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Inequality and the Measurement of Residential Segregation by Income In American Neighborhoods

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Tara Watson

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Abstract

American metropolitan areas have experienced rising residential segregation by income since 1970. One potential explanation for this change is growing income inequality. However, measures of residential sorting are typically mechanically related to the income distribution, making it difficult to identify the impact of inequality on residential choice. This paper presents a measure of residential segregation by income, the Centile Gap Index (CGI) which is based on income percentiles. Using the CGI, I find that a one standard deviation increase in income inequality raises residential segregation by income by 0.4-0.9 standard deviations. Inequality at the top of the distribution is associated with more segregation of the rich, while inequality at the bottom and declines in labor demand for less-skilled men are associated with residential isolation of the poor. Inequality can fully explain the rise in income segregation between 1970 and 2000.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14908.

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Date of creation: Apr 2009
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Handle: RePEc:nbr:nberwo:14908

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R21 - Urban, Rural, and Regional Economics - - Household Analysis - - - Housing Demand

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  7. Jeffrey R. Kling & Jeffrey B. Liebman & Lawrence F. Katz, 2005. "Experimental Analysis of Neighborhood Effects," NBER Working Papers 11577, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Susan E. Mayer, 2001. "How the Growth in Income Inequality Increased Economic Segregation," JCPR Working Papers 230, Northwestern University/University of Chicago Joint Center for Poverty Research.
  9. Cutler, David M & Glaeser, Edward L, 1997. "Are Ghettos Good or Bad?," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 827-72, August.
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  10. Davidoff, Thomas, 2005. "Income sorting: Measurement and decomposition," Journal of Urban Economics, Elsevier, vol. 58(2), pages 289-303, September. [Downloadable!] (restricted)
  11. Susan E. Mayer, 2001. "How the Growth in Income Inequality Increased Economic Segregation," Working Papers 0117, Harris School of Public Policy Studies, University of Chicago. [Downloadable!]
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