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Beyond Treatment Effects: Estimating the Relationship Between Neighborhood Poverty and Individual Outcomes in the MTO Experiment

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  • Lawrence Katz
  • Jeffrey R. Kling

Abstract

Several important social science literatures hinge on the functional relationship between neighborhood characteristics and individual outcomes. Although there have been numerous non-experimental estimates of these relationships, there are serious concerns about their reliability because individuals self-select into neighborhoods. This paper uses data from HUD’s Moving to Opportunity (MTO) randomized housing voucher experiment to estimate the relationship between neighborhood poverty and individual outcomes using experimental variation. In addition, it assesses the reliability of non-experimental estimates by comparing them to experimental estimates. We find that our method for using experimental variation to estimate the relationship between neighborhood poverty and individual outcomes – instrumenting for neighborhood poverty with site-by-treatment group interactions – produces precise estimates in models in which poverty enters linearly. Our estimates of nonlinear and threshold models are not precise enough to be conclusive, though many of our point estimates suggest little, if any, deviation from linearity. Our non-experimental estimates are inconsistent with our experimental estimates, suggesting that non-experimental estimates are not reliable. Moreover, the selection pattern that reconciles the experimental and non-experimental results is complex, suggesting that common assumptions about the direction of bias in non-experimental estimates may be incorrect.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 872.

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Date of creation: Aug 2004
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Handle: RePEc:pri:indrel:dsp01g158bh29k

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Keywords: neighborhood effects; social experiments;

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  1. Edward L. Glaeser & Bruce I. Sacerdote & Jose A. Scheinkman, 2003. "The Social Multiplier," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 345-353, 04/05.
  2. Jeffrey R. Kling & Jeffrey B. Liebman & Lawrence F. Katz & Lisa Sanbonmatsu, 2004. "Moving To Opportunity And Tranquility: Neighborhood Effects On Adult Economic Self-Sufficiency And Health From A Randomized Housing Voucher Experiment," Working Papers 247, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
  3. Arnott, Richard & Rowse, John, 1987. "Peer group effects and educational attainment," Journal of Public Economics, Elsevier, vol. 32(3), pages 287-305, April.
  4. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 531-42, July.
  5. Janet Currie & Aaron Yelowitz, 1997. "Are Public Housing Projects Good for Kids?," NBER Working Papers 6305, National Bureau of Economic Research, Inc.
  6. Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 135-64, February.
  7. Philip Oreopoulos, 2003. "The Long-Run Consequences Of Living In A Poor Neighborhood," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1533-1575, November.
  8. Jeffrey R. Kling & B. Jeffrey Liebman, 2004. "Experimental Analysis of Neighborhood Effects on Youth," Working Papers 862, Princeton University, Department of Economics, Industrial Relations Section..
  9. Brian A. Jacob, 2004. "Public Housing, Housing Vouchers, and Student Achievement: Evidence from Public Housing Demolitions in Chicago," American Economic Review, American Economic Association, vol. 94(1), pages 233-258, March.
  10. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer.
  11. Jeffrey R. Kling & Jeffrey B. Liebman, 2005. "Experimental Analysis Of Neighborhood Effects On Youth," Working Papers 249, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
  12. de Bartolome, Charles A M, 1990. "Equilibrium and Inefficiency in a Community Model with Peer Group Effects," Journal of Political Economy, University of Chicago Press, vol. 98(1), pages 110-33, February.
  13. Roland Benabou, 1991. "Workings of a City: Location, Education, and Production," NBER Technical Working Papers 0113, National Bureau of Economic Research, Inc.
  14. Galster, George, 2002. "An economic efficiency analysis of deconcentrating poverty populations," Journal of Housing Economics, Elsevier, vol. 11(4), pages 303-329, December.
  15. Henderson, Vernon & Mieszkowski, Peter & Sauvageau, Yvon, 1978. "Peer group effects and educational production functions," Journal of Public Economics, Elsevier, vol. 10(1), pages 97-106, August.
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Cited by:
  1. Jeffrey R Kling & Jeffrey B Liebman & Lawrence F Katz, 2007. "Experimental Analysis of Neighborhood Effects," Econometrica, Econometric Society, vol. 75(1), pages 83-119, 01.
  2. Florence Goffette-Nagot & Claire Dujardin, 2006. "Neighborhood effects, public housing and unemployment in France," Post-Print halshs-00133854, HAL.
  3. Dominique Goux & Eric Maurin, 2006. "Close Neighbours Matter: Neighbourhood Effects on Early Performance at School," CEE Discussion Papers 0068, Centre for the Economics of Education, LSE.

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