Search Results

Author: Lochner, Lance John
Resulting in 30 citations.
1. Belley, Philippe
Frenette, Marc
Lochner, Lance John
Post-Secondary Attendance by Parental Income in the U.S. and Canada : What Role for Financial Aid Policy?
NBER Working Paper No. 17218, National Bureau of Economic Research, July 2011.
Also: http://www.nber.org/papers/w17218
Cohort(s): NLSY97
Publisher: National Bureau of Economic Research (NBER)
Keyword(s): College Enrollment; Family Income; Financial Assistance; Higher Education; Tuition

This paper examines the implications of tuition and need-based financial aid policies for family income -- post-secondary (PS) attendance relationships. We first conduct a parallel empirical analysis of the effects of parental income on PS attendance for recent high school cohorts in both the U.S. and Canada using data from the 1997 Cohort of the National Longitudinal Survey of Youth and Youth in Transition Survey. We estimate substantially smaller PS attendance gaps by parental income in Canada relative to the U.S., even after controlling for family background, adolescent cognitive achievement, and local residence fixed effects. We next document that U.S. public tuition and financial aid policies are actually more generous to low-income youth than are Canadian policies. By contrast, Canada offers more generous aid to middle-class youth than does the U.S. These findings suggest that the much stronger family income -- PS attendance relationship in the U.S. is not driven by differences in the need-based nature of financial aid policies. Based on previous estimates of the effects of tuition and aid on PS attendance, we consider how much stronger income -- attendance relationships would be in the absence of need-based aid and how much additional aid would need to be offered to lower income families to eliminate existing income -- attendance gaps entirely.
Bibliography Citation
Belley, Philippe, Marc Frenette and Lance John Lochner. "Post-Secondary Attendance by Parental Income in the U.S. and Canada : What Role for Financial Aid Policy?" NBER Working Paper No. 17218, National Bureau of Economic Research, July 2011.
2. Belley, Philippe
Frenette, Marc
Lochner, Lance John
Post-secondary Attendance by Parental Income in the U.S. and Canada: Do Financial Aid Policies Explain the Differences?
Canadian Journal of Economics 47,2 (May 2014): 664-696.
Also: http://onlinelibrary.wiley.com/wol1/doi/10.1111/caje.12088/abstract
Cohort(s): NLSY97
Publisher: Canadian Economics Association / Association canadienne d\'economiques
Keyword(s): Canada, Canadian; College Enrollment; Cross-national Analysis; Family Income; Financial Assistance; Tuition

Permission to reprint the abstract has not been received from the publisher.

We examine the extent to which tuition and needs-based aid policies explain important differences in the relationship between family income and post-secondary attendance relationships between Canada and the U.S. Using data from recent cohorts, we estimate substantially smaller attendance gaps by parental income in Canada relative to the U.S., even after controlling for family background, cognitive achievement, and local-residence fixed effects. We next document that U.S. public tuition and financial aid policies are actually more generous to low-income youth than are Canadian policies. Equalizing these policies across Canada and the U.S. would likely lead to a greater difference in income-attendance gradients.
Bibliography Citation
Belley, Philippe, Marc Frenette and Lance John Lochner. "Post-secondary Attendance by Parental Income in the U.S. and Canada: Do Financial Aid Policies Explain the Differences?" Canadian Journal of Economics 47,2 (May 2014): 664-696.
3. Belley, Philippe
Lochner, Lance John
The Changing Role of Family Income and Ability in Determining Educational Achievement
NBER Working Paper No. 13527, National Bureau of Economic Research, October 2007.
Also: http://www.nber.org/papers/w13527
Cohort(s): NLSY79, NLSY97
Publisher: National Bureau of Economic Research (NBER)
Keyword(s): Cognitive Ability; College Enrollment; Educational Attainment; Educational Returns; Family Income; High School Diploma; Modeling

This paper uses data from the 1979 and 1997 National Longitudinal Survey of Youth cohorts (NLSY79 and NLSY97) to estimate changes in the effects of ability and family income on educational attainment for youth in their late teens during the early 1980s and early 2000s. Cognitive ability plays an important role in determining educational outcomes for both NLSY cohorts, while family income plays little role in determining high school completion in either cohort. Most interestingly, we document a dramatic increase in the effects of family income on college attendance (particularly among the least able) from the NLSY79 to the NLSY97. Family income has also become a much more important determinant of college 'quality' and hours/weeks worked during the academic year (the latter among the most able) in the NLSY97. Family income has little effect on college delay in either sample.

To interpret our empirical findings on college attendance, we develop an educational choice model that incorporates both borrowing constraints and a 'consumption' value of schooling - two of the most commonly invoked explanations for a positive family income - schooling relationship. Without borrowing constraints, the model cannot explain the rising effects of family income on college attendance in response to the sharply rising costs and returns to college experienced from the early 1980s to early 2000s: the incentives created by a 'consumption' value of schooling imply that income should have become less important over time (or even negatively related to attendance). Instead, the data are more broadly consistent with the hypothesis that more youth are borrowing constrained today than were in the early 1980s.

Bibliography Citation
Belley, Philippe and Lance John Lochner. "The Changing Role of Family Income and Ability in Determining Educational Achievement." NBER Working Paper No. 13527, National Bureau of Economic Research, October 2007.
4. Belley, Philippe
Lochner, Lance John
The Changing Role of Family Income and Ability in Determining Educational Achievement
Working Paper No. 2008-2, Department of Economics, Social Science Centre, University of Western Ontario, December 2008.
Also: http://economics.uwo.ca/faculty/lochner/papers/thechangingrole.pdf
Cohort(s): NLSY79, NLSY97
Publisher: Department of Economics, University of Western Ontario
Keyword(s): College Enrollment; Debt/Borrowing; Educational Attainment; Family Income; High School Diploma; Modeling

Permission to reprint the abstract has not been received from the publisher.

