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Neighborhood Effects and Missing Markets for Opportunity

Author

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  • Lawrence F. Katz

Abstract

Experimental and quasi-experimental studies show that childhood neighborhoods have substantial causal impacts on children’s adult earnings and other long-term socioeconomic outcomes. Several market failures are likely to lead to excessive residential segregation by parental income and to an under-supply of mixed-income neighborhoods. Missing markets for opportunity originate in capital market imperfections for borrowing on children’s future earnings, neighbor spillovers, behavioral biases, and housing search frictions. Customized housing mobility services combined with subsidized housing vouchers can help low-income families move to higher-opportunity areas. Place-based policies that create mixed-income neighborhoods appear to increase long-term outcomes for less-advantaged children.

Suggested Citation

  • Lawrence F. Katz, 2026. "Neighborhood Effects and Missing Markets for Opportunity," NBER Working Papers 35419, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35419
    Note: CH LS
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    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General

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