The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports

PWP-CCPR-2003-010

Abstract

This paper estimates the effect of education on participation in criminal activity among men 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. The paper begins by analyzing the effect of schooling on incarceration using Census data and changes in state compulsory attendance laws over time as an instrument for schooling. Changes in these laws have a significant effect on educational achievement, and we reject tests for reverse causality. Moreover, increases in compulsory schooling ages are not correlated with increases in state resources devoted to fighting crime. Both OLS and IV estimates agree and suggest that additional years of secondary schooling reduce the probability of incarceration with the greatest impact associated with completing high school. Differences in educational attainment between black and white men can explain as much as 23% of the black-white gap in male incarceration rates. We corroborate our findings on incarceration using FBI data on arrests that distinguish among different types of crimes. The biggest impacts of education are associated with murder, assault, and motor vehicle theft. We also examine the effect of schooling 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 among men. The externality is about 14-26% of the private return, suggesting that a significant part of the social return to completing high school for men comes in the form of externalities from crime reduction.