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Cognitive ability and the division of labor in urban ghettos: Evidence from gang activity in U.S. data

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  • Seals, Richard Alan
  • Stern, Liliana V.

Abstract

Hernstein and Murray (1994) famously argued that the division of labor in modern society is determined by individual differences in cognitive ability. This paper shows that differences in cognitive ability can also determine the division of labor in poor urban areas. We estimate the effect of IQ on time-to-first gang participation with data from the National Longitudinal Survey of Youth (NLSY97) and Project on Human Development in Chicago Neighborhoods (PHDCN). Results from both the NLSY97 and PHDCN indicate that low-IQ is a robust predictor of gang participation. There are two plausible explanations of this main finding: (1) low-IQ individuals may have comparative advantage in violence as their opportunity costs of engaging in legal activities are low and (2) gangs may prefer low-IQ individuals as a way to reduce agency costs. We find strong evidence in support of the hypothesis that persons with lower IQs have comparative advantage in criminal activity in the PHDCN dataset.

Suggested Citation

  • Seals, Richard Alan & Stern, Liliana V., 2013. "Cognitive ability and the division of labor in urban ghettos: Evidence from gang activity in U.S. data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 44(C), pages 140-149.
  • Handle: RePEc:eee:soceco:v:44:y:2013:i:c:p:140-149
    DOI: 10.1016/j.socec.2012.11.003
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    Keywords

    Cognitive ability; Gang participation; Non-cognitive skills; Urban; Division of labor;

    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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