This paper uses data from the 1979 and 1997 National Longitudinal Survey of Youth cohorts (NLSY79 and NLSY97) to estimate changes in the effects of ability and family income on educational attainment for youth in their late teens during the early 1980s and early 2000s. Cognitive ability plays an important role in determining educational outcomes for both NLSY cohorts, while family income plays little role in determining high school completion in either cohort. Most interestingly, we document a dramatic increase in the effects of family income on college attendance (particularly among the least able) from the NLSY79 to the NLSY97. Family income has also become a much more important determinant of college 'quality' and hours/weeks worked during the academic year (the latter among the most able) in the NLSY97. Family income has little effect on college delay in either sample. To interpret our empirical findings on college attendance, we develop an educational choice model that incorporates both borrowing constraints and a 'consumption' value of schooling--two of the most commonly invoked explanations for a positive family income--schooling relationship. Without borrowing constraints, the model cannot explain the rising effects of family income on college attendance in response to the sharply rising costs and returns to college experienced from the early 1980s to early 2000s: the incentives created by a 'consumption' value of schooling imply that income should have become less important over time (or even negatively related to attendance). Instead, the data are more broadly consistent with the hypothesis that more youth are borrowing constrained today than were in the early 1980s.
Bibliography Citation
Belley, Philippe and Lance John Lochner. "The Changing Role of Family Income and Ability in Determining Educational Achievement." Working Paper No. 2008-2, Department of Economics, Social Science Centre, University of Western Ontario, December 2008.
5. Belley, Philippe
Lochner, Lance John
The Changing Role of Family Income and Ability in Determining Educational Achievement
Journal of Human Capital 1,1 (December 2007): 37-89.
Also: http://www.jstor.org/pss/10.1086/524674
Cohort(s): NLSY79, NLSY97
Publisher: University of Chicago Press
Keyword(s): Cognitive Ability; College Enrollment; Educational Attainment; Educational Returns; Family Income; School Completion

We use the National Longitudinal Survey of Youth 1979 and 1997 cohorts to estimate the effects of ability and family income on educational attainment in the early 1980s and early 2000s. The effects of family income on college attendance increase substantially over this period. Cognitive ability strongly affects schooling outcomes in both periods. We develop an educational choice model that incorporates both borrowing constraints and a "consumption value" of schooling. The model cannot explain the rising effects of family income on college attendance in response to rising costs and returns to college without appealing to borrowing constraints.
Bibliography Citation
Belley, Philippe and Lance John Lochner. "The Changing Role of Family Income and Ability in Determining Educational Achievement." Journal of Human Capital 1,1 (December 2007): 37-89.
6. Caucutt, Elizabeth M.
Lochner, Lance John
Borrowing Constraints on Families with Young Children
Presented: Cleveland, OH, Federal Reserve Bank of Cleveland Research Department Conference on Innovation in Education, November 17-18, 2005.
Cohort(s): Children of the NLSY79, NLSY79
Publisher: Federal Reserve Bank of Cleveland
Keyword(s): Children, Academic Development; Debt/Borrowing; Family Background; Family Income; Family Structure; Mothers, Race; Parental Investments; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading); Test Scores/Test theory/IRT

Permission to reprint the abstract has not been received from the publisher.

This study investigates the role of family income and borrowing constraints in determining early invest-ments in children and youth achievement scores. As figure 3 shows, youths raised in families in the bottom third of the income distribution are much less likely to be among the highest PIAT test scorers (at ages 13–14) than are those in middle- and high-income groups.3 While more than 50 percent of all 13- to 14-year-olds in the top tercile of the income distribution are in the top third of the test-score distribution, fewer than 20 percent of those in the bottom income tercile managed such scores. These findings raise the natural question: To what extent do family borrowing constraints during early childhood and adolescence influence early investments in chil-dren, cognitive achievement levels, and ultimately college attendance and completion? Summary from Slides of the oral presentation at the conference. [Editor]

Schooling Outcomes and Family Income

  • Large differences in schooling outcomes by family income
    • Raw difference in college enrollment between highest and lowest income terciles is greater than 30%
    • After controlling for achievement test scores during adolescence, the gap declines considerably (especially among most able)
    • Most of the gap is eliminated when further controlling for family background
    Findings suggest that short-run credit constraints at college-going ages are not an important determinant of college attendance and completion decisions (Carneiro and Heckman, 2002)

    Conclusions

  • We distinguish between intragenerational and intergenerational borrowing constraints
  • We implement three tests for intragenerational constraints to determine whether the timing of family income affects child achievement for children and adolescents
  • All three tests suggest that income earned earlier leads to better child outcomes, consistent with an inability of s ome parents to borrow against future earnings
  • Potential remedies:
    • Improved borrowing opportunities for lower income families with young children
    • Expanded public subsidies for early investments in children (e.g. preschool) targeted to lower income families
  • Bibliography Citation
    Caucutt, Elizabeth M. and Lance John Lochner. "Borrowing Constraints on Families with Young Children." Presented: Cleveland, OH, Federal Reserve Bank of Cleveland Research Department Conference on Innovation in Education, November 17-18, 2005..
    7. Caucutt, Elizabeth M.
    Lochner, Lance John
    Early and Late Human Capital Investments, Borrowing Constraints and the Family
    Working Paper No. 18493. National Bureau of Economic Research, October 2012.
    Also: http://www.nber.org/papers/w18493; also presented at the 2012 Society of Economic Dynamics Annual Meetings and at the 2012 AEA Meetings.
    Cohort(s): Children of the NLSY79, NLSY79
    Publisher: National Bureau of Economic Research (NBER)
    Keyword(s): College Graduates; Debt/Borrowing; Family Income; Family Structure; Financial Investments; Human Capital; Intergenerational Patterns/Transmission; Mothers, Education

