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

  • Liebman, Jeffrey

    (Harvard U)

  • Katz, Lawrence

    (Harvard U)

  • Kling, Jeffrey

    (Princeton U)

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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Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp04-036.

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Date of creation: Aug 2004
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Handle: RePEc:ecl:harjfk:rwp04-036
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  1. Kling, Jeffrey & Liebman, Jeffrey, 2004. "Experimental Analysis of Neighborhood Effects on Youth," Working Paper Series rwp04-034, Harvard University, John F. Kennedy School of Government.
  2. 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..
  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. 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.
  5. 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.
  6. Galster, George, 2002. "An economic efficiency analysis of deconcentrating poverty populations," Journal of Housing Economics, Elsevier, vol. 11(4), pages 303-329, December.
  7. Janet Currie & Aaron Yelowitz, 1997. "Are Public Housing Projects Good for Kids?," NBER Working Papers 6305, National Bureau of Economic Research, Inc.
  8. Manski, C.F., 1991. "Identification of Endogenous Social Effects: the Reflection Problem," Working papers 9127, Wisconsin Madison - Social Systems.
  9. Roland Benabou, 1991. "Workings of a City: Location, Education, and Production," NBER Technical Working Papers 0113, National Bureau of Economic Research, Inc.
  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.
  11. 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.
  12. King, Jeffrey & Liebman, Jeffrey & Katz, Lawrence & Sanbonmatsu, Lisa, 2004. "Moving to Opportunity and Tranquility: Neighborhood Effects on Adult Economic Self-Sufficiency and Health from a Randomized Housing Voucher Experiment," Working Paper Series rwp04-035, Harvard University, John F. Kennedy School of Government.
  13. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," NBER Working Papers 7580, National Bureau of Economic Research, Inc.
  14. 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.
  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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