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What Explains Neighborhood Sorting by Income and Race?

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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 Young, 2019. "What Explains Neighborhood Sorting by Income and Race?," Working Papers 18-08R, 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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    1. 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.
    2. Raj Chetty & Nathaniel Hendren & Maggie R Jones & Sonya R Porter, 2020. "Race and Economic Opportunity in the United States: an Intergenerational Perspective [“Intergenerational Mobility of Immigrants in the US Over Two Centuries,”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 711-783.
    3. Francine D. Blau & John W. Graham, 1990. "Black-White Differences in Wealth and Asset Composition," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 321-339.
    4. 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.
    5. Benjamin Austin & Edward Glaeser & Lawrence Summers, 2018. "Jobs for the Heartland: Place-Based Policies in 21st-Century America," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 49(1 (Spring), pages 151-255.
    6. Dionissi Aliprantis, 2011. "Assessing the evidence on neighborhood effects from moving to opportunity," Working Papers (Old Series) 1101, Federal Reserve Bank of Cleveland.
    7. Patrick Bayer & Robert McMillan, 2005. "Racial Sorting and Neighborhood Quality," NBER Working Papers 11813, National Bureau of Economic Research, Inc.
    8. Dionissi Aliprantis & Daniel R. Carroll, 2018. "Neighborhood dynamics and the distribution of opportunity," Quantitative Economics, Econometric Society, vol. 9(1), pages 247-303, March.
    9. Dionissi Aliprantis, 2017. "Assessing the evidence on neighborhood effects from Moving to Opportunity," Empirical Economics, Springer, vol. 52(3), pages 925-954, May.
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    Cited by:

    1. Victoria Gregory & Julian Kozlowski & Hannah Rubinton, 2022. "The Impact of Racial Segregation on College Attainment in Spatial Equilibrium," Working Papers 2022-036, Federal Reserve Bank of St. Louis, revised 24 Jul 2023.
    2. Dionissi Aliprantis & Hal Martin & Kristen Tauber, 2020. "What Determines the Success of Housing Mobility Programs?," Working Papers 20-36R, Federal Reserve Bank of Cleveland, revised 19 Oct 2022.
    3. 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.
    4. Peter Christensen & Ignacio Sarmiento-Barbieri & Christopher Timmins, 2022. "Housing Discrimination and the Toxics Exposure Gap in the United States: Evidence from the Rental Market," The Review of Economics and Statistics, MIT Press, vol. 104(4), pages 807-818, October.
    5. Alex W. Bartik & Evan Mast, 2021. "Black Suburbanization: Causes and Consequences of a Transformation of American Cities," Upjohn Working Papers 21-355, W.E. Upjohn Institute for Employment Research.
    6. Dionissi Aliprantis & Daniel R. Carroll & Eric Young, 2019. "The Dynamics of the Racial Wealth Gap," Working Papers 19-18R, Federal Reserve Bank of Cleveland, revised 29 Nov 2022.
    7. Dionissi Aliprantis & Hal Martin, 2020. "Neighborhood Sorting Obscures Neighborhood Effects in the Opportunity Atlas," Working Papers 20-37, Federal Reserve Bank of Cleveland.

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    More about this item

    Keywords

    Race; Income; Neighborhood; Wealth;
    All these keywords.

    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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