    This paper investigates the importance of family borrowing constraints in determining human capital investments in children at early and late ages. We begin by providing new evidence from the Children of the NLSY (CNLSY) which suggests that borrowing constraints bind for at least some families with young children. Next, we develop an intergenerational model of lifecycle human capital accumulation to study the role of early versus late investments in children when credit markets are imperfect. We analytically establish the importance of dynamic complementarity in investment for the qualitative nature of investment responses to income and policy changes. We extend the framework to incorporate dynasties and use data from the CNLSY to calibrate the model. Our benchmark steady state suggests that roughly half of young parents and 12% of old parents are borrowing constrained, while older children are unconstrained. We also identify strong complementarity between early and late investments, suggesting that policies targeted to one stage of development tend to have similar effects on investment in both stages. We use this calibrated model to study the effects of education subsidies, loans and transfers offered at different ages on early and late human capital investments and subsequent earnings in the short-run and long-run. A key lesson is that the interaction between dynamic complementarity and early borrowing constraints means that early interventions tend to be more successful than later interventions at improving human capital outcomes.
    Bibliography Citation
    Caucutt, Elizabeth M. and Lance John Lochner. "Early and Late Human Capital Investments, Borrowing Constraints and the Family." Working Paper No. 18493. National Bureau of Economic Research, October 2012.
    8. Caucutt, Elizabeth M.
    Lochner, Lance John
    Park, Youngmin
    Correlation, Consumption, Confusion, or Constraints: Why do Poor Children Perform so Poorly?
    NBER Working Paper No. 21023, National Bureau of Economic Research, March 2015.
    Also: http://www.nber.org/papers/w21023
    Cohort(s): Children of the NLSY79, NLSY79
    Publisher: National Bureau of Economic Research (NBER)
    Keyword(s): Armed Forces Qualifications Test (AFQT); Children, Academic Development; Children, Poverty; Family Background; Family Income; Home Observation for Measurement of Environment (HOME); Human Capital; Intergenerational Patterns/Transmission; Parental Influences; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading); Risk Perception

    The economic and social mobility of a generation may be largely determined by the time it enters school given early developing and persistent gaps in child achievement by family income and the importance of adolescent skill levels for educational attainment and lifetime earnings. After providing new evidence of important differences in early child investments by family income, we study four leading mechanisms thought to explain these gaps: an intergenerational correlation in ability, a consumption value of investment, information frictions, and credit constraints. In order to better determine which of these mechanisms influence family investments in children, we evaluate the extent to which these mechanisms also explain other important stylized facts related to the marginal returns on investments and the effects of parental income on child investments and skills.
    Bibliography Citation
    Caucutt, Elizabeth M., Lance John Lochner and Youngmin Park. "Correlation, Consumption, Confusion, or Constraints: Why do Poor Children Perform so Poorly?" NBER Working Paper No. 21023, National Bureau of Economic Research, March 2015.
    9. Caucutt, Elizabeth M.
    Lochner, Lance John
    Park, Youngmin
    Correlation, Consumption, Confusion, or Constraints: Why Do Poor Children Perform so Poorly?
    Scandinavian Journal of Economics 119,1 (January 2017): 102-147.
    Also: http://onlinelibrary.wiley.com/wol1/doi/10.1111/sjoe.12195/abstract
    Cohort(s): Children of the NLSY79, NLSY79
    Publisher: Blackwell Publishing, Inc. => Wiley Online
    Keyword(s): Armed Forces Qualifications Test (AFQT); Children, Academic Development; Children, Poverty; Credit/Credit Constraint; Family Income; Home Observation for Measurement of Environment (HOME); Intergenerational Patterns/Transmission; Parental Influences; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading)

    Early developing and persistent gaps in child achievement by family income combined with the importance of adolescent skill levels for schooling and lifetime earnings suggest that a key component of intergenerational mobility is determined before individuals enter school. After documenting important differences in early child investments by family income, we study four leading mechanisms thought to explain these gaps: intergenerational ability correlation, consumption value of investment, information frictions, and credit constraints. We evaluate whether these mechanisms are consistent with other stylized facts related to the marginal returns on investments and the effects of parental income on child investments and skills.
    Bibliography Citation
    Caucutt, Elizabeth M., Lance John Lochner and Youngmin Park. "Correlation, Consumption, Confusion, or Constraints: Why Do Poor Children Perform so Poorly?" Scandinavian Journal of Economics 119,1 (January 2017): 102-147.
    10. Dahl, Gordon B.
    Lochner, Lance John
    The Impact of Family Income on Child Achievement
    NBER Working Paper No. 11279, National Bureau of Economic Research, April 2005.
    Also: http://www.nber.org/papers/w11279.pdf
    Cohort(s): Children of the NLSY79, NLSY79
    Publisher: National Bureau of Economic Research (NBER)
    Keyword(s): Achievement; Earned Income Tax Credit (EITC); Family Income; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading)

    Understanding the consequences of growing up poor for a child's well-being is an important research question, but one that is difficult to answer due to the potential endogeneity of family income. Past estimates of the effect of family income on child development have often been plagued by omitted variable bias and measurement error. In this paper, we use a fixed effect instrumental variables strategy to estimate the causal effect of income on children's math and reading achievement. Our primary source of identification comes from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20%, or approximately $2,100. Using a panel of over 6,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity and endogenous transitory income shocks as well as measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises math test scores by 2.1% and reading test scores by 3.6% of a standard deviation. The results are even stronger when looking at children from disadvantaged families who are affected most by the large changes in the EITC, and are robust to a variety of alternative specifications.
    Bibliography Citation
    Dahl, Gordon B. and Lance John Lochner. "The Impact of Family Income on Child Achievement." NBER Working Paper No. 11279, National Bureau of Economic Research, April 2005.
    11. Dahl, Gordon B.
    Lochner, Lance John
    The Impact of Family Income on Child Achievement
    Presented: London, England, Econometric Society 2005 World Congress, 19 - 24th August 2005.
    Also: http://eswc2005.econ.ucl.ac.uk/papers/ESWC/2005/2371/dahl%26lochner.pdf
    Cohort(s): Children of the NLSY79, NLSY79
    Publisher: Econometric Society
    Keyword(s): Armed Forces Qualifications Test (AFQT); Children, Academic Development; Earned Income Tax Credit (EITC); Family Income; Family Structure; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading)

    Permission to reprint the abstract has not been received from the publisher.

