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Inequality and the Measurement of Residential Segregation by Income In American Neighborhoods

American metropolitan areas have experienced rising residential segregation by income since 1970. One potential explanation for this change is growing income inequality. However, measures of residential sorting are typically mechanically related to the income distribution, making it difficult to identify the impact of inequality on residential choice. This paper presents a measure of residential segregation by income, the Centile Gap Index (CGI) which is based on income percentiles. Using the CGI, I find that a one standard deviation increase in income inequality raises residential segregation by income by 0.4-0.9 standard deviations. Inequality at the top of the distribution is associated with more segregation of the rich, while inequality at the bottom and declines in labor demand for less-skilled men are associated with residential isolation of the poor. Inequality can fully explain the rise in income segregation between 1970 and 2000.

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File URL: http://www.nber.org/papers/w14908.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14908.

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Date of creation: Apr 2009
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Publication status: published as Tara Watson, 2009. "Inequality And The Measurement Of Residential Segregation By Income In American Neighborhoods," Review of Income and Wealth, Blackwell Publishing, vol. 55(3), pages 820-844, 09.
Handle: RePEc:nbr:nberwo:14908
Note: HE LS
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  1. Edward L. Glaeser, 2007. "The Economics Approach to Cities," NBER Working Papers 13696, National Bureau of Economic Research, Inc.
  2. P. A. Jargowsky, . "Take the money and run: Economic segregation in U.S. metropolitan areas," Institute for Research on Poverty Discussion Papers 1056-95, University of Wisconsin Institute for Research on Poverty.
  3. Susan E. Mayer, 2001. "How the Growth in Income Inequality Increased Economic Segregation," Working Papers 0117, Harris School of Public Policy Studies, University of Chicago.
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  8. Stephen Machin, 2008. "An Appraisal of Economic Research on Changes in Wage Inequality," LABOUR, CEIS, vol. 22(s1), pages 7-26, 06.
  9. Jeffrey R. Kling & Jeffrey B. Liebman & Lawrence F. Katz, 2005. "Experimental Analysis of Neighborhood Effects," NBER Working Papers 11577, National Bureau of Economic Research, Inc.
  10. Epple, Dennis & Platt, Glenn J., 1998. "Equilibrium and Local Redistribution in an Urban Economy when Households Differ in both Preferences and Incomes," Journal of Urban Economics, Elsevier, vol. 43(1), pages 23-51, January.
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  12. Caroline Hoxby, 2000. "Peer Effects in the Classroom: Learning from Gender and Race Variation," NBER Working Papers 7867, National Bureau of Economic Research, Inc.
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