Working Paper: NBER ID: w14908
Authors: Tara Watson
Abstract: 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.
Keywords: No keywords provided
JEL Codes: R21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Income Inequality (top) (D31) | Segregation of the Wealthy (D31) |
| Income Inequality (bottom) (D31) | Residential Isolation of the Poor (R28) |
| Declines in Labor Demand for Less-Skilled Men (F66) | Residential Isolation of the Poor (R28) |
| Rising Income Inequality (D31) | Increase in Income Segregation (1970-2000) (D31) |
| Income Inequality (D31) | Residential Segregation (R23) |
| Log of 80-20 Family Income Ratio (E25) | CGI (D58) |