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Inequality and the Measurement of Residential Segregation by Income In American Neighborhoods

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  • Tara Watson
Abstract
American metropolitan areas have experienced rising residential segregation by income since 1970. One potential explanation for this change is growing income inequality. However, measures of residential sorting are typically mechanically related to the income distribution, making it difficult to identify the impact of inequality on residential choice. This paper presents a measure of residential segregation by income, the Centile Gap Index (CGI) which is based on income percentiles. Using the CGI, I find that a one standard deviation increase in income inequality raises residential segregation by income by 0.4-0.9 standard deviations. Inequality at the top of the distribution is associated with more segregation of the rich, while inequality at the bottom and declines in labor demand for less-skilled men are associated with residential isolation of the poor. Inequality can fully explain the rise in income segregation between 1970 and 2000.

Suggested Citation

  • Tara Watson, 2009. "Inequality and the Measurement of Residential Segregation by Income In American Neighborhoods," NBER Working Papers 14908, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:14908
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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