. Survey data is generally insufficient to estimate the impact of juvenile incarceration on future outcomes due to a lack of sufficient sample sizes given low rates of juvenile incarceration in the general population and underreporting of criminal activity and incarceration.





Our estimation strategy addresses each of these complicating factors. First, our identification strategy exploits plausibly exogenous variation in juvenile detention stemming from the random assignment of cases to judges who vary in their sentencing. With this strategy we address the issue of negative selection into juvenile incarceration and estimate effects for those at the margin of incarceration where the judge assignment matters for the incarceration decision.

This strategy is similar to that used by Kling (2006) and Di Tella and Schargrodsky (forthcoming) to estimate the impact of length of sentence on labor market outcomes and recidivism, respectively, among adults.3 But unlike previous work, we use it in a context of juvenile offending where human capital accumulation may still be in its formative stages, and thus the long term effects may well be greater.

Second, we do not use survey data, but rather a unique source of linked administrative data for over 35,000 juveniles over 10 years who came before a juvenile court in Chicago, Illinois.

These data were linked to both public school data for the same city and adult incarceration data for the same state to investigate effects of juvenile incarceration on high school completion and Chang and Schoar (2008) and Dobbie and Song (2013) employ a similar strategy using judges assigned to bankruptcy cases, Maestas, Mullen and Strand (forthcoming) use disability examiner propensities to approve disability claims, and Doyle (2008) uses case worker propensities to place children in foster care.

adult imprisonment.

We find that juvenile incarceration reduces the probability of high school completion and increases the probability of incarceration later in life. While some of this relationship reflects omitted variables, even when we control for potential omitted variables using IV techniques, the relationships remain strong. In OLS regressions with minimal controls, those incarcerated as a juvenile are 39 percentage points less likely to graduate from high school and are 41 percentage points more likely to have entered adult prison by age 25 compared with other public school students from the same neighborhood. Once we include demographic controls, limit our comparison group to juveniles charged with a crime in court but not incarcerated, and instrument for incarceration, juvenile incarceration is estimated to decrease high school graduation by 13 percentage points and increase adult incarceration by 22 percentage points. The IV results, while smaller than the initial OLS results, remain large and suggest substantial negative effects of juvenile incarceration on long term outcomes.

The main IV estimates and subgroup analyses suggest that marginal cases are at particularly low (high) risk of high school completion (adult incarceration) as a result of juvenile custody. The results are also consistent with the idea that the timing of incarceration matters: the strongest results are for juveniles aged 15 and 16 – a critical period of adolescence when incarceration is most likely to end one’s high school education.

The rest of the paper is organized as follows: in section 2 we summarize the existing theoretical and empirical literature on the relationship between incarceration and future outcomes and provide background information on judge assignment in our context; in section 3 we describe the data; in section 4 we describe the empirical strategy; section 5 presents the results;

and section 6 offers interpretation and conclusions.

–  –  –

In the economic model of crime originally developed by Becker (1968), criminal activity and participation in the legitimate market are substitutes. In deciding whether to commit a crime, individuals weigh the net gains of criminal versus legal labor market activity on the basis of the expected utility to be gained from each. The net gains of criminal activity are a function of the monetary rewards, the probability of being caught, and the severity of sentence. Net gains of participation in the legal sector are a function of wages which are largely determined by one’s human capital.4 According to this model, the probability of incarceration serves as a deterrent to criminal activity. To the extent that juvenile incarceration makes the cost of later incarceration more salient, such detention may reduce the likelihood of future criminal activity, all else equal.

However, the standard model of crime takes human capital as given, which is justified if we consider adults only, for whom years of schooling and other measures of human capital are already largely determined.5 In contrast, in a model of juvenile behavior, incarceration can negatively influence human capital and increase the likelihood future criminal activity through two potential channels. The first is by encouraging the accumulation of ”criminal capital” (see Bayer, Hjalmarsson, and Pozen, 2011) and hindering the accumulation of social capital that can aid in job search, lowering the probability of employment (Granovetter, 1995).6 While these mechanisms are likely more acute for juveniles, they are also relevant to adults. The second way in which juvenile incarceration can negatively affect human capital accumulation is by interrupting high school completion and reducing years of schooling, thereby greatly reducing future labor market wages and increasing future criminal activity (as suggested by Samson and Laub, 1993, 1997). Indeed, Freeman (1996) argues that the steady rise in crime witnessed over the 1980s and 90’s (despite the rise in incarceration) reflected the severe depression of the labor market for less skilled men over this period.

Incarceration can potentially increase the probability of GED receipt among HS drop outs. However, having a GED is associated with much lower earnings than a high school diploma (Cameron and Heckman, 1993). Moreover, the existing studies suggest that once one controls for potential selection into GED programs, earning a GED in prison is not associated with lower recidivism or higher earnings (Wilson et al, 2000; Kling and Tyler, 2007).

In the criminology literature this is often referred to as deviant labeling (see Bernberg and Krohn, 2003).



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