RESIDENTIAL SEGREGATION AND THE ECONOMIC-STATUS OF BLACK WORKERS - NEW EVIDENCE FOR AN OLD DEBATE

Scholars have long debated whether ghetto residence lowers the earnings of blacks. Most empirical studies on this question have been flawed because they have not considered the simultaneous effects of choices of work and residence locations and the effects of intrametropolitan variation in rents and wages. This paper estimates a revealed preference model of intraurban location with data from the 1980 Public Use Microdata Sample for Cleveland, Detroit, and Philadelphia to test whether black male household heads who are employed full-time year-round are less likely than whites to live and work at their best locations. We measure the wages, rents, and commuting costs associated with each possible job/residence location combination in these cities for each person, given their job qualifications and their housing needs. A revealed preference approach is used to evaluate the economic welfare of individuals at each possible location and then compare the actual distribution of work and residence locations by race with the welfare-maximizing distribution. The divergence in these distributions by race measures the economic effects for employed black male household heads of residential segregation in ghettos. We find that the economic status of blacks can be improved significantly by changing their intrametropolitan job locations. Surprisingly, this conclusion holds regardless of whether or not blacks keep their current residential locations. While changes in residential locations can improve the economic status of blacks relative to whites by decreasing commuting and/or the cost of housing, such residential changes do not significantly alter the physical accessibility of better paying jobs. © 1991.