Working Paper: NBER ID: w11095
Authors: Patrick Bayer; Robert McMillan; Kim Rueben
Abstract: Black households in the United States with high levels of income and education (SES) typically face a stark tradeoff when deciding where to live. They can choose neighborhoods with high levels of public goods or a high proportion of blacks, but very few neighborhoods combine both, a fact we document clearly. In the face of this constraint, we conjecture that racial sorting may dramatically lower the consumption of local public goods by high-SES blacks. To shed light on this, we estimate a model of residential sorting using unusually detailed restricted Census microdata, then use the estimated preferences to simulate a counterfactual world in which racial factors play no role in household residential location decisions. Results from this exercise provide the first evidence that sorting on the basis of race gives rise to significant reductions in the consumption of local public goods by black and high-SES black households in particular. These consumption effects lead to significant losses of welfare and are likely to have important intergenerational implications.
Keywords: residential segregation; public goods; racial sorting; socioeconomic status
JEL Codes: H0; J7; R0; R2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| racial sorting (J15) | consumption of local public goods by black households (H73) |
| if race is eliminated as a factor in residential location decisions (R28) | consumption of local public goods by black households (H73) |
| racial sorting (J15) | disparities in consumption of public safety and education (I24) |
| reduced access to quality public goods (H49) | adverse effects on educational and economic prospects for black households (I24) |