Working Paper: NBER ID: w17364
Authors: Patrick Bayer; Robert McMillan
Abstract: Tiebout's classic 1956 paper has strong implications regarding stratification across and within jurisdictions, predicting in the simplest instance a hierarchy of internally homogeneous communities ordered by income. Typically, urban areas are less than fully stratified, and the question arises how much departures from standard Tiebout assumptions contribute to observed within-neighborhood mixing. This paper quantifies the separate effects on neighborhood stratification of employment geography (via costly commuting) and preferences for housing attributes. It does so using an equilibrium sorting model, estimated with rich Census micro-data. Simulations based on the model using credible preference estimates show that counterfactual reductions in commuting costs lead to marked increases in racial and education segregation and, to a lesser degree, increases in income segregation, given that households now find it easier to locate in neighborhoods with like households. While turning off preferences for housing characteristics increases racial segregation, especially for blacks, doing so reduces income segregation, indicating that heterogeneity in the housing stock serves to stratify households based on ability-to-pay. Further, we show that differences in housing also help accentuate differences in the consumption of local amenities.
Keywords: Tiebout sorting; neighborhood stratification; segregation; commuting costs; housing preferences
JEL Codes: H41; I20; R21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Commuting costs (R41) | Racial segregation (J15) |
| Commuting costs (R41) | Educational segregation (I24) |
| Housing preferences (R21) | Racial segregation (J15) |
| Housing preferences (R21) | Educational segregation (I24) |
| Commuting costs (R41) | Neighborhood stratification (R23) |
| Housing characteristics (R21) | Racial segregation (J15) |
| Housing characteristics (R21) | Income segregation (D31) |
| Differences in housing attributes (R21) | Socio-demographic stratification (Z13) |