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http://ssrn.com/abstract=429241
 
 

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An Equilibrium Model of Sorting in an Urban Housing Market: The Causes and Consequences of Residential Segregation


Patrick J. Bayer


Duke University - Department of Economics; National Bureau of Economic Research (NBER)

Robert McMillan


University of Toronto - Department of Economics

Kim S. Rueben


Tax Policy Center

July 2003

Yale University Economic Growth Center Discussion Paper No. 860

Abstract:     
This paper presents a new equilibrium framework for analyzing
economic and policy questions related to the sorting of
households within a large metropolitan area. We estimate the
model using restricted-access Census data that precisely
characterize residential and employment locations for
households in the San Francisco Bay Area, yielding accurate measures of preferences for a wide variety of housing and
neighborhood attributes across different types of household.
We use these estimates to explore the causes and consequences
of racial segregation in general equilibrium. Our results
indicate that, given the preference structure of households in
the Bay Area, the elimination of racial differences in income
and wealth would significantly increase the residential
segregation of each major racial group, as the equalization of
income leads, for example, to the formation of new wealthy,
segregated Black and Hispanic neighborhoods. We also provide
evidence that sorting on the basis of race itself (whether
driven by preferences or discrimination) leads to large
reductions in the consumption of housing, public safety, and
school quality by Black and Hispanic households.

Number of Pages in PDF File: 89

Keywords: Segregation, Sorting, Housing Markets, Locational Equilibrium, Residential Choice, Discrete Choice

JEL Classification: H0, J7, R0, R2

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Date posted: August 5, 2003  

Suggested Citation

Bayer, Patrick J. and McMillan, Robert and Rueben, Kim S., An Equilibrium Model of Sorting in an Urban Housing Market: The Causes and Consequences of Residential Segregation (July 2003). Yale University Economic Growth Center Discussion Paper No. 860. Available at SSRN: http://ssrn.com/abstract=429241

Contact Information

Patrick J. Bayer (Contact Author)
Duke University - Department of Economics ( email )
Durham, NC 27708-0204
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Robert McMillan
University of Toronto - Department of Economics ( email )
150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-4190 (Phone)
416-978-6713 (Fax)
Kim S. Rueben
Tax Policy Center ( email )
Urban Institute
2100 M Street NW
Washington, DC 20009
United States
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