Institutional Placement and Illegal Earnings: Examining the Crime School Hypothesis

Objectives: The objective of the current study is to examine the hypothesis that correctional environments can facilitate the accumulation of “criminal capital” and might actually encourage offending by serving as a school of crime. Methods: We use panel data from a sample of 615 serious juvenile offenders who reported illegal earnings and information regarding institutional stays over a 7 year period. There are two separate measures that can contribute to criminal capital within institutions: the prevalence of friends in the institution who have committed income generating crimes and the length of institutional stays as a cumulative dosage. We account for unobserved heterogeneity using fixed effects estimation. Results: Both institutional measures, total number of days incarcerated and exposure to deviant peers, predict a positive increase in an individual’s daily illegal wage rate, even after eliminating fixed unobserved heterogeneity and controlling for important time-varying confounders. For total number of days institutionalized, there were positive though marginally declining returns to length of stay. Conclusions: For juveniles, placement in institutions can have important negative consequences. Our findings extend and complement findings showing that institutionalization might help increase opportunities in the illegal market. This not only undermines prison as a crime-prevention strategy but could also promote longer and more successful criminal careers.