Does schooling reduce juvenile delinquency? Evidence from a natural experiment in Japan∗

Individual returns of schooling have been examined intensively but social returns of schooling have received less attention. If schooling yields not only individual returns but also social returns such as a reduction in crime then the rationale for policies which encourage individual investments in schooling is strengthened. In this paper, we explore the e ect of schooling on juvenile delinquency. To identify the e ect of schooling, we use exogenous variation in schooling caused by a policy intervention in speci c cities and towns after the Great Hanshin-Awaji Earthquake, which occurred in the Midwestern part of Japan in 1995. We treat this as a natural experiment. Using the Within Group Instrumental Variable estimator, we address an endogeneity problem of schooling caused by simultaneity and unobserved heterogeneity. Our results indicate that higher school attainment signi cantly reduces crime committed by youth regardless of crime categories, i.e., reduces both violent crime and property crime. This negative impact of schooling on crimes supports theoretical predictions that higher educational attainment reduces the participation in criminal activities through a higher opportunity cost of committing crimes.