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Residential Segregation in General Equilibrium

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  • 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.

Suggested Citation

  • Patrick Bayer & Robert McMillan & Kim Rueben, 2005. "Residential Segregation in General Equilibrium," NBER Working Papers 11095, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11095
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    More about this item

    JEL classification:

    • H0 - Public Economics - - General
    • J7 - Labor and Demographic Economics - - Labor Discrimination
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis

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