    Understanding the consequences of growing up poor for a child's well-being is an important research question, but one that is difficult to answer due to the potential endogeneity of family income. Past estimates of the effect of family income on child development have often been plagued by omitted variable bias and measurement error. In this paper, we use a fixed effect instrumental variables strategy to estimate the causal effect of income on children's math and reading achievement. Our primary source of identification comes from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20%, or approximately $2,100. Using a panel of over 6,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity and endogenous transitory income shocks as well as measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises math test scores by 2.1% and reading test scores by 3.6% of a standard deviation. The results are even stronger when looking at children from disadvantaged families who are affected most by the large changes in the EITC, and are robust to a variety of alternative specifications.
    Bibliography Citation
    Dahl, Gordon B. and Lance John Lochner. "The Impact of Family Income on Child Achievement." Presented: London, England, Econometric Society 2005 World Congress, 19 - 24th August 2005.
    12. Dahl, Gordon B.
    Lochner, Lance John
    The Impact of Family Income on Child Achievement
    Presented: Chicago, IL, The Chicago Workshop on Black-White Inequality, Department of Economics, University of Chicago, April 21, 2006.
    Also: http://economics.uchicago.edu/Inequality_Workshop/papers/Dahl_Lochner_2006_income.pdf
    Cohort(s): Children of the NLSY79, NLSY79
    Publisher: Department of Economics, University of Chicago
    Keyword(s): Academic Development; Achievement; Children, Academic Development; Children, Well-Being; Earned Income Tax Credit (EITC); Family Income; Modeling, Fixed Effects; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading)

    Permission to reprint the abstract has not been received from the publisher.

    Understanding the consequences of growing up poor for a child's well-being is an important research question, but one that is difficult to answer due to the potential endogeneity of family income. Past estimates of the effect of family income on child development have often been plagued by omitted variable bias and measurement error. In this paper, we use a fixed effect instrumental variables strategy to estimate the causal effect of income on children's math and reading achievement. Our primary source of identification comes from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20%, or approximately $2,100. Using a panel of over 6,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity and endogenous transitory income shocks as well as measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises math test scores by 2.1% and reading test scores by 3.6% of a standard deviation. The results are even stronger when looking at children from disadvantaged families who are affected most by the large changes in the EITC, and are robust to a variety of alternative specifications.
    Bibliography Citation
    Dahl, Gordon B. and Lance John Lochner. "The Impact of Family Income on Child Achievement." Presented: Chicago, IL, The Chicago Workshop on Black-White Inequality, Department of Economics, University of Chicago, April 21, 2006.
    13. Dahl, Gordon B.
    Lochner, Lance John
    The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit
    NBER Working Paper No. 14599, National Bureau of Economic Research, December 2008.
    Also: http://www.nber.org/papers/w14599.pdf
    Cohort(s): Children of the NLSY79, NLSY79
    Publisher: National Bureau of Economic Research (NBER)
    Keyword(s): Children, Academic Development; Earned Income Tax Credit (EITC); Family Income; Family Structure; Modeling, Fixed Effects; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading); Taxes; Variables, Instrumental

    A brief narrative description of the journal article, document, or resource. Past estimates of the effect of family income on child development have often been plagued by endogeneity and measurement error. In this paper, we use two simulated instrumental variables strategies to estimate the causal effect of income on children's math and reading achievement. Our identification derives from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20%, or approximately $2,100. Using a panel of almost 5,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity, endogenous transitory income shocks, and measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises combined math and reading test scores by 6% of a standard deviation in the short run. The gains are larger for children from disadvantaged families and are robust to a variety of alternative specifications. We find little evidence of long-run income effects, with most of the effects disappearing after one year.
    Bibliography Citation
    Dahl, Gordon B. and Lance John Lochner. "The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit." NBER Working Paper No. 14599, National Bureau of Economic Research, December 2008.
    14. Dahl, Gordon B.
    Lochner, Lance John
    The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit
    Discussion Paper No. 1361-09, Institute for Research on Poverty, January 2009.
    Also: http://www.irp.wisc.edu/publications/dps/pdfs/dp136109.pdf
    Cohort(s): Children of the NLSY79
    Publisher: Institute for Research on Poverty (IRP), University of Wisconsin - Madison
    Keyword(s): Achievement; Child Development; Children, Academic Development; Children, Poverty; Earned Income Tax Credit (EITC); Endogeneity; Family Income; Family Influences; Heterogeneity; Modeling, Fixed Effects; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading)

    Permission to reprint the abstract has not been received from the publisher.

    Past estimates of the effect of family income on child development have often been plagued by endogeneity and measurement error. In this paper, we use two simulated instrumental variables strategies to estimate the causal effect of income on children's math and reading achievement. Our identification derives from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20 percent, or approximately $2,100. Using a panel of almost 5,000 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity, endogenous transitory income shocks, and measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises combined math and reading test scores by 6 percent of a standard deviation in the short run. The gains are larger for children from disadvantaged families and are robust to a variety of alternative specifications. We find little evidence of long-run income effects, with most of the effects disappearing after one year. ...

    To make the PIAT test scores more easily interpretable, we create normalized test scores with a mean of zero and a standard deviation of one based on the random sample of test takers (i.e. excluding the poor and minority oversamples). We also create a combined math-reading score, which takes the average of our normalized math and reading scores. This is then re-normalized to have a mean of zero and standard deviation of one in the random sample.2

    Bibliography Citation
    Dahl, Gordon B. and Lance John Lochner. "The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit." Discussion Paper No. 1361-09, Institute for Research on Poverty, January 2009.
    15. Dahl, Gordon B.
    Lochner, Lance John
    The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit
    CIBC Working Paper Series, Working Paper #2011-3, Department of Economics, Social Science Centre, The University of Western Ontario, 2011.
    Also: http://economics.uwo.ca/centres/cibc/wp2011/Dahl_Lochner03.pdf
    Cohort(s): Children of the NLSY79
    Publisher: Economics Department, Queens University
    Keyword(s): Achievement; Child Development; Children, Academic Development; Children, Poverty; Earned Income Tax Credit (EITC); Endogeneity; Family Income; Family Influences; Heterogeneity; Modeling, Fixed Effects; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading)

    Permission to reprint the abstract has not been received from the publisher.

