51 Pages Posted: 19 Jun 2011 Last revised: 9 May 2012
Date Written: May 7, 2012
This paper introduces a mechanism that, contrary to standard reasoning, may lead segregation in U.S. cities to increase as racial inequality narrows. Specifically, when the proportion of highly educated blacks rises holding white education fixed, new middle-class black neighborhoods can emerge, and these are attractive to blacks, resulting in increases in segregation as households re-sort. To examine the importance of this 'neighborhood formation' mechanism in practice, we propose a new two-part research design that yields distinctive cross-sectional and time-series predictions. In cross section, if our mechanism is important, inequality and segregation should be negatively related for older blacks, as we find using both the 1990 and 2000 Censuses. In time series, a negative relationship should also be apparent, particularly for older blacks. Controlling for white education, we show that increased black educational attainment in a city between 1990 and 2000 leads to a signicant rise in segregation, especially for older blacks, and to a marked increase in the number of middle-class black communities, consistent with neighborhood formation. Of broader relevance, our findings point to a negative feedback loop likely to inhibit reductions in segregation and racial inequality over time.
Keywords: Segregation, Racial Inequality, Neighborhood Formation, Racial Sorting, General Equilibrium, Negative Feedback
JEL Classification: H0, J7, R0, R2
Suggested Citation: Suggested Citation
Bayer, Patrick J. and Fang, Hanming and McMillan, Robert, Separate When Equal? Racial Inequality and Residential Segregation (May 7, 2012). Economic Research Initiatives at Duke (ERID) Working Paper No. 100. Available at SSRN: https://ssrn.com/abstract=1865965