Residential Segregation in General Equilibrium

Patrick Bayer, Robert McMillan and Kim Rueben

No 11095, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: H0 J7 R0 R2 (search for similar items in EconPapers)
Date: 2005-01
New Economics Papers: this item is included in nep-cmp, nep-geo, nep-pbe and nep-ure
Note: ED
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Residential Segregation in General Equilibrium (2004)
Working Paper: Residential Segregation in General Equilibrium (2004)
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