On the Role of Social Capital in Youth Crime: A Dynamic Structural Approach

We study criminality in a dynamic context by introducing social capital into the economic theory of crime. Social capital measures the extent to which an individual is bonded to legitimate society. According to the social control perspective. bonds to society strengthen as the individual ages, increasing the cost of deviant behaviof, making criminal acts less likely. This hypothesis is consistent with the temporal patlern displayed in aggregate arrest data. We empirically implement our model using panel data on a sample representative of young men in urban areas of the United States. Estimation is complicated by an omitled regressor problem, which arises because choices in future states not realized, are unobserved. We resolve this issue by replacing the unobservables with Monte Carlo draws from the conditional empirical distribution of observed outcomes and using a Method of Simulated Moments estimator. Our results provide evidence in support of a social capital theory of crime. We find that social capital affects both preferences and earnings in the legitimate sector. Further, as predicted by social control theory. social capital becomes increasingly important over the Iife-cQurse. This raises the cost associated with crime. making its occurrence less likely.