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Segregation and Tiebout Sorting: Investigating the Link between Investments in Public Goods and Neighborhood Tipping

  • H. Spencer Banzhaf
  • Randall P. Walsh

Segregation has been a recurring social concern throughout human history. While much progress has been made to our understanding of the mechanisms driving segregation, work to date has ignored the role played by location-specific amenities. Nonetheless, policy remedies for reducing group inequity often involve place-based investments in minority communities. In this paper, we introduce an exogenous location-specific public good into a model of group segregation. We characterize the equilibria of the model and derive the comparative statics of improvements to the local public goods. We show that the dynamics of neighborhood tipping depend on the levels of public goods. We also show that investments in low-public good communities can actually increase segregation.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16057.

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Date of creation: Jun 2010
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Publication status: published as "Segregation and Tiebout Sorting: The Link between Place-Based Investments and Neighborhood Tipping," Journal of Urban Economics 74, 2013, pp. 83-98 (with R.P. Walsh).
Handle: RePEc:nbr:nberwo:16057
Note: EEE
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  1. Holger Sieg & V. Kerry Smith & H. Spencer Banzhaf & Randy Walsh, . "Estimating the General Equilibrium Benefits of Large Changes in Spatially Delineated Public Goods," GSIA Working Papers 2003-07, Carnegie Mellon University, Tepper School of Business.
  2. David Card & Alexandre Mas & Jesse Rothstein, 2007. "Tipping and the Dynamics of Segregation," NBER Working Papers 13052, National Bureau of Economic Research, Inc.
  3. Debreu, Gerard, 1970. "Economies with a Finite Set of Equilibria," Econometrica, Econometric Society, vol. 38(3), pages 387-92, May.
  4. Rajiv Sethi & Rohini Somanathan, 2004. "Inequality and segregation," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 04-03, Indian Statistical Institute, New Delhi, India.
  5. Seema Arora & Timothy N. Cason, 1999. "Do Community Characteristics Influence Environmental Outcomes? Evidence from the Toxics Release Inventory," Southern Economic Journal, Southern Economic Association, vol. 65(4), pages 691-716, April.
  6. Pancs, Romans & Vriend, Nicolaas J., 2007. "Schelling's spatial proximity model of segregation revisited," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 1-24, February.
  7. Terra McKinnish & Randall Walsh & T. Kirk White, 2008. "Who Gentrifies Low Income Neighborhoods?," Working Papers 08-02, Center for Economic Studies, U.S. Census Bureau.
  8. Michael Greenstone & Justin Gallagher, 2006. "Does Hazardous Waste Matter? Evidence from the Housing Market and the Superfund Program," Working Papers 0620, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  9. Kiel, Katherine A. & Zabel, Jeffrey E., 1996. "House Price Differentials in U.S. Cities: Household and Neighborhood Racial Effects," Journal of Housing Economics, Elsevier, vol. 5(2), pages 143-165, June.
  10. Patrick Bayer & Hanming Fang & Robert McMillan, 2011. "Separate When Equal? Racial Inequality and Residential Segregation," Working Papers 11-09, Duke University, Department of Economics.
  11. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64, pages 416.
  12. David M. Cutler & Edward L. Glaeser & Jacob L. Vigdor, 1997. "The Rise and Decline of the American Ghetto," NBER Working Papers 5881, National Bureau of Economic Research, Inc.
  13. Schelling, Thomas C, 1969. "Models of Segregation," American Economic Review, American Economic Association, vol. 59(2), pages 488-93, May.
  14. McGuire, Martin, 1974. "Group Segregation and Optimal Jurisdictions," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 112-32, Jan.-Feb..
  15. Scott Marchi & James Hamilton, 2006. "Assessing the Accuracy of Self-Reported Data: an Evaluation of the Toxics Release Inventory," Journal of Risk and Uncertainty, Springer, vol. 32(1), pages 57-76, January.
  16. Brooks, Nancy & Sethi, Rajiv, 1997. "The Distribution of Pollution: Community Characteristics and Exposure to Air Toxics," Journal of Environmental Economics and Management, Elsevier, vol. 32(2), pages 233-250, February.
  17. H. Spencer Banzhaf & Randall P. Walsh, 2008. "Do People Vote with Their Feet? An Empirical Test of Tiebout," American Economic Review, American Economic Association, vol. 98(3), pages 843-63, June.
  18. Spencer Banzhaf & Eleanor McCormick, 2007. "Moving Beyond Cleanup: Identifying the Crucibles of Environmental Gentrification," NCEE Working Paper Series 200702, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Jan 2007.
  19. Trudy Ann Cameron & Ian T. McConnaha, 2006. "Evidence of Environmental Migration," Land Economics, University of Wisconsin Press, vol. 82(2), pages 273-290.
  20. Hoff, Karla & Sen, Arijit, 2004. "Homeownership, community interactions, and segregation," Policy Research Working Paper Series 3316, The World Bank.
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