We look at a two-stage model where, in the first stage, every individual decides whether to become criminal and, if she or he chooses to take action, they decides just how much crime to exert in the next stage. We show the way the distance to the criminal leader affects both decision to become criminal (extensive margin) and the amount of crimes thereafter committed (intensive margin).
Data and empirical framework
We test our theoretical predictions using data from the National Longitudinal Study of Adolescent to Adult Health (Add Health) in america, which contains information on all students attending a random sample folks high schools in 1995. This dataset provides unique information on friendship networks by asking students to nominate up to ten friends from a school roster. In addition, it contains detailed information on juvenile delinquency, including 12 types of crime. To recognize criminal leaders in a manner that is exogenous to the network formation process, we define a criminal leader as an adolescent who has a degree of crime a lot more than three standard deviations above the median in the institution. The distance to the first choice is then calculated utilizing the (shortest) distance between any delinquent and the first choice in the social networking to which they belongs. Our identification strategy is founded on the actual fact that students choose their friends, and perhaps the friends of their friends, however, not beyond. The question we study in the empirical analysis is how being (randomly) located at a particular distance to the first choice affects a person’s criminal activities.