A new working paper (abstract; PDF) from William N. Evans, Timothy J. Moore, and Craig Garthwaite presents one explanation for the decline in black high-school graduation rates beginning in the 1980s:
We propose the rise of crack cocaine markets as an explanation for the end to the convergence in black-white educational outcomes beginning in the mid-1980s. After constructing a measure to date the arrival of crack markets in cities and states, we show large increases in murder and incarceration rates after these dates. Black high school graduation rates also decline, and we estimate that crack markets accounts for between 40 and 73 percent of the fall in black male high school graduation rates. We argue that the primary mechanism is reduced educational investments in response to decreased returns to schooling.
How did crack cocaine depress schooling returns? “Crack markets had three primary impacts on young black males: an increased probability of being murdered, an increased risk of incarceration, and a potential source of income,” explain the authors. “Each limits the benefits of education.” In other words, high school looks less attractive when you’re more likely to end up dead or in jail, or earn money.
This finding echoes a passage from Freakonomics: