The End of the American Dream? Ineq uality and Segregation in US cities (with Veronica Guerrieri)
< p style="text-align: justify;">Abstract:This paper explores the dynamic relationship between income inequality, se gregation and mobility. Using data from the 100 largest US metropolitan are as, we document a large increase in inequality and segregation over the las t four decades and a strong relationship between them both in the time seri es and in the cross section. We develop a general equilibrium overlapping g eneration model in which income inequality and segregation are both endogen ous and feed on each other. Agents make residential choices and invest in t heir children's education. Neighborhoods differ in the education compositio n of their residents which, in turn, affects the return from investing in e ducation. High inequality, through housing prices, drives up the residentia l sorting of families in neighborhoods. As society becomes more segregated, the return from investing in children's education endogenously diverge bet ween low and high income families. A larger differential in the return from education translates into a larger gap in children's educational outcomes, lower intergenerational mobility and higher inequality in the following ge neration. Using data on children's test scores from US school districts, we show that the relationship between children's educational outcomes and par ental income is significantly stronger in highly segregated metropolitan ar eas.
DTSTAMP:20260406T181216Z DTSTART:20160727T130000Z DTEND:20160727T140000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR