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Racial Sorting and Neighborhood Quality

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Author Info
Patrick Bayer
Robert McMillan

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Abstract

In cities throughout the United States, blacks tend to live in significantly poorer and lower-amenity neighborhoods than whites. An obvious first-order explanation for this is that an individual%u2019%u2019s race is strongly correlated with socioeconomic status (SES), and poorer households can only afford lower quality neighborhoods. This paper conjectures that another explanation may be as important. The limited supply of high-SES black neighborhoods in most U.S. metropolitan areas means that neighborhood race and neighborhood quality are explicitly bundled together. In the presence of any form of segregating preferences, this bundling raises the implicit price of neighborhood amenities for blacks relative to whites, prompting our conjecture -- that racial differences in the consumption of neighborhood amenities are significantly exacerbated by sorting on the basis of race, given the small numbers of blacks and especially high-SES blacks in many cities. To provide evidence on this conjecture, we estimate an equilibrium sorting model with detailed restricted Census microdata and use it to carry out informative counterfactual simulations. Results from these indicate that racial sorting explains a substantial portion of the gap between whites and blacks in the consumption of a wide range of neighborhood amenities -- in fact, as much as underlying socioeconomic differences across race. We also show that the adverse effects of racial sorting for blacks are fundamentally related to the small proportion of blacks in the U.S. metropolitan population. These results emphasize the significant role of racial sorting in the inter-generational persistence of racial differences in education, income, and wealth.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11813.

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Date of creation: Dec 2005
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Handle: RePEc:nbr:nberwo:11813

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Find related papers by JEL classification:
H0 - Public Economics - - General
J7 - Labor and Demographic Economics - - Labor Discrimination
R0 - Urban, Rural, and Regional Economics - - General
R2 - Urban, Rural, and Regional Economics - - Household Analysis

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  1. Eid, Jean & Overman, Henry G. & Puga, Diego & Turner, Matthew A, 2007. "Fat City: Questioning the Relationship Between Urban Sprawl and Obesity," CEPR Discussion Papers 6191, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Jean Eid & Henry G. Overman & Diego Puga & Matthew A. Turner, 2006. "Fat City: The Relationship Between Urban Sprawl and Obesity," Working Papers tecipa-255, University of Toronto, Department of Economics. [Downloadable!]
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  3. Steven Stillman & David C. Maré, 2007. "The Impact of Immigration on the Geographic Mobility of New Zealanders," Working Papers 07_05, Motu Economic and Public Policy Research. [Downloadable!]
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  4. Alejandra Mizala & Miguel Urquiola, 2007. "School Markets: The Impact of Information Approximating Schools' Effectiveness," NBER Working Papers 13676, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Alejandra Mizala & Miguel Urquiola, 2007. "Parental choice and school markets: The impact of information approximating school effectiveness," Documentos de Trabajo 239, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
  6. Christopher R. Knittel & Konstantinos Metaxoglou, 2008. "Estimation of Random Coefficient Demand Models: Challenges, Difficulties and Warnings," NBER Working Papers 14080, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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