The Returns to Criminal Capital

57 Pages Posted: 26 Feb 2013

See all articles by Thomas Loughran

Thomas Loughran

University of Maryland

Holly Nguyen

University of Maryland - Department of Criminology and Criminal Justice

Alex R. Piquero

University of Texas at Dallas - School of Economic, Political and Policy Sciences; Griffith University

Jeffrey Fagan

Columbia Law School

Date Written: February 25, 2013

Abstract

Human capital theory (Becker 1962; Mincer 1958; Schultz 1960; 1961) posits that individuals can increase their labor market returns through investments in education and training. This concept has been studied extensively across several disciplines. An analog concept of criminal capital, while the focus of speculation and limited empirical study, remains considerably less developed theoretically and methodologically. This paper offers a formal theoretical model of criminal capital indicators and tests for greater illegal wage returns using a sample of serious adolescent offenders, many of whom participate in illegal income-generating activities. Our results reveal that, consistent with human capital theory, there are important illegal wage premiums associated with investments in criminal capital, notably an increasing but declining marginal return to experience and a premium for specialization. Further, as in studies of legal labor markets, we find strong evidence that, if left unaccounted for, non-random sample selection causes severe bias in models of illegal wages. Theoretical and practical implications of these results, along with directions for future research, are discussed.

Keywords: criminal capital, illegal earnings, sample selection, Heckman correction

Suggested Citation

Loughran, Thomas and Nguyen, Holly and Piquero, Alex R. and Fagan, Jeffrey, The Returns to Criminal Capital (February 25, 2013). Columbia Public Law Research Paper No. 13-339, Available at SSRN: https://ssrn.com/abstract=2225323 or http://dx.doi.org/10.2139/ssrn.2225323

Thomas Loughran (Contact Author)

University of Maryland ( email )

2220 LeFrak Hall
College Park, MD 20742
United States

Holly Nguyen

University of Maryland - Department of Criminology and Criminal Justice ( email )

College Park
College Park, MD 20742
United States

Alex R. Piquero

University of Texas at Dallas - School of Economic, Political and Policy Sciences ( email )

800 W. Campbell Road, GR31
Richardson, TX 75080
United States
972-883-2482 (Phone)
972-883-6572 (Fax)

Griffith University

170 Kessels Road
Nathan, Queensland QLD 4111
Australia

Jeffrey Fagan

Columbia Law School ( email )

435 West 116th Street
New York, NY 10027
United States
212-854-2624 (Phone)
212-854-7946 (Fax)

HOME PAGE: http://www.law.columbia.edu/fac/Jeffrey_Fagan

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