Association for Public Policy Analysis & Management

Vastly unequal neighborhoods have implications for educational achievement, health, and labor market outcomes (Chetty, Hendren, and Katz 2015; Chetty et al. 2014; Ludwig et al. 2011; Burdick-Will et al. 2011). This paper examines neighborhood inequality using new measures that highlight the separate contributions of income inequality, on the one hand, and economic segregation on the other. We examine the degree of inequality of neighborhoods in 264 US metropolitan areas for the period of 1970 through 2010 using Decennial Census for 1970, 1980, 1990, and 2000 and from the American Community Survey 5-year file spanning 2008-2012.

Consistent with past research (Owens 2016), we find that neighborhood inequality has increased in almost all metropolitan areas. While both rising household inequality and economic segregation contribute to neighborhood inequality, we find that the economic segregation is the driving force behind the variation among metropolitan areas in neighborhood inequality and that changes in economic segregation are more important in driving the changes in inequality from one decade to the next. Thus, policies that affect economic segregation – such as reducing exclusionary zoning and improving the distribution of affordable housing – can be a powerful lever to address neighborhood inequality. Relative to income inequality, which is driven by national and international changes in returns to skill and globalization, economic segregation is more amenable to change through policy options available to state and local policymakers. We highlight specific metropolitan areas that have been more successful at controlling economic segregation, e.g. Denver and Minneapolis.