Assessing the evidence on neighborhood effects from moving to opportunity

The interpretation of estimates from Moving to Opportunity (MTO) as neighborhood effects has created significant controversy among social scientists. This paper presents a framework that clarifies the interpretation of results from the MTO housing mobility experiment. The paper defines several neighborhood treatments and estimates their Local Average Treatment Effects (LATEs) using assigned treatment in MTO as an instrumental variable. This framework clarifies that while parameters estimated in the literature do not suffer from selection bias, selection into treatment is an inescapable issue if one seeks to learn about neighborhood effects from MTO. The LATE parameters estimated in this paper are neighborhood effects for the subgroup of MTO families who are compliers with respect to the defined treatment. In contrast, the Treatment-on-the-Treated (TOT) parameters reported in the literature are program effects. Since the subgroup of compliers for various neighborhood treatments can be considerably smaller than the subgroup induced to move by MTO, preliminary estimates indicate that LATE neighborhood effects tend to be much larger than the TOT program effects from MTO. This re-interpretation of the MTO data suggests two important conclusions related to the current understanding of neighborhood effects and programs. First, if alternative housing mobility programs were designed to induce moves to neighborhoods with characteristics other than low poverty, it is entirely feasible that such programs might induce larger effects than MTO. Second, initial LATE estimates appear to reconcile the evidence from MTO with prevailing theories of neighborhood effects.