    Past estimates of the effect of family income on child development have often been plagued by endogeneity and measurement error. In this paper, we use an instrumental variables strategy to estimate the causal effect of income on children’s math and reading achievement. Our identification derives from the large, non-linear changes in the Earned Income Tax Credit (EITC) over the last two decades. The largest of these changes increased family income by as much as 20%, or approximately $2,100, between 1993 and 1997. Using a panel of roughly 4,500 children matched to their mothers from National Longitudinal Survey of Youth datasets allows us to address problems associated with unobserved heterogeneity, endogenous transitory income shocks, and measurement error in income. Our baseline estimates imply that a $1,000 increase in income raises combined math and reading test scores by 6% of a standard deviation in the short-run. Test gains are larger for children from disadvantaged families and are robust to a variety of alternative specifications.
    Bibliography Citation
    Dahl, Gordon B. and Lance John Lochner. "The Impact of Family Income on Child Achievement: Evidence from the Earned Income Tax Credit." CIBC Working Paper Series, Working Paper #2011-3, Department of Economics, Social Science Centre, The University of Western Ontario, 2011.
    16. Heckman, James J.
    Lochner, Lance John
    Taber, Christopher Robert
    Explaining Rising Wage Inequality: Explorations with a Dynamic General Equilibrium Model of Labor Earnings with Heterogeneous Agents
    NBER Working Paper No. 6384, National Bureau of Economic Research, January 1998.
    Also: http://www.nber.org/cgi-bin/wpsearch.pl?action=bibliography&paper=W6384&year=98
    Cohort(s): NLSY79
    Publisher: National Bureau of Economic Research (NBER)
    Keyword(s): Armed Forces Qualifications Test (AFQT); College Enrollment; College Graduates; Earnings; Human Capital; Modeling; Schooling; Skill Formation; Skills; Training, On-the-Job; Training, Post-School; Transition, School to Work; Wage Differentials; Wage Equations

    This paper develops and estimates an overlapping generations general equilibrium model of labor earnings, skill formation and physical capital accumulation with heterogeneous human capital. The model analyzes both schooling choices and post-school on-the-job investment in skills in a framework in which different schooling levels index different skills. A key insight in the model is that accounting for the distinction between skill prices and measured wages is important for analyzing the changing wage structure, as they often move in different directions. New methods are developed and applied to estimate the demand for unobserved human capital and to determine the substitution relationships in aggregate technology among skills and capital. We estimate skill-specific human capital accumulation equations that are consistent with the general equilibrium predictions of the model. Using our estimates, we find that a model of skill-biased technical change with a trend estimated from our aggregate technology is consistent with the central feature of rising wage equality measured by the college-high school wage differential and by the standard deviation of log earnings over the past 15 years. Immigration of low skill workers contributes little to rising wage inequality. When the model is extended to account for the enlarged cohorts of the Baby Boom, we find that the same parameter estimates of the supply functions for human capital that are used the explain the wage history of the last 15 years also explain the last 35 years of wage inequality as documented by Katz and Murphy (1992).
    Bibliography Citation
    Heckman, James J., Lance John Lochner and Christopher Robert Taber. "Explaining Rising Wage Inequality: Explorations with a Dynamic General Equilibrium Model of Labor Earnings with Heterogeneous Agents." NBER Working Paper No. 6384, National Bureau of Economic Research, January 1998.
    17. Heckman, James J.
    Lochner, Lance John
    Taber, Christopher Robert
    General Equilibrium Cost Benefit Analysis of Education and Tax Policies
    NBER Working Paper No. 6881, National Bureau of Economic Research, January 1999.
    Also: http://nber.nber.org/papers/W6881
    Cohort(s): NLSY79
    Publisher: National Bureau of Economic Research (NBER)
    Keyword(s): Cost-Benefit Studies; Endogeneity; Heterogeneity; Human Capital; Modeling; Schooling; Skill Formation; Taxes; Training, On-the-Job; Tuition

    This paper formulates and estimates an open-economy overlapping generation general-equilibrium model of endogenous heterogeneous human capital in the form of schooling and on-the-job training. Physical capital accumulation is also analyzed. We use the model to explain rising wage inequality in the past two decades due to skill-biased technical change and to estimate investment responses. We compare an open economy version with a closed economy version. Using our empirically grounded general equilibrium model that explains rising wage inequality, we evaluate two policies often suggested as solutions to the problem of rising wage inequality: (a) tuition subsidies to promote skill formation and (b) tax policies. We establish that conventional partial equilibrium policy evaluation methods widely used in labor economics and public finance give substantially misleading estimates of the impact of national tax and tuition policies on skill formation. Conventional microeconomic methods for estimating the schooling response to tuition overestimate the response by an order of magnitude. Simulations of our model also reveal that move to a flat consumption tax raises capital accumulation and the real wages of all skill groups and barely affects overall measures of income inequality.
    Bibliography Citation
    Heckman, James J., Lance John Lochner and Christopher Robert Taber. "General Equilibrium Cost Benefit Analysis of Education and Tax Policies." NBER Working Paper No. 6881, National Bureau of Economic Research, January 1999.
    18. Levitt, Steven D.
    Lochner, Lance John
    The Determinants of Juvenile Crime
    In: Risky Behavior Among Youths: An Economic Analysis. J. Gruber, ed. Chicago IL: The University of Chicago Press, 2001: pp. 327-373
    Cohort(s): NLSY79
    Publisher: University of Chicago Press
    Keyword(s): Cognitive Ability; Crime; Delinquency/Gang Activity; Gender Differences; Home Environment; Income; Poverty

    Examines the issues of youth crime. The authors begin by laying out the basic facts and trends relevant to youth crime over the last 30 yrs. They then consider both the social costs of youth crime and the personal risks and costs borne by the criminals themselves. After reviewing the various hypotheses as to the determinants of crime identified in the previous literature, the authors present 3 new sets of estimates that shed light on the issue. The first set of regressions uses that National Longitudinal Survey of Youth to explore the correlates of crime at the individual level. The second analysis focuses on census-tract-level homicide data for the city of Chicago over 30 yrs. The final data set is a state-level panel covering 15 yrs. This analysis is ideal for examining the effect of the criminal-justice system and, to a lesser extent, economic factors. The authors found that such factors as gender, family environment, cognitive ability, income inequality, poverty, and the effectiveness of the criminal justice system influence criminal involvement (PsycINFO Database Record (c) 2000 APA, all rights reserved))
    Bibliography Citation
    Levitt, Steven D. and Lance John Lochner. "The Determinants of Juvenile Crime" In: Risky Behavior Among Youths: An Economic Analysis. J. Gruber, ed. Chicago IL: The University of Chicago Press, 2001: pp. 327-373
    19. Levitt, Steven D.
    Lochner, Lance John
    The Determinants of Juvenile Crime
    Working Paper, University of Chicago and American Bar Foundation, February 2000.
    Also: http://www.econ.rochester.edu/lochner/levitt-lochner.pdf
    Cohort(s): NLSY79
    Publisher: University of Chicago
    Keyword(s): Adolescent Behavior; Behavior, Antisocial; Crime; Labor Market Demographics; Labor Market Studies, Geographic; State-Level Data/Policy

    Permission to reprint the abstract has not been received from the publisher.

