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Income Inequality, School Choice and the Endogenous Gentrification of US Cities

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  • Paololo Melindi Ghidi

    () (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

Why in some urban areas do rich and poor households cohabit at the community level while, in others, we observe a sorting by income? To answer this question I develop a two-community general equilibrium framework of school quality, residential choice and tax decision. The model predicts that in highly unequal societies low and high income households choose to live in the same community but segregate by schooling. When inequality is smaller, we observe the typical sorting by income across communities. The effect of inequality on the quality of public schools depends on the relative size of the housing market of each community. When inequality increases, if the housing conditions of the community in which rich and poor households cohabit are affordable, then an inflow of high income middle class households towards this community emerges (gentrification). As a consequence, inequality impacts negatively the quality of the public school because both rich and poor households vote for lower taxation.

Suggested Citation

  • Paololo Melindi Ghidi, 2012. "Income Inequality, School Choice and the Endogenous Gentrification of US Cities," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2012006, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2012006
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    File URL: http://sites.uclouvain.be/econ/DP/IRES/2012006.pdf
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    References listed on IDEAS

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    1. Davide, DOTTORI & I-Ling, SHEN, 2008. "Low-Skilled Immigration and th Expansion of Private Schools," Discussion Papers (ECON - Département des Sciences Economiques) 2008023, Université catholique de Louvain, Département des Sciences Economiques.
    2. Nechyba, Thomas J, 1999. " School Finance Induced Migration and Stratification Patterns: The Impact of Private School Vouchers," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 1(1), pages 5-50.
    3. Calin Arcalean & Ioana Schiopu, 2010. "Inequality and Education Funding Theory and Evidence from the U.S. School Districts," Caepr Working Papers 2010-009 Classification-, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    4. Epple, Dennis & Romano, Richard E., 1996. "Ends against the middle: Determining public service provision when there are private alternatives," Journal of Public Economics, Elsevier, vol. 62(3), pages 297-325, November.
    5. Sean Corcoran & William N. Evans, 2010. "Income Inequality, the Median Voter, and the Support for Public Education," NBER Working Papers 16097, National Bureau of Economic Research, Inc.
    6. Gerhard Glomm & B. Ravikumar, 1998. "Opting out of publicly provided services: A majority voting result," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 15(2), pages 187-199.
    7. Nico A. Hansen & Anke S. Kessler, 2001. "The Political Geography of Tax H(e)avens and Tax Hells," American Economic Review, American Economic Association, vol. 91(4), pages 1103-1115, September.
    8. Martinez-Mora, Francisco, 2006. "The existence of non-elite private schools," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1505-1518, September.
    9. Epple, Dennis & Romano, Richard E, 1998. "Competition between Private and Public Schools, Vouchers, and Peer-Group Effects," American Economic Review, American Economic Association, vol. 88(1), pages 33-62, March.
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    More about this item

    Keywords

    Gentrification; Housing; Inequality; Segregation; Stratification;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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