The Effect of Neighborhood Characteristics on Young Adult Outcomes: Alternative Estimates

We estimate a set of alternative models to examine the effect of neighborhood characteristics on outcomes among young adult women. The models are motivated by a concern that standard estimates of neighborhood effects may in part reflect the characteristics of families that reside in those neighborhoods. In addition to a "standard" model that includes controls for family background, we estimate fixed-effect models that also control for unobservable family characteristics that may affect young adult outcomes. To do this, we use a sample of sisters drawn from the Panel Study of Income Dynamics. In models that control for family background, we find evidence of neighborhood effects consistent with other recent work. In the fixed-effect models, however, there are no statistically significant effects that are consistent with standard hypotheses about neighborhood effects. The findings from this exploratory study suggest that one should be cautious about accepting findings of significant neighborhood effects derived from models that do not account for the possible selection of neighborhood.