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

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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

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