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Strong Spatial Spillovers Determine Neighborhood Shape and Neighborhood Change

Author

Listed:
  • Dionissi Aliprantis
  • Jeffrey Lin

Abstract

This paper explores how spatial spillovers define neighborhoods and drive neighborhood change through a stylized computable equilibrium model of income-based residential sorting. We find three main results. First, stronger spillovers create larger, more distinct neighborhood clusters even when the spatial scope of externalities is small. Second, spillovers make neighborhoods resistant to small change but also susceptible to rapid shifts between equilibrium states. Third, stronger spillovers concentrate change at cluster boundaries and isolated locations rather than neighborhood interiors. Extending Schelling-like insights to income sorting dynamics, the model treats neighborhood shape as an endogenous outcome determined by decentralized household location choices mediated through housing markets. The framework helps explain persistent urban segregation patterns, neighborhood resilience, and the geography of neighborhood change, offering new approaches for linking spatial spillovers to urban spatial structure and dynamics.

Suggested Citation

  • Dionissi Aliprantis & Jeffrey Lin, 2026. "Strong Spatial Spillovers Determine Neighborhood Shape and Neighborhood Change," Working Papers 26-11, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpwp:102819
    DOI: 10.21799/frbp.wp.2026.11
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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