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What Explains Neighborhood Sorting by Income and Race?

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Abstract

Why do high-income black households live in neighborhoods with characteristics similar to those of low-income white households? We find that neighborhood sorting by income and race cannot be explained by financial constraints: High-income, high-wealth black households live in similar-quality neighborhoods as low-income, low-wealth white households. We provide evidence that black households sort across neighborhoods according to some non-pecuniary factor(s) correlated with the racial composition of neighborhoods. Black households sorting into black neighborhoods can explain the racial gap in neighborhood quality at all income levels. The supply of high-quality black neighborhoods drives the neighborhood quality of black households.

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  • Dionissi Aliprantis & Daniel R. Carroll & Eric R. Young, 2019. "What Explains Neighborhood Sorting by Income and Race?," Working Papers 201808R, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwq:180801
    DOI: 10.26509/frbc-wp-201808r
    Note: First version June 2018 with the title “Can Wealth Explain Neighborhood Sorting by Race and Income?”
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    File URL: https://doi.org/10.26509/frbc-wp-201808r
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    References listed on IDEAS

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    1. Dionissi Aliprantis, 2011. "Assessing the evidence on neighborhood effects from moving to opportunity," Working Papers (Old Series) 1101, Federal Reserve Bank of Cleveland.
    2. Dionissi Aliprantis & Daniel R. Carroll, 2018. "Neighborhood dynamics and the distribution of opportunity," Quantitative Economics, Econometric Society, vol. 9(1), pages 247-303, March.
    3. Bayer, Patrick & Fang, Hanming & McMillan, Robert, 2014. "Separate when equal? Racial inequality and residential segregation," Journal of Urban Economics, Elsevier, vol. 82(C), pages 32-48.
    4. Francine D. Blau & John W. Graham, 1990. "Black-White Differences in Wealth and Asset Composition," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 321-339.
    5. Raj Chetty & Nathaniel Hendren & Maggie R. Jones & Sonya R. Porter, 2018. "Race and Economic Opportunity in the United States: An Intergenerational Perspective," Working Papers 18-40, Center for Economic Studies, U.S. Census Bureau.
    6. Barsky R. & Bound J. & Charles K.K. & Lupton J.P., 2002. "Accounting for the Black-White Wealth Gap: A Nonparametric Approach," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 663-673, September.
    7. Dionissi Aliprantis, 2017. "Assessing the evidence on neighborhood effects from Moving to Opportunity," Empirical Economics, Springer, vol. 52(3), pages 925-954, May.
    8. Patrick Bayer & Robert McMillan, 2005. "Racial Sorting and Neighborhood Quality," NBER Working Papers 11813, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Peter Christensen & Ignacio Sarmiento-Barbieri & Christopher Timmins, 2020. "Housing Discrimination and the Toxics Exposure Gap in the United States: Evidence from the Rental Market," NBER Working Papers 26805, National Bureau of Economic Research, Inc.
    2. Dionissi Aliprantis & Daniel R. Carroll, 2019. "What Is Behind the Persistence of the Racial Wealth Gap?," Economic Commentary, Federal Reserve Bank of Cleveland, issue February.
    3. Dionissi Aliprantis & Daniel R. Carroll & Eric R. Young, 2019. "The Dynamics of the Racial Wealth Gap," Working Papers 201918, Federal Reserve Bank of Cleveland.

    More about this item

    Keywords

    Race; Income; Neighborhood; Wealth;

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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