Racial Variation in Economic Returns to Gang Participation

• In Event: Understanding the Diverse Consequences of Gang Membership

Abstract

Despite extensive research on racial income inequality in the labor market, less is known about racial income inequality in illegal markets. I tackle this gap by examining (1) the distribution of illegal income by race, (2) racial variation in economic returns to an illegitimate institution—gangs, and (3) the mechanism of these economic returns. Using the NLSY97 data, I find that gang participation increases illegal income for whites but not blacks or Hispanics. Building on the notion of criminal embeddedness, I provide the following explanation and supporting evidence.
Because the distinction between legal and illegal economic activities is shaper for whites than for minorities, they have more to lose in the legitimate market by joining a gang. Gang participation substitutes legal economic activities with illegal ones, increasing criminal commitment, and hence an increase in illegal income. Because illegal income is on average lower for whites than for racial minorities, the results suggest that gang participation serves as a ladder of social mobility in illegal markets for whites.

Author

• Takuma Kamada, Penn State