Editors' Summary
Brookings-Wharton Papers on Urban Affairs presents new research on urban economics to a broad audience of interested policy analysts and researchers. The papers and comments contained in this volume, the seventh in the series, were presented at a December 8–9, 2005, conference at the Brookings Institution. The papers treat a range of issues examined by contemporary urban economists, including the effects of population growth and changing income inequality on neighborhood segregation, the economic gains from creating express lanes and charging congestion prices on busy expressways, recent trends in the school achievement gap between white and black youngsters, the impact of neighborhood poverty on barriers to employment, the potential benefits of restructuring local property taxes, and the effects of land use restrictions and jurisdictional fragmentation on sprawl and the price of housing.
U.S. income inequality rose sharply after 1979, increasing the gap between America's rich and poor. Tara Watson examines some effects of this development on the income segregation of urban and suburban neighborhoods in "Metropolitan Growth, Inequality, and Neighborhood Segregation by Income." Watson begins by observing that neighborhood segregation is particularly malleable when the local housing stock is first built. It is more costly to change the physical characteristics and distribution of amenities after housing has already been constructed. Neighborhoods built when the local income distribution is comparatively equal may reflect this reality. Many neighborhoods in a metropolitan area may have a similar average level of amenities, and the distribution of physical amenities may be similar across a large proportion of neighborhoods. However, an unequal income distribution will give metropolitan residents unequal access to housing amenities. High-income residents can afford dwellings with better amenities, including neighborhood attractions such as safe streets, good schools, and well-maintained parks. [End Page ix]
Depending on the connection between residents' incomes and their tastes for housing amenities, it is easy to imagine that higher income inequality will be associated with greater income segregation across neighborhoods. Increased inequality can boost residential segregation in both direct and indirect ways. As incomes grow more unequal, rich and poor households will be less willing or able to spend the same amount of money to live in the same neighborhood. As less-affluent households become more concentrated in selected neighborhoods, there may be feedback effects on neighborhood amenities, further reducing the attractiveness of neighborhoods from which well-to-do households have moved. Watson notes that housing markets can easily accommodate changing preferences induced by changes in the income distribution when the metropolitan population is climbing rapidly. Increased inequality translates into newly built neighborhoods in which there is greater sorting by households' income ranks. On the other hand, in metropolitan areas experiencing population decline, the increased demand for residential segregation may not be large enough to overcome the high cost of retrofitting old homes or building new ones. A big shock in inequality may be needed in stagnant or declining areas to cause a shift in residential segregation patterns.
Watson finds a U-shaped relationship between the rise of residential segregation in metropolitan areas and population growth. The greatest changes in income segregation have occurred in distressed areas with stagnant or declining populations and in areas with rapidly growing populations. There typically has been less change in residential segregation in areas with moderate rates of population growth. Watson also finds support for some of her predictions on the relationship between changing income inequality and residential segregation patterns. As expected, higher income inequality is associated with higher levels of residential segregation by income. Also as predicted, rising inequality has a larger effect on segregation in rapidly growing areas compared with areas with stagnant or declining populations. Large increases in segregation are accommodated with higher-than-expected housing construction in distressed areas, but unexpectedly high rates of new construction are not needed in areas with big population gains. Finally, income segregation tends to be persistent within a metropolitan area, and the persistence is more pronounced in cities with an...
