Neighborhood Income Inequality

Abstract

This paper offers a descriptive empirical analysis of the geographic pattern of income inequality within a sample of 359 US metropolitan areas between 1980 and 2000. Specifically, we decompose the variance of metropolitan area-level household income into two parts: one associated with the degree of variation among household incomes within neighborhoods - defined by block groups and tracts - and the other associated with the extent of variation among households in different neighborhoods. Consistent with previous work, the results reveal that the vast majority of a city's overall income inequality - at least three quarters - is driven by within-neighborhood variation rather than between-neighborhood variation, although we find that the latter rose significantly during the 1980s, especially between block groups. We then identify a number of metropolitan area-level characteristics that are associated with both levels of and changes in the degree of each type of residential income inequality.

Keywords: Income Inequality, Residential Segregation, Neighborhoods

JEL Classification: D31, R23, J10