    Criminal involvement in the United States rises sharply with the onset of adolescence, peaking in the late teenage years before dropping steadily thereafter. An eighteen-year old is five times more likely to be arrested for a property crime than a thirty-five year old; for violent crime the corresponding ratio is 2 to 1. In 1997, those aged 15-19 comprised roughly 7 percent of the overall population, but accounted for over 20 percent of arrests for violent offenses and roughly one-third of all property crime arrests.

    This essay examines the issue of youth crime. We begin by laying out the basic facts and trends relevant to youth crime over the last thirty years. We then consider both the social costs of youth crime and the personal risks and costs borne by the criminals themselves. After reviewing the various hypotheses as to the determinants of crime identified in the previous literature, we present three new sets of estimates that shed light on the issue. The first set of regressions use the National Longitudinal Survey of Youth (NLSY) to explore the correlates of crime at the individual level. The second analysis focuses on census tract-level homicide data for the city of Chicago over a thirty year period. These data provide a means of better understanding the influence of social factors and local labor market conditions on youth crime. The final data set is a state-level panel covering fifteen years. The state-level analysis is ideal for examining the impact of the criminal justice system (and to a lesser extent economic factors). We use these three sets of estimates to determine the extent to which observed fluctuations in the correlates of crime can explain the time series pattern of juvenile crime over the last three decades.

    Bibliography Citation
    Levitt, Steven D. and Lance John Lochner. "The Determinants of Juvenile Crime." Working Paper, University of Chicago and American Bar Foundation, February 2000.
    20. Lochner, Lance John
    A Life-Cycle Model of Human Capital and Crime: Estimating Deterrent Effects of Wage and Education Subsidies
    Ph.D. Dissertation, The University Of Chicago, 1998
    Cohort(s): NLSY79
    Publisher: UMI - University Microfilms, Bell and Howell Information and Learning
    Keyword(s): High School Completion/Graduates; Human Capital; Life Cycle Research; Modeling

    This study develops a dynamic model of an individual's decision to work, to invest in human capital, or to commit crime. The model explains declining criminal participation with age and duration dependence of criminal activity. The effects of high school graduation and ability on crime are estimated using data from the National Longitudinal Survey of Youth. Both significantly reduce criminal participation among young men. High school graduation also reduces the probability that a young man will become incarcerated. The model developed in this study is used to explore the impacts of wage and education subsidies and of wage taxes on crime, work, and investment in skills. Parameters of the model are estimated for men, and those estimates are used to show that skill investment subsidies substantially lower aggregate crime and raise earnings from work. Permanent wage subsidies have similar impacts, although their effects are much smaller. For individuals who only participate in crime for afew years, short-term wage subsidies in early periods of a worker's career are effective criminal deterrents; however, these subsidies lower skill investment and may increase crime rates for long-term criminals after they are discontinued. In aggregate, a uniform short-term wage subsidy can lower labor earnings and raise crime. Finally, we show that a program which corrects for deficient families can substantially raise legitimate earnings and lower crime.
    Bibliography Citation
    Lochner, Lance John. A Life-Cycle Model of Human Capital and Crime: Estimating Deterrent Effects of Wage and Education Subsidies. Ph.D. Dissertation, The University Of Chicago, 1998.
    21. Lochner, Lance John
    A Theoretical and Empirical Study of Individual Perceptions of the Criminal Justice System
    RCER Working Papers No. 483, University of Rochester - Center for Economic Research (RCER), June 2001.
    Also: http://rcer.econ.rochester.edu/RCERPAPERS/rcer_483.pdf
    Cohort(s): NLSY97
    Publisher: Center for Economic Research (RCER) - University of Rochester
    Keyword(s): Arrests; Crime; Heterogeneity; Modeling; Neighborhood Effects

    Permission to reprint the abstract has not been received from the publisher.

    This paper examines perceptions of the criminal justice system held by young males using longitudinal survey data from the recent National Longitudinal Survey of Youth 1997 Cohort and the National Youth Survey. First, a model is developed to study how perceptions respond to individual information about the probability of arrest and how perceptions affect criminal behavior. Then, the model is shown to be consistent with the data. Young males who engage in crime but are not arrested revise their perceived probability of arrest downward, while those who are arrested revise their probability upwards. The perceived probability of arrest is then linked to subsequent criminal behavior - youth with a lower perceived probability of arrest are significantly more likely to engage in crime during subsequent periods. Perceived probabilities of arrest appear to be idiosyncratic and individual-specific. As a result, information about the arrests of others, local neighborhood conditions, and official arrest rates have little impact on the perceptions of any given individual about his own arrest rate. Another interesting feature of the data on perceptions includes the finding that young males typically report a higher probability of arrest than is actually observed in official arrest rates. Consistent with the model, perceived arrest probabilities among those engaged in crime are lower than those of non-criminals. Despite substantial heterogeneity in the perceived probability of arrest across individuals, those perceptions are difficult to predict from standard background measures, ability, and neighborhood characteristics. Most notably, there do not appear to be substantial differences in perceptions across race and ethnicity for most of the crimes studied. These findings suggest that heterogeneity in perceptions may be an important cause for differences in criminal participation across individuals. Furthermore, those perceptions can be influenced by the justice system. A model of belief updating and criminal behavior that is consistent with the data suggests that policies enacted to change the actual probability of arrest will have heterogeneous effects on individuals with different crime and arrest histories, but increases in true arrest rates will lower crime. Since it may take time for information about changes in actual arrest rates to disseminate, changes in enforcement policy are likely to have lagged effects on crime rates.
    Bibliography Citation
    Lochner, Lance John. "A Theoretical and Empirical Study of Individual Perceptions of the Criminal Justice System." RCER Working Papers No. 483, University of Rochester - Center for Economic Research (RCER), June 2001.
    22. Lochner, Lance John
    Education, Work, and Crime a Human Capital Approach
    NBER Working Paper No. 10478, National Bureau of Economic Research, 2004.
    Also: http://papers.nber.org/papers/w10478.pdf
    Cohort(s): NLSY79
    Publisher: National Bureau of Economic Research (NBER)
    Keyword(s): Crime; Educational Attainment; Human Capital; Modeling; Self-Reporting; Training

