Neighborhood Effects and Housing Vouchers

53 Pages Posted: 25 Jan 2017 Last revised: 22 Jun 2020

See all articles by Morris A. Davis

Morris A. Davis

Rutgers Business School

Jesse Gregory

University of Wisconsin - Madison

Daniel A. Hartley

Federal Reserve Bank of Chicago

Kegon Tan

University of Wisconsin - Madison - Department of Economics; University of Wisconsin - Madison - Institute for Research on Poverty

Date Written: 2017-01-11

Abstract

We study how households choose neighborhoods, how neighborhoods affect child ability, and how housing vouchers influence neighborhood choices and child outcomes. We use two new panel data sets with tract-level detail for Los Angeles county to estimate a dynamic model of optimal tract-level location choice for renting households and, separately, the impact of living in a given tract on child test scores (which we call “child ability" throughout). We simulate optimal location choices and changes in child ability of the poorest households in our sample under various housing-voucher policies. We demonstrate that a Moving-to-Opportunity type voucher, in which people residing in high poverty tracts are given a voucher to move to low-poverty tracts, does not affect child ability as households use the voucher to move to relatively inexpensive, low-impact neighborhoods. When vouchers are restricted such that they can only be applied in tracts with large effects on children, we demonstrate the total benefits of any voucher less than $700 per month exceed the costs and the voucher that maximizes total social surplus is $300 per month.

Keywords: Demographics, Neighborhood Choice, Neighborhood Effects, Moving to Opportunity, Poverty, Vouchers

JEL Classification: I31, I38, J13, R23, R38

Suggested Citation

Davis, Morris A. and Gregory, Jesse and Hartley, Daniel A. and Tan, Kegon, Neighborhood Effects and Housing Vouchers (2017-01-11). FRB of Chicago Working Paper No. WP-2017-2, Available at SSRN: https://ssrn.com/abstract=2905589

Morris A. Davis (Contact Author)

Rutgers Business School ( email )

Rutgers Business School
One Washington Park #1092
Newark, NJ 07102
United States

Jesse Gregory

University of Wisconsin - Madison ( email )

716 Langdon Street
Madison, WI 53706-1481
United States

Daniel A. Hartley

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

HOME PAGE: http://www.danielaaronhartley.com

Kegon Tan

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States

University of Wisconsin - Madison - Institute for Research on Poverty

1180 Observatory Drive
Madison, WI 53706
United States

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