Returns to education in criminal organizations: Did going to college help Michael Corleone?

By Nadia Campaniello, Rowena Gray & Giovanni Mastrobuoni. 

"Highlights

•           We estimate the returns to education of Italian–American mobsters using the 1940 Census to be close to 8% per year.

•           Such returns are similar to those of white men of similar age living in the same neighborhood and are larger than those of immigrants, of Italian immigrants, and of US residents of Italian descent.

•           We find that mobsters involved in illegal businesses, like racketeering, loan sharking, bookmaking, etc., exhibit the largest returns to education.

 

Abstract

Is there any return to education in criminal activities? This paper is one of the first to investigate whether education has not only a positive impact on legitimate, but also on illegitimate activities. We use as a case study one of the longest running criminal corporations in history: the Italian-American mafia. Its most successful members were capable businessmen, orchestrating crimes that required abilities that might be learned at school: extracting the optimal rent when setting up a racket, weighting interests against default risk when starting a loan sharking business or organizing supply chains, logistics and distribution when setting up a drug dealing system. We address this question by comparing mobsters to a variety of samples drawn from the United States 1940 Population Census, including a sample of their closest (non-mobster) neighbors. We document that mobsters have one year less education than their neighbors on average. We find that mobsters have significant returns to education of 7.5–8.5% , which is only slightly smaller than their neighbors and 2–5 percentage points smaller than for U.S.-born men or male citizens. Mobster returns were consistently about twice as large as a sample of Italian immigrants or immigrants from all origin countries. Within that, those charged with complex crimes including embezzlement and bookmaking have the highest returns. We conclude that private returns to education exist even in the illegal activities characterized by a certain degree of complexity as in the case of organized crime in mid-twentieth century United States."