Friday, August 21, 2015

The neighborhood matters, it turns out, but for tomorrow more than today

I've been so busy this summer that I haven't had a chance to blog about some major developments on one of my favorite topics:  neighborhoods.  But now I have some time, so here goes.  

I have several recommendations for those interested in neighborhoods.  First, Malcolm Gladwell's article in this week's New Yorker, "Starting Over," discusses how social scientists have used the Hurricane Katrina-induced diaspora from New Orleans' poorest neighborhoods to explore the question of whether neighborhood matters.  In short, it does.  I highly recommend the article.

In addition, Gladwell does a short description of several very important social science articles that have come out this year.  Those are both from teams led by Raj Chetty that have dug into HUD Moving to Opportunity data.  As many of you know, MTO was a massive, multi-decade study that used different variables to explore whether removing people from the poorest neighborhoods to those with less poverty would affect their life choices and life outcomes.  The initial results from the MTO study were surprisingly lackluster.  

But Chetty and his team revisited the data and found what the initial investigation of the data had not:  where poor kids grew up had a huge effect on how much money they earned as adults.  In other words, while the results of MTO did not show a tremendous change in the lives of adults that were moved to new neighborhoods, the kids of those adults that moved to those new neighborhoods saw profound life changes.

In one of Chetty's studies, he investigated those families living in public housing in the MTO program that were randomly selected to be eligible for housing vouchers that required them to move to less-concentrated poverty neighborhoods. Children whose families received the special MTO vouchers grew up to earn significantly more than those whose families remained in public housing.  Here is Chetty's abstract:

The Moving to Opportunity (MTO) experiment offered randomly selected families living in high poverty housing projects housing vouchers to move to lower-poverty neighborhoods. We present new evidence on the impacts of MTO on children’s long-term outcomes using administrative data from tax returns. We find that moving to a lower-poverty neighborhood significantly improves college attendance rates and earnings for children who were young (below age 13) when their families moved. These children also live in better neighborhoods themselves as adults and are less likely to become single parents. The treatment effects are substantial: children whose families take up an experimental voucher to move to a lower-poverty area when they are less than 13 years old have an annual income that is $3,477 (31%) higher on average relative to a mean of $11,270 in the control group in their mid-twenties. In contrast, the same moves have, if anything, negative long-term impacts on children who are more than 13 years old when their families move, perhaps because of disruption effects. The gains from moving fall with the age when children move, consistent with recent evidence that the duration of exposure to a better environment during childhood is a key determinant of an individual’s long-term outcomes. The findings imply that offering families with young children living in high-poverty housing projects vouchers to move to lower-poverty neighborhoods may reduce the intergenerational persistence of poverty and ultimately generate positive returns for taxpayers.

In a second study, Chetty and his colleagues looked at data for millions of families who moved from one county to another. Based on this data, they were able to estimate how much where poor kids grow up affects their income as adults.  Here is Chetty's abstract:

We characterize the effects of neighborhoods on children’s earnings and other outcomes in adulthood by studying more than five million families who move across counties in the U.S. Our analysis consists of two parts. In the first part, we present quasi-experimental evidence that neighborhoods affect intergenerational mobility through childhood exposure effects. In particular, the outcomes of children whose families move to a better neighborhood – as measured by the outcomes of children already living there – improve linearly in proportion to the time they spend growing up in that area. We distinguish the causal effects of neighborhoods from confounding factors by comparing the outcomes of siblings within families, studying moves triggered by displacement shocks, and exploiting sharp variation in predicted place effects across birth cohorts, genders, and quantiles. We also document analogous childhood exposure effects for college attendance, teenage birth rates, and marriage rates. In the second part of the paper, we identify the causal effect of growing up in every county in the U.S. by estimating a fixed effects model identified from families who move across counties with children of different ages. We use these estimates to decompose observed intergenerational mobility into a causal and sorting component in each county. For children growing up in families at the 25th percentile of the income distribution, each year of childhood exposure to a one standard deviation (SD) better county increases income in adulthood by 0.5%. Hence, growing up in a one SD better county from birth increases a child’s income by approximately 10%. Low-income children are most likely to succeed in counties that have less concentrated poverty, less income inequality, better schools, a larger share of two-parent families, and lower crime rates. Boys’ outcomes vary more across areas than girls, and boys have especially poor outcomes in highly-segregated areas. In urban areas, better areas have higher house prices, but our analysis uncovers significant variation in neighborhood quality even conditional on prices.

Planet Money has a good laymen's explanation of Chetty's work here:

I continue to find this work exciting.  I hope you do, too.  I continue to believe that the neighborhood is worthy of further study on how law and policy can facilitate these new findings in the social sciences.

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