Cleveland Fed researcher finds that neighborhood effects may be strong and policy relevant after all

If neighborhood effects drive outcomes, then addressing racial inequality requires concerted efforts beyond legislation designed to end racial discrimination. In this Economic Commentary, Cleveland Fed researcher Dionissi Aliprantis discusses new research that leads to interpreting results from Moving to Opportunity (MTO) differently.

“If poverty alone is used to measure neighborhood quality, then MTO would indicate there are no neighborhood effects on adult labor market outcomes. One obtains different results, however, if neighborhood quality is measured using an index that includes additional neighborhood characteristics that we think matter,” says Aliprantis. “Our findings suggest that considerable improvement in outcomes can be gained by focusing policy efforts on improving environments and that addressing racial inequality will require concerted investments in black enclaves.”

Consistent with other strands of research, this new research implies that improving environments has the potential to break intergenerational poverty, whether through housing mobility programs, investing to create environments where kids can thrive, or simply by making jobs more accessible.

Read more: Racial Inequality, Neighborhood Effects, and Moving to Opportunity

Federal Reserve Bank of Cleveland

The Federal Reserve Bank of Cleveland is one of 12 regional Reserve Banks that along with the Board of Governors in Washington DC comprise the Federal Reserve System. Part of the US central bank, the Cleveland Fed participates in the formulation of our nation’s monetary policy, supervises banking organizations, provides payment and other services to financial institutions and to the US Treasury, and performs many activities that support Federal Reserve operations System-wide. In addition, the Bank supports the well-being of communities across the Fourth Federal Reserve District through a wide array of research, outreach, and educational activities.

The Cleveland Fed, with branches in Cincinnati and Pittsburgh, serves an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.

Media contact

Doug Campbell, doug.campbell@clev.frb.org, 513.218.1892