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Working Paper

What Explains Neighborhood Sorting by Income and Race?

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Why do high-income black households live in neighborhoods with characteristics similar to those of low-income white households? We find that neighborhood sorting by income and race cannot be explained by financial constraints: High-income, high-wealth black households live in similar-quality neighborhoods as low-income, low-wealth white households. We provide evidence that black households sort across neighborhoods according to some non-pecuniary factor(s) correlated with the racial composition of neighborhoods. Black households sorting into black neighborhoods can explain the racial gap in neighborhood quality at all income levels. The supply of high-quality black neighborhoods drives the neighborhood quality of black households.
Topics
Neighborhood quality
10.08.2019ISSN 2573-7953 WP 1808ROriginal Paper WP 18-08DOI 10.26509/frbc-wp-201808r
Keywords neighborhood, income, wealth, race
JEL Classification Codes H72, J15, J18, R11, R21

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Aliprantis, Dionissi, Daniel R. Carroll, and Eric R. Young. 2019. “What Explains Neighborhood Sorting by Income and Race?” Federal Reserve Bank of Cleveland, Working Paper No. 1808R. https://doi.org/10.26509/frbc-wp-201808r