The returns to education for mobsters

There is a long history of research demonstrating positive returns to education. That is, the benefits of education typically exceed the costs of education for most students in fairly standard education (primary, secondary, vocational or higher education). A 2016 paper (ungated version here) by Nadia Campaniello (University of Essex), Rowena Gray (UC Merced), and Giovanni Mastrobuoni (University of Essex) and published in the journal Economics of Education Review adds to the evidence, but in a fairly unique direction. Campaniello et al. use data on 712 mobsters from the Federal Bureau of Narcotics and compare them with various samples from the 1940 Census. They found that there were:

...large returns to education within the mafia, no matter the model, or the outcome variable, that we use. This shows that private returns to education exist not only in legitimate but also in the illegitimate activities that imply a sufficient degree of complexity. Mobster returns (in terms of income) to a year of schooling are around 7.5-8.5 percent, compared to 9-10 percent for the neighbor sample and 10.5-13 percent for the U.S. born and U.S. citizen samples. Interestingly, mobster returns are substantially larger than we find for the immigrant and, especially, the Italian immigrant, samples, while they are only about one percentage point higher than we find for second-generation Italians. Moreover, for mobsters who, according to the FBN records, were involved in white-collar crimes or in crimes that require running an illegal business (i.e., racketeering, loan sharking, bootlegging, etc.) we find returns to education that are about three times as large as for those who are involved in violent crimes (i.e., robberies, murders, etc.).

The key points to take away are that the returns to education in illegal activities are very similar to the returns to education in legal activities (based on the other samples the authors looked at), and that the mobsters earn higher returns than other Italian immigrants. The latter result is best explained by thinking about the optimal level of education, being where the marginal benefit of an additional year of education (through higher lifetime earnings) is equal to marginal cost of an additional year of education. For a mobster, the annual earnings premium for education needs to be higher because they will expect to spend fewer years 'working', due to the likelihood of prison time for their illegal activities.

The title of the paper asks "Did going to college help Michael Corleone?" Based on these results, I guess it probably did.

[HT: Marginal Revolution, back in January]