How Much Do Neighborhoods Influence Future Earnings? – Real Time Economics

Lifetime earnings are $900,000 greater for those who are raised in the wealthiest 20% of neighborhoods than for those in the poorest 20% of neighborhoods, the study found.
Andrew Hinderaker for The Wall Street Journal

The potential impact on lifetime earnings between growing up in a well-to-do neighborhood and a poor neighborhood is potentially larger than the difference between the earnings of the average college and high school graduate, according to a new study on social mobility.

The study by Douglas Massey of Princeton University and Jonathan Rothwell of the Brookings Institution, published in Economic Geography, calculated the average household income of the census tracts that children lived in for the first 16 years of their lives to see how well this predicted their average earnings between the ages of 30 and 44.

They found that lifetime earnings are $900,000 greater for those who are raised in the wealthiest 20% of neighborhoods than for those in the poorest 20% of neighborhoods. That’s greater than the difference in earnings between the average high school and college graduate.

Messrs. Massey and Rothwell estimate that this earnings difference based on what neighborhood children are raised in is also between 50% and 66% of the effect that parents’ incomes have on their children’s future income. The upshot is that “growing up in a poor neighborhood would wipe out much of the advantage of growing up in a wealthy household,” writes Mr. Rothwell in a blog post summarizing the paper for Brookings.

What could explain the neighborhood effect on incomes? Mr. Rothwell says school quality is a likely factor. Poor children tend to have better upward mobility when they attend better schools, and more affluent neighborhoods tend to have better schools.

Related coverage:

SAT Scores and Income Inequality: How Wealthier Kids Rank Higher

Among Rich Countries, America’s Youth Took the Recession Especially Hard

 


 


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28 November 2014 | 1:45 pm – Source: blogs.wsj.com

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