Economics of the metropolitan area 212G, Spring 2013

Professor: Keren Mertens HornOffice: Wheatley 5-78B

Office Hours: TR 2:30-4:00 pmE-mail: [email protected]

ECONOMICS OF THE METROPOLITAN AREA

212G, SPRING 2013

W. E. B. Du Bois thought that in the long run “the greatest human development is going to take place under experiences of widest individual contact.”

Diversity was cited by most of you as one of the features of cities you enjoyed the most.

But in fact our cities and metropolitan areas are quite segregated by race.

Today we will explore the topic of racial segregation in our cities: We will describe this phenomenon Ask whether we should worry racial segregation Discuss ways our country has attempted to address this

issue

CITIES AND DIVERSITY

Measures of Racial Segregation Dissimilarity Index: captures unevenness; the extent to which

residential patterns deviate from one of even integration.

Interpretation: 59% of Black households would need to move to achieve an even distribution of Black and White households throughout an MSA

MEASURING RACIAL SEGREGATION

  1980 1990 2000 2010

Black – Non-Hispanic White 74 69 64 59

Hispanic – Non-Hispanic White 51 51 52 48

Asian – Non-Hispanic White 41 42 42 41

U.S. Average Dissimilarity Indices (U.S. Census):

Fact #1: Black households remain extremely segregated in this country Segregation in some cities much higher than national average

NYC 82; Chicago 87; Los Angeles 74; Philadelphia 81; Boston 76*Fact #2: Blacks are the most segregated minority group,

followed by HispanicsFact #3: Segregation has declined the most for BlacksFact #4: Segregation remains constant for both Asians and

Hispanics

FACTS ABOUT RACIAL SEGREGATION

  1980 1990 2000 2010

Black – Non-Hispanic White 74 69 64 59

Hispanic – Non-Hispanic White 51 51 52 48

Asian – Non-Hispanic White 41 42 42 41

U.S. Average Dissimilarity Indices (U.S. Census):

*http://www.censusscope.org/us/s42/p60000/chart_dissimilarity.html

We may be concerned with segregation for two reasons:

We don’t like the causes of racial segregation

We don’t like the consequences of racial segregation

SHOULD WE WORRY ABOUT SEGREGATION?

Income differences? Doesn’t explain much of Black/White segregation, though

does explain a lot more of Hispanic/White and Asian/White segregation

Average Dissimilarity Index between Blacks/Whites with incomes above $50,000 is .73!

If income were all that mattered in determining segregation, then the average dissimilarity index would fall between .08 and .18, 1/5 of what it currently is!

CAUSES OF RACIAL SEGREGATION

Preferences? Ethnic Clustering: Is true of recent immigrants, but does not

explain the high levels of segregation associated with households who have lived in this country for generations.

White racial animus: Survey data does not support racial animus, though most white households report being unwilling to live in neighborhoods that are half black, a substantial minority say they are willing to do so.

White neighborhood racial stereotyping: whites may not harbor racial animus, but they hold stereotyped views about largely black neighborhoods, and often assume that mixed neighborhoods will quickly become all black.

Minority reluctance: clustering may be more about avoiding violence/hostility they may experience in white neighborhood.

CAUSES OF RACIAL SEGREGATION

Market failures? Information – think about how you decided where you were

going to live? Where did you get information from? Often people find out about housing through family and friends, thus different racial groups may only have information about housing close to them.

Discrimination? Perhaps landlords in white neighborhoods will not rent to

minority households, or real estate agents do not show minority households houses in mostly white areas?

Fair Housing Act (1968) prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status, and disability.

How do we identify discriminating landlords?

CAUSES OF RACIAL SEGREGATION

Most influential body of evidence on discrimination comes from a series of carefully designed “audit” experiments.

Goal was to isolate the impact of a person’s minority status on the way they are treated when asking a landlord about available housing.

Successive visits to the same housing agents by two different “auditors” who are matched to be equally qualified but who differ in minority status.

These studies suggest discrimination still occurs. Black auditors were told 11% of the time that a house advertised

for sale was no longer available, but white counterparts were told this only 6% of the time. (9.5% for Hispanic auditors)

Realtors are also more likely to show minorities, specifically blacks, houses in minority neighborhoods

These levels of discrimination still do not explain the large levels of segregation in our country

DISCRIMINATION IN THE HOUSING MARKET

Business In an extensive study of minority businesses Bates (1997)

finds that minority businesses that are located in minority neighborhoods and serve predominantly minority customers are less successful than those businesses that operate in a wider world.

