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Immigration and the Neighborhood

60 Pages Posted: 21 Sep 2006  

Albert Saiz

University of Pennsylvania - The Wharton School; IZA Institute of Labor Economics

Susan M. Wachter

University of Pennsylvania - Wharton School, Department of Real Estate ; University of Pennsylvania - Finance Department

Date Written: November 2006

Abstract

What impact does immigration have on neighborhood dynamics? Within metropolitan areas, we find that housing values have grown relatively more slowly in neighborhoods of immigrant settlement. We propose three nonexclusive explanations: changes in housing quality, reverse causality, or the hypothesis that natives find immigrant neighbors relatively less attractive (native flight). To instrument for the actual number of new immigrants, we deploy a geographic diffusion model that predicts the number of new immigrants in a neighborhood using lagged densities of the foreign-born in surrounding neighborhoods. Subject to the validity of our instruments, the evidence is consistent with a causal interpretation of an impact from growing immigration density to native flight and relatively slower housing price appreciation. Further evidence indicates that these results may be driven more by the demand for residential segregation based on race and education than by foreignness per se.

Keywords: Immigration, housing prices

JEL Classification: J61, R23, R31

Suggested Citation

Saiz, Albert and Wachter, Susan M., Immigration and the Neighborhood (November 2006). FRB of Philadelphia Working Paper No. 06-22; IZA Discussion Paper No. 2503. Available at SSRN: https://ssrn.com/abstract=931733

Albert Saiz (Contact Author)

University of Pennsylvania - The Wharton School ( email )

314 Lauder-Fischer Hall
256 South Street
Philadelphia, PA 19104-6330
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Susan M. Wachter

University of Pennsylvania - Wharton School, Department of Real Estate ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104-6330
United States
215-898-6355 (Phone)

HOME PAGE: http://real.wharton.upenn.edu/~wachter/index.html

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

HOME PAGE: http://real.wharton.upenn.edu/~wachter/index.html

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