Segregation patterns in cities: ethnic clustering without skill differences

This study analyzes residential segregation by introducing the concept of ethnicity clustering externality. In an economy with two areas, namely the center and suburb, households with different ethnic characteristics (termed the majority and minority), both of which have identical skill levels, endogenously choose their residential location in the long run. By analyzing stable residential equilibria, we show that, because of their ethnic clustering preferences, minority residents are more likely to cluster in one area than majority residents. In addition, when the commuting cost is low, minority residents always cluster, widening the population gap between areas. At the same time, majority households migrate to a less crowded area to avoid the residential congestion caused by minority clustering, thus reducing the population gap. In this sense, the majority acts as an equalizer of population sizes between the center and suburb under low commuting costs. Copyright Springer-Verlag Berlin Heidelberg 2015