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Residential Segregation in General Equilibrium


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

January 2005

NBER Working Paper No. w11095

Abstract:     
Black households in the United States with high levels of income and education (SES) typically face a stark tradeoff when deciding where to live. They can choose neighborhoods with high levels of public goods or a high proportion of blacks, but very few neighborhoods combine both, a fact we document clearly. In the face of this constraint, we conjecture that racial sorting may dramatically lower the consumption of local public goods by high-SES blacks. To shed light on this, we estimate a model of residential sorting using unusually detailed restricted Census microdata, then use the estimated preferences to simulate a counterfactual world in which racial factors play no role in household residential location decisions. Results from this exercise provide the first evidence that sorting on the basis of race gives rise to significant reductions in the consumption of local public goods by black and high-SES black households in particular. These consumption effects lead to significant losses of welfare and are likely to have important intergenerational implications.

Number of Pages in PDF File: 57

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Date posted: March 1, 2005  

Suggested Citation

Bayer, Patrick J. and McMillan, Robert and Rueben, Kim S., Residential Segregation in General Equilibrium (January 2005). NBER Working Paper No. w11095. Available at SSRN: http://ssrn.com/abstract=656585

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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