Child Development and Education Cutler and Glaeser (1997) find that blacks in more segregated

cities are less likely to graduate from high school, more likely to be unemployed or single mothers than blacks who lived in less segregated cities.

These effects were BIG – If segregation were eliminated entirely, the black-white difference in high school graduation would disappear, as would two-thirds of the difference in the rates of unwed motherhood.

Overall evidence suggests that racial segregation hurts minorities

CONSEQUENCES OF RACIAL SEGREGATION

If we believe that causes of racial segregation are not purely about household preferences and that the causes of racial segregation are detrimental then should we as a society make an effort to reduce racial segregation?

POLICIES TO REDUCE RACIAL SEGREGATION?

Series of supreme court cases have made exclusion illegal Ex/Buchanan v. Warley (1917) struck down ordinance that

forbade blacks or other minorities from living in white-zoned neighborhoods.

Ex/Shelly v. Kraemer (1948) held that it was unconstitutional for any government to enforce a racial covenant (provision in deed forbidding owner from selling or renting property to minorities)

The Fair Housing Act and the Civil Rights Act are the chief tools the federal government uses to combat discrimination in housing.

Some evidence that these laws are working Gablinger and Virabhak (2003) found that segregation decreased

faster in the 1990s in states with more stringent fair housing laws.

But overall these laws do not appear to have a large impact on decreasing racial segregation.

RESPONSE 1: MAKING EXCLUSION ILLEGAL

The most famous program of this type grew out of a desegregation case in 1976 – Gautreaux vs. Chicago Housing Authority

Group of public housing residents sued the Chicago Housing Authority (CHA) and the U.S. Department of Housing and Urban Development (HUD) claiming that the CHA had discriminated in selecting housing sites (concentrating projects in minority neighborhoods) and in placing tenants (concentrating minority tenants in minority projects)

Court sided with tenants, and settlement established Gautreaux Assisted Housing Program

Households received Section 8 Certificates, which they could only use in low-poverty neighborhoods, most of which were mainly white

A few years later, research showed that households who moved out of minority neighborhoods were move l ikely to have jobs than those who didn’t and their children were more likely to attend college, and more likely to have good jobs than children of families who did not move.

RESPONSE 2: HELPING MINORITIES MOVE TO WHITE

NEIGHBORHOODS

The federal government tried to replicated these outcomes and established a Gautreaux-type program called Moving to Opportunity

Established in the 1990s, this program provided residents of public housing projects with certificates they could use in low-poverty neighborhoods.

The effects of this initiative were not nearly as powerful as those of Gautreaux. One theory as to why is that MTO moved households to lower-poverty neighborhoods, but most had high minority concentrations, so perhaps the key to Gautreaux’s success was racial integration.

MOVING TO OPPORTUNITY

Initiatives include Model Cities in 1960s, Community Development Block Grantss in the 1970s, Urban Enterprise Zones in the 1980s, and Urban Empowerment Zones in the 1990s.

Techniques include Reducing corporate or sales tax on businesses in a targeted neighborhood, build infrastructure, improve schools, pay for demolishing abandoned buildings.

Overall evidence on these initiatives have shown little impact.

Building affordable housing in high-poverty neighborhoods, however, has been shown to have some positive impacts on property values.

RESPONSE 3: MAKING MINORITY NEIGHBORHOODS MORE

ATTRACTIVE

Mortgage subsidies for whites moving into heavily minority neighborhoods

Mortgage subsidies for minorities moving into heavily white neighborhoods

Housing counseling designed to encourage moves by minorities into white neighborhoods and whites into minority neighborhoods

Bans on visible for-sale signs Advertising the advantages of integrated livingThese types of activities are seen mainly in upper-

middle and middle-income suburbs near heavily minority cities (Oak Park and Park Forest near Chicago, Shaker Heights and Cleveland Heights near Cleveland, West Mount Airy in Philadelphia)

RESPONSE 4: INTEGRATION MAINTENANCE

INTEGRATED NEIGHBORHOODS

STABILITY OF INTEGRATION

DECLINE OF RACIAL SEGREGATION

SEGREGATION IN NATION’S 10 LARGEST MSAS

LONG RUN TRENDS IN SEGREGATION