Residential segregation: The role of inequality and housing subsidies

Philipp Harting and Davide Radi

Journal of Economic Behavior & Organization, 2020, vol. 178, issue C, 801-819

Abstract: Residential segregation is a key public policy issue that is driven by economic factors on the one side, and individual attitudes towards ethnic diversity on the other side. We assume a modeling framework that consists of a population of two ethnic groups, a rental market for each neighborhood, and household’s utility which depends on consumption and housing. Accounting for income disparities and heterogeneous preferences for living in ethnically diverse neighborhoods, we examine the residential segregation patterns that occur when households make their neighborhood choice by taking economic and diversity related aspects into account. The investigation reveals that ethnic income disparities and heterogeneous preferences are antagonistic forces such that a certain level of income stratification is the price for residential integration. In light of these findings, we discuss to which extent and under which conditions housing subsidy policies can favor residential integration.

Keywords: Residential segregation; Ethnic income disparities; Housing subsidies; Evolutionary dynamics (search for similar items in EconPapers)
JEL-codes: C63 C73 I30 J15 R23 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:178:y:2020:i:c:p:801-819

DOI: 10.1016/j.jebo.2020.08.011

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