    This paper develops a model of crime in which human capital increases the opportunity cost of crime from foregone work and expected costs associated with incarceration. Older, more intelligent, and more educated adults should commit fewer street (unskilled) crimes. White collar crimes decline less (or increase) with age and education. Predictions for age-crime and education-crime relationships receive broad empirical support in self-report data from the National Longitudinal Survey of Youth and arrest data from the Uniform Crime Reports. The effects of education, training, and wage subsidies, as well as enforcement policies on criminal behavior are discussed
    Bibliography Citation
    Lochner, Lance John. "Education, Work, and Crime a Human Capital Approach." NBER Working Paper No. 10478, National Bureau of Economic Research, 2004.
    23. Lochner, Lance John
    Education, Work, and Crime: A Human Capital Approach
    International Economic Review 45,3 (August 2004): 811-844.
    Also: http://search.epnet.com/direct.asp?an=13932162&db=buh
    Cohort(s): NLSY79
    Publisher: U.S. International Trade Commission
    Keyword(s): Age and Ageing; Crime; Educational Attainment; Human Capital; Incarceration/Jail; Labor Economics; Modeling; Self-Reporting; Training

    This article develops a model of crime in which human capital increases the opportunity cost of crime from foregone work and expected costs associated with incarceration. Older, more intelligent, and more educated adults should commit fewer street (unskilled) crimes. White collar crimes decline less (or increase) with age and education. Predictions for age
    Bibliography Citation
    Lochner, Lance John. "Education, Work, and Crime: A Human Capital Approach." International Economic Review 45,3 (August 2004): 811-844.
    24. Lochner, Lance John
    Education, Work, and Crime: Theory and Evidence
    Working Paper No. 465, Center for Economic Research (RCER) - University of Rochester, October 1999.
    Also: http://rcer.econ.rochester.edu/RCERPAPERS/rcer_465.pdf
    Cohort(s): NLSY79
    Publisher: Center for Economic Research (RCER) - University of Rochester
    Keyword(s): Crime; Current Population Survey (CPS) / CPS-Fertility Supplement; Endogeneity; Gambling; High School Completion/Graduates; Human Capital; Modeling; Punishment, Criminal; Skills

    Permission to reprint the abstract has not been received from the publisher.

    This paper develops and empirically examines a dynamic model of decisions to work, invest in human capital, and commit crime. By making all three activities endogenous, the model makes a number of new and interesting contributions to the study of crime. First, the model explains why older, more intelligent, and more educated workers tend to commit less of some property crimes than others. Age and education are more negatively correlated with crimes requiring little skill. Second, the model is useful for analyzing the impacts of education, training, and work subsidies on criminal behavior. It predicts that all three subsidy policies can reduce criminal activity. However, short-term wage subsidies only temporarily reduce crime, at the expense of increasing future crime rates. Third, unobserved age differences in on-the-job skill investment explain why wages and crime are more negatively correlated at older ages: at later ages, wages more accurately reflect skill levels and the true opportunity cost of crime. Fourth, the model predicts a rise in youth crime should accompany the recent rise in returns to skill; however, adult crime rates may rise or fall since the most able are likely to reduce their criminal activity when older while the least able increase theirs. Finally, the model suggests that law enforcement policies increase education, training, and labor supply, while reducing criminal activity.

    A number of testable implications of the model are empirically studied using data from the National Longitudinal Survey of Youth (NLSY), Current Population Survey (CPS), and Uniform Crime Reports (UCR). Both ability and high school graduation are found to significantly reduce criminal participation among young men in the NLSY. High school graduation also reduces the probability that a young man will become incarcerated sometime in the following five years. While the impact of high school graduation on criminal participation declines with age, its effect on incar ceration is large and relatively stable throughout young adulthood. We also estimate the deterrent effect of more severe punishment, which appears to be strong in the NLSY. Evidence from the UCR and CPS supports our individual-level findings: states with higher high school graduation rates and more severe punishment policies have lower index property crime rates. A number of other predictions are supported by the data, suggesting that the model is useful for studying the interactions of education, work, and crime.

    Bibliography Citation
    Lochner, Lance John. "Education, Work, and Crime: Theory and Evidence." Working Paper No. 465, Center for Economic Research (RCER) - University of Rochester, October 1999.
    25. Lochner, Lance John
    Individual Perceptions of the Criminal Justice System
    NBER Working Paper No. 9474, National Bureau of Economic Research, February 2003.
    Also: http://www.nber.org/papers/w9474.pdf
    Cohort(s): NLSY97
    Publisher: National Bureau of Economic Research (NBER)
    Keyword(s): Arrests; Crime; Delinquency/Gang Activity

    This paper empirically examines perceptions of the criminal justice system held by young males using longitudinal survey data from the recent National Longitudinal Survey of Youth 1997 Cohort and the National Youth Survey. While beliefs about the probability of an arrest are positively correlated with local official arrest rates, they are largely idiosyncratic and unresponsive to information about the arrests of other random individuals and local neighborhood conditions. There is little support, therefore, for the 'broken windows' theory of Wilson and Kelling (1982). Yet, perceptions do respond to changes in an individual's own criminal and arrest history. Young males who engage in crime but are not arrested revise their perceived probability of arrest downward, while those who are arrested revise their probability upwards. Beliefs respond similarly to changes in a sibling's criminal and arrest history. The perceived probability of arrest is then linked to subsequent criminal behavior. Cross-sectionally, youth with a lower perceived probability of arrest are significantly more likely to engage in crime during subsequent periods. Following an arrest, individuals commit less crime, consistent with deterrence theory and the fact that their perceived probability of arrest increases.

