The Effects of Neighborhood and Location : Is Urban Segregation Unavoidable?

Résumé 0

In this paper, we provide a theoretical framework for exploring the consequences of neighborhood informational effects –identified as role models– so as to deduce the urban configuration. Specifically, we have developed an overlapping generations model of community formation. When young, an individual must choose whether to invest in education or not. The crucial feature of our framework is that children assess the economic pay-off of education by observing the experience of the older generation residing in their neighborhood. When an adult, an individual who cares about her offspring’s income must choose the family’s location. We show that there exist two stable urban configurations. (i) An integrated city may occur where the socio-economic composition of each neighborhood makes its inhabitants well informed and therefore willing to invest in education. (ii) A segregated city may emerge where socio-economic segregation makes the inhabitants of poor communities be misinformed about the benefits of education. Classification JEL: D31, D82, I2, J24, R1.