I found this paper trough Freakonomics. The conclusion is pretty clear:

…we find that for juveniles on the margin of incarceration, such detention leads to both a decrease in high school completion and an increase in adult incarceration, and it appears welfare enhancing to use alternatives to juvenile incarceration. This state has an array of such policies, including electronic monitoring and well-enforced curfews that serve as substitutes for incarceration. Indeed, these substitutes have been growing in popularity. Since similar results were found when these alternatives were in use, this suggests that their continued expansion could increase high school graduation rates and reduce the likelihood of adult crime still further.

Abstract of the research paper that can be downloaded in an earlier version here:

Over 130,000 juveniles are detained in the US each year with 70,000 in detention on any given day, yet little is known whether such a penalty deters future crime or interrupts social and human capital formation in a way that increases the likelihood of later criminal behavior. This paper uses the incarceration tendency of randomly-assigned judges as an instrumental variable to estimate causal effects of juvenile incarceration on high school completion and adult recidivism. Estimates based on over 35,000 juvenile offenders over a ten-year period from a large urban county in the US suggest that juvenile incarceration results in large decreases in the likelihood of high school completion and large increases in the likelihood of adult incarceration. These results are in stark contrast to the small effects typically found for adult incarceration, but consistent with larger impacts of policies aimed at adolescents.