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Immigration and the neighborhood

  • Albert Saiz
  • Susan M. Wachter

What impact does immigration have on neighborhood dynamics? Within metropolitan areas, the authors find that housing values have grown relatively more slowly in neighborhoods of immigrant settlement. They propose three nonexclusive explanations: changes in housing quality, reverse causality, or the hypothesis that natives find immigrant neighbors relatively less attractive (native flight). To instrument for the actual number of new immigrants, the authors deploy a geographic diffusion model that predicts the number of new immigrants in a neighborhood using lagged densities of the foreign-born in surrounding neighborhoods. Subject to the validity of their instruments, the evidence is consistent with a causal interpretation of an impact from growing immigration density to native flight and relatively slower housing price appreciation. Further evidence indicates that these results may be driven more by the demand for residential segregation based on race and education than by foreignness per se.

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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 06-22.

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Date of creation: 2006
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Handle: RePEc:fip:fedpwp:06-22
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