    Earlier versions of this paper are available at:
    http://www.econ.rochester.edu/lochner/arrest_probability.pdf
    http://adfdell.pstc.brown.edu/papers/loch02.pdf

    Bibliography Citation
    Lochner, Lance John. "Individual Perceptions of the Criminal Justice System." NBER Working Paper No. 9474, National Bureau of Economic Research, February 2003.
    26. Lochner, Lance John
    Belley, Philippe
    Frenette, Marc
    Family Income, Ability and Post-Secondary Attendance in the US and Canada
    Presented: Washington, DC, Bureau of Labor Statistics Conference Center, NLSY97 Tenth Anniversary Conference, May 29-30, 2008
    Cohort(s): NLSY97
    Publisher: U.S. Department of Labor
    Keyword(s): Canada, Canadian; Family Income; Schooling, Post-secondary

    Bibliography Citation
    Lochner, Lance John, Philippe Belley and Marc Frenette. "Family Income, Ability and Post-Secondary Attendance in the US and Canada." Presented: Washington, DC, Bureau of Labor Statistics Conference Center, NLSY97 Tenth Anniversary Conference, May 29-30, 2008.
    27. Lochner, Lance John
    Monge-Naranjo, Alexander
    Credit Constraints in Education
    Working Paper No. 17435, National Bureau of Economic Research, September 2011.
    Also: http://www.nber.org/papers/w17435
    Cohort(s): NLSY79, NLSY97
    Publisher: National Bureau of Economic Research (NBER)
    Keyword(s): College Education; Credit/Credit Constraint; Education; Family Income; Human Capital

    We review studies of the impact of credit constraints on the accumulation of human capital. Evidence suggests that credit constraints are increasingly important for schooling and other aspects of households' behavior. We highlight the importance of early childhood investments, since their response largely determines the impact of credit constraints on the overall lifetime acquisition of human capital. We also review the intergenerational literature and examine the macroeconomic impacts of credit constraints on social mobility and the income distribution.

    A common limitation across all areas of the human capital literature is the imposition of ad hoc constraints on credit. We propose a more careful treatment of the structure of government student loan programs as well as the incentive problems underlying private credit. We show that endogenizing constraints on credit for human capital helps explain observed borrowing, schooling, and default patterns and offers new insights about the design of government policy.

    Bibliography Citation
    Lochner, Lance John and Alexander Monge-Naranjo. "Credit Constraints in Education." Working Paper No. 17435, National Bureau of Economic Research, September 2011.
    28. Lochner, Lance John
    Monge-Naranjo, Alexander
    The Nature of Credit Constraints and Human Capital
    American Economic Review 101,6 (October 2011): 2487-2529.
    Also: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.6.2487
    Cohort(s): NLSY79, NLSY97
    Publisher: American Economic Association
    Keyword(s): College Education; Credit/Credit Constraint; Debt/Borrowing; Family Income; Human Capital; Modeling; Student Loans

    Permission to reprint the abstract has not been received from the publisher.

    We develop a human capital model with borrowing constraints explicitly derived from government student loan (GSL) programs and private lending under limited commitment. The model helps explain the persistent strong positive correlation between ability and schooling in the United States, as well as the rising importance of family income for college attendance. It also explains the increasing share of undergraduates borrowing the GSL maximum and the rise in student borrowing from private lenders. Our framework offers new insights regarding the interaction of government and private lending, as well as the responsiveness of private credit to economic and policy changes. (JEL D14, H52, I22, I23, J24)
    Bibliography Citation
    Lochner, Lance John and Alexander Monge-Naranjo. "The Nature of Credit Constraints and Human Capital." American Economic Review 101,6 (October 2011): 2487-2529.
    29. Lochner, Lance John
    Moretti, Enrico
    The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports
    American Economic Review 94,1 (March 2004): 155-189.
    Also: http://www.aeaweb.org/articles.php?doi=10.1257/000282804322970751
    Cohort(s): NLSY79
    Publisher: American Economic Association
    Keyword(s): Arrests; Behavior; Census of Population; Crime; Education; Educational Attainment; Endogeneity; High School Completion/Graduates; Incarceration/Jail; Schooling; Self-Reporting

    Permission to reprint the abstract has not been received from the publisher.

    We estimate the effect of education on participation in criminal activity using changes in state compulsory schooling laws over time to account for the endogeneity of schooling decisions. Using Census and FBI data, we find that schooling significantly reduces the probability of incarceration and arrest. NLSY data indicate that our results are caused by changes in criminal behavior and not differences in the probability of arrest or incarceration conditional on crime. We estimate that the social savings from crime reduction associated with high school graduation (for men) is about 14-26 percent of the private return.
    Bibliography Citation
    Lochner, Lance John and Enrico Moretti. "The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports." American Economic Review 94,1 (March 2004): 155-189.
    30. Lochner, Lance John
    Moretti, Enrico
    The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports
    NBER Working Paper No. 8605, National Bureau of Economic Research, November 2001.
    Also: http://www.nber.org/papers/w8605.pdf
    Cohort(s): NLSY79
    Publisher: National Bureau of Economic Research (NBER)
    Keyword(s): Arrests; Census of Population; Crime; Endogeneity; High School Completion/Graduates; Incarceration/Jail; Racial Differences; Schooling; Self-Reporting

    We estimate the effect of high school graduation on participation in criminal activity accounting for endogeneity of schooling. 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. 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 can explain differences in the 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 these findings using FBI 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. We estimate that 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.
    Bibliography Citation
    Lochner, Lance John and Enrico Moretti. "The Effect of Education on Crime: Evidence from Prison Inmates, Arrests, and Self-Reports." NBER Working Paper No. 8605, National Bureau of Economic Research, November 2001.