Returns to Education and Experience in Criminal Organizations: Evidence from the Italian-American Mafia

Is there any return to education in criminal activities? This is the first paper that investigates 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 have been capable businessmen, orchestrating crimes that require 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 organising supply chains, logistics and distribution when setting up a drug dealing system. We address this question by comparing mobsters with their closest (non-mobster) neighbors using United States Census data in 1940. We document that mobsters have one year less education than their neighbors on average. None of the specifications presented identified any significant difference in the returns to education between these two groups. Private returns to education exist also in the illegal activities characterised by a certain degree of complexity as in the case of organized crime in mid-twentieth century United States.