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Inequality and Segregation

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Author Info
Rajiv Sethi (Barnard College, Columbia University)
Rohini Somanathan (University of Michigan)

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Abstract

This paper explores the manner in which race and income interact to determine patterns of residential location in metropolitan areas. We use a framework in which individuals care about both the level of affluence and the racial composition of their communities, and in which there are differences in income both within and between groups. Three main findings emerge. First, conditional on income, black households experience lower neighborhood quality relative to whites at any stable equilibrium. Second, extreme levels of segregation can be stable when racial income disparities are either large or negligible, but unstable in some intermediate range. Third, there exist multiple stable equilibria with very different levels of segregation when racial income disparities are sufficiently small. These results hold even when preferences are pro-integrationist, in the sense that racially mixed neighborhoods within a certain range are strictly preferred by all households to homogenous neighborhoods of either type.

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Paper provided by EconWPA in its series Microeconomics with number 0108005.

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Length: 27 pages
Date of creation: 06 Sep 2001
Date of revision:
Handle: RePEc:wpa:wuwpmi:0108005

Note: Type of Document - Tex; prepared on IBM PC; to print on HP/PostScript/; pages: 27 ; figures: included
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Related research
Keywords: Race; Inequality; Segregation;

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Find related papers by JEL classification:
D1 - Microeconomics - - Household Behavior
D2 - Microeconomics - - Production and Organizations
D3 - Microeconomics - - Distribution
D4 - Microeconomics - - Market Structure and Pricing

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Shelly Lundberg & Richard Startz, 1998. "Race, Information, and Segregation," Discussion Papers in Economics at the University of Washington 0047, Department of Economics at the University of Washington.
    Other versions:
  2. Bond, Eric W. & Coulson, N. Edward, 1989. "Externalities, filtering, and neighborhood change," Journal of Urban Economics, Elsevier, vol. 26(2), pages 231-249, September. [Downloadable!] (restricted)
  3. Benabou, R., 1992. "Heterogeneity, Stratification, and Growth," Working papers 93-4, Massachusetts Institute of Technology (MIT), Department of Economics.
    Other versions:
  4. Nancy A. Denton & Douglas S. Massey, . "Residential Segregation of Blacks, Hispanics, and Asians by Socioeconomic Status and Generation," University of Chicago - Population Research Center 88-2, Chicago - Population Research Center.
  5. Roland Benabou, 1991. "Workings of a City: Location, Education, and Production," NBER Technical Working Papers 0113, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. David M. Cutler & Edward L. Glaeser & Jacob L. Vigdor, 1999. "The Rise and Decline of the American Ghetto," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 455-506, June. [Downloadable!] (restricted)
    Other versions:
  7. Kern, Clifford R., 1981. "Racial prejudice and residential segregation: The Yinger model revisited," Journal of Urban Economics, Elsevier, vol. 10(2), pages 164-172, September. [Downloadable!] (restricted)
  8. Schelling, Thomas C, 1969. "Models of Segregation," American Economic Review, American Economic Association, vol. 59(2), pages 488-93, May. [Downloadable!] (restricted)
  9. Glenn C. Loury, 1976. "A Dynamic Theory of Racial Income Differences," Discussion Papers 225, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  10. 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. [Downloadable!] (restricted)
  11. 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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  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. [Downloadable!] (restricted)
  13. Denton, N.A. & Massey, D.S., 1988. "Residential Segregation Of Blacks, Hispanics, And Asians By Socioeconomic Status And Generation," University of Chicago - Economics Research Center 88-2, Chicago - Economics Research Center.
  14. Yinger, John, 1976. "Racial prejudice and racial residential segregation in an urban model," Journal of Urban Economics, Elsevier, vol. 3(4), pages 383-396, October. [Downloadable!] (restricted)
  15. Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-58, August. [Downloadable!] (restricted)
  16. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January. [Downloadable!] (restricted)
  17. Rajiv Sethi & Rohini Somanathan, 2001. "Racial Income Disparities and the Measurement of Segregation," Urban/Regional 0107001, EconWPA. [Downloadable!]
  18. Durlauf, Steven N, 1996. " A Theory of Persistent Income Inequality," Journal of Economic Growth, Springer, vol. 1(1), pages 75-93, March.
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Patrick Bayer & Hanming Fang & Robert McMillan, 2005. "Separate When Equal? Racial Inequality and Residential Segregation," NBER Working Papers 11507, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Jean Louis Dessalles & Denis Phan, 2005. "Emergence in multi-agent systems:Cognitive hierarchy, detection, and complexity reduction," Computing in Economics and Finance 2005 257, Society for Computational Economics. [Downloadable!]
  3. Shubham Chaudhuri & Rajiv Sethi, 2003. "Statistical Discrimination with Neighborhood Effects: Can Integration Eliminate Negative Stereotypes?," Game Theory and Information 0312001, EconWPA. [Downloadable!]
    Other versions:
  4. Brendan O'Flaherty & Rajiv Sethi, 2004. "Racial stereotypes and robbery," Discussion Papers 0405-15, Columbia University, Department of Economics. [Downloadable!]
    Other versions:
  5. Samuel Bowles & Rajiv Sethi, 2006. "Social Segregation and the Dynamics of Group Inequality," Working Papers 2006-02, University of Massachusetts Amherst, Department of Economics. [Downloadable!]
  6. La Ferrara, Eliana & Mele, Angelo, 2006. "Racial Segregation and Public School Expenditure," CEPR Discussion Papers 5750, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Shelly Lundberg & Richard Startz, 2007. "Information and racial exclusion," Journal of Population Economics, Springer, vol. 20(3), pages 621-642, July. [Downloadable!] (restricted)
    Other versions:
  8. Guido Cozzi & Fabio Privileggi, 2009. "The fractal nature of inequality in a fast growing world: new version," Working Papers 2009_30, Department of Economics, University of Glasgow. [Downloadable!]
  9. Calabrese, Stephen & Epple, Dennis & Romer, Thomas & Sieg, Holger, 2005. "Local Public Good Provision: Voting, Peer Effects, and Mobility," Papers 10-04-2005, Princeton University, Research Program in Political Economy. [Downloadable!]
  10. Alberto Alesina & Eliana La Ferrara, 2004. "Ethnic Diversity and Economic Performance," NBER Working Papers 10313, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Samuel Bowles & Glenn C. Loury & Rajiv Sethi, 2009. "Group Inequality," Economics Working Papers 0088, Institute for Advanced Study, School of Social Science. [Downloadable!]
  12. Rajiv Sethi & Rohini Somanathan, 2009. "Racial Inequality And Segregation Measures--Some Evidence From The 2000 Census," Working papers 177, Centre for Development Economics, Delhi School of Economics. [Downloadable!]
    Other versions:
  13. Osiris Jorge, Parcero & Adolfo, Cristobal-Campoamor, 2009. "Dynamics of neighborhood formation and segregation by income," MPRA Paper 16936, University Library of Munich, Germany. [Downloadable!]
  14. Stephen Calabrese & Dennis Epple & Thomas Romer & Holger Sieg, 2005. "Local Public Good Provision: Voting, Peer Effects, and Mobility," NBER Working Papers 11720, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Maurizio Iacopetta, 2006. "Human Capital Dispersion and Incentives to Innovate," DEGIT Conference Papers c011_013, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  16. Rajiv Sethi & Muhamet Yildiz, 2009. "Public Disagreement," Economics Working Papers 0089, Institute for Advanced Study, School of Social Science. [Downloadable!]
  17. Roland G. Fryer, Jr. & Glenn C. Loury, 2005. "Affirmative Action and Its Mythology," NBER Working Papers 11464, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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