Employment Location, Neighborhood Change, and Gentrification

Abstract

This paper assesses the contribution of employment location to neighborhood change and to gentrification. At the tract level, average household income change from 1990 to 2000 is positively correlated both with the change and the level of average earnings for nearby jobs. I instrument for the tract-level change in average earnings with predicted change in tract average earnings based on national industry trends, confirming a causal interpretation. The relationship between employment location and neighborhood change is strongest for tracts with slower commuting speeds, suggesting that people live nearer work where the time cost of commuting is higher.

Keywords: neighborhood change, gentrification, employment location, commuting

JEL Classification: R11, R12, R21, R23