Human Capital in the Inner City

There is a large divide in the education, labor market, and personal security outcomes of black and white young males in the United States. This paper develops and estimates a dynamic model of black young males' joint decisions about schooling, labor force participation, and personal security. The formulation of the model is inspired by Elijah Anderson's ethnographic research regarding the incentives black young males face to ensure their personal security in environments where it is not provided by state institutions. I operationalize Anderson's notion of the code of the street by defining the set of skills and knowledge useful for providing personal security to be a distinct type of human capital, street capital, that agents may accumulate in my model. The model is estimated using longitudinal data from the NLSY97, which includes unusually rich information on participation in street behaviors. I use the model to quantify the influence of the code of the street on black males' schooling and labor market choices, and I examine potential policies to influence such choices. In particular, the estimated model is used to simulate a world in which children grow up in safe neighborhoods, as well as a world in which agents are given an unforeseen opportunity to freely dispose of their stocks of street capital. Large effects of the code of the street indicate that interpersonal violence is an empirically important factor influencing the education and labor market outcomes of black young men.