Geography of economic inequality

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About the author: Kendra Bischoff is an assistant professor of sociology at Cornell University.

Why does it matter where you live? Or where a child grows up? Neighborhoods are a primary non-familial context by which lives are shaped—residential context plays a significant role in access to education and other public services, opportunities for social interactions, labor market prospects, the frequency and nature of encounters with the police, and the freedom enabled by one’s real or perceived physical safety.

The geography of economic inequality refers to the spatial sorting of individuals by income, and the correlated patterning of economic resources and opportunities. The ability to pay has always determined the latitude of one’s residential choices as well as one’s capacity to afford certain neighborhoods. Research shows, however, that residential sorting by income has significantly increased over the past 45 years.1 This sorting has resulted in more Americans living in communities that represent the poles of the income distribution rather than the middle. In 1970, two-thirds of families in large metropolitan areas lived in middle-income neighborhoods. By 2012, just 40 percent of families lived in such neighborhoods.

Similarly, the percentage of families living in affluent or poor neighborhoods more than doubled from 15 percent to 34 percent over that same time period.2 This pattern is particularly problematic for lower income individuals. The most recent American Community Survey data show that approximately 12 percent of all poor individuals, and nearly a quarter of poor individuals in urban areas, live in “distressed” neighborhoods, defined as census tracts with poverty rates greater than 40 percent. This means that more than five million Americans face the double disadvantage of individual and contextual poverty.3

What are the causes and consequences
of spatial economic inequality?

The spatial sorting of economic resources results from many regional factors, including income inequality, suburbanization patterns, the age and quality of housing stock, school and municipal boundaries, zoning and land-use regulation, and current and historical housing policies.4 Income segregation is more pronounced among families with children than it is among the general population, and most of the increase in income segregation that has occurred since 1990 can be accounted for by the residential choices of parents.5 This means that children, in particular, experience stratified residential contexts, and that parents are increasingly choosing to live with others similar to themselves.6

It is common sense that the lived experiences of people in neighborhoods characterized by high poverty rates, low employment rates, and routine violence are dramatically different than those of people in wealthy, protected neighborhoods. The concentration of social, financial, and environmental resources and hazards form the context in which children develop and adults live, which not only affects day-to-day experience but also is thought to affect educational achievement and attainment, adult earnings, mental and physical health, and attitudes toward society and the government.

In addition to the direct effects of neighborhood conditions, highly segregated neighborhoods make it less likely that advantages afforded by those with more resources will be shared, or will spill over, to those who are less fortunate. Economically heterogeneous schools, for example, ensure that the time and money that middle- and upper-class families have to invest in their children’s schools, such as through the parent-teacher association, fund-raising, event planning, and curricular decisions, will also benefit children with fewer resources who share that educational environment.

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There is great interest among social scientists and policymakers in understanding how residential context matters, especially for the trajectory of children. Understanding the link between neighborhoods and individual or distributional outcomes is challenging—people are not randomly assigned to residential location, and the degree of segregation in a city or metropolitan area is likely related to characteristics of the area itself. But using high-quality research designs such as controlled and natural experiments, longitudinal analyses, and carefully crafted observational studies, there is an ever-growing and improving body of evidence on whether, how, and under what conditions neighborhoods affect individual and distributional outcomes, net of personal characteristics. In these studies, disadvantaged neighborhood contexts are defined by the concentration of poverty, but also sometimes by other indicators of neighborhood advantage or disadvantage, such as rates of unemployment, educational attainment, family structure, and welfare receipt.

Educational outcomes are probably the most-frequently studied outcome relating to neighborhood composition. In these studies, the authors seek to understand how neighborhood poverty affects the lives of individuals (as opposed to trying to understand the effect of the distribution of income across neighborhoods). Evidence suggests that exposure to a disadvantaged neighborhood context negatively affects educational outcomes such as high school graduation rates and test scores, and reduces children’s verbal ability by as much as one year of learning.7 Long-term residence in the most disadvantaged neighborhoods, as compared to the most advantaged ones, severely reduces the odds of graduating from high school, and these conditions have a larger depressive effect on educational attainment for African American children than they do for other children.8 The effects of neighborhood disadvantage on high school graduation rates appear to be especially acute during adolescence, and are most harmful for those children who face the double disadvantage of family and neighborhood poverty.9 A number of other studies have shown that episodes of neighborhood violence reduce performance on academic tests and diminish the attention span and impulse control of children.10

Experimental evidence from housing programs on the effect of neighborhood composition has been more mixed. The well-known Moving to Opportunity study, for example, offered a random sample of participants a voucher to induce them to move to more advantaged neighborhoods. Comparisons between those who received the voucher and those who did not showed few long-term differences, which led people to conclude that neighborhoods, in and of themselves, had limited effects on individuals.11

Yet recently completed, longer-term evidence from the Moving to Opportunity data show that children who moved to low-poverty neighborhoods before the age of 13 have reaped significant benefits. They were more likely to attend college, had significantly higher earnings by their mid-20s, and lived in less disadvantaged neighborhoods as adults—all compared to those who did not receive the voucher in the experimental project. Results for children who moved after the age of 13 were nil or even negative, suggesting that stability and consistent social environments may be more important in late adolescence.12

Finally, a study of a housing program in Montgomery County, MD found significantly higher academic achievement among low-income students who lived in low-poverty school zones, compared to similar peers in high-poverty school zones.13 Taken together, there is a fairly strong body of evidence supporting the fact that childhood neighborhood context matters for contemporaneous and long-term outcomes, but that the effects differ by family income, race/ethnicity, and age.

There is less evidence on the consequences of economic segregation itself, a characteristic not of individual neighborhoods but of the arrangement of neighborhoods in a city. The existing research has demonstrated that metropolitan- and state-level income segregation increases inequality of educational attainment and infant health outcomes and shows that income segregation in U.S. metropolitan areas weakens economic mobility, establishing an important link between the geography of economic inequality and intergenerational mobility.14

Concluding thoughts and
policy directions

The spatial dimension of economic inequality is a persistent feature of U.S. cities and communities. The magnitude of residential sorting continues to increase, closely tracking the steady rise in income inequality. Over one third of all families in large metropolitan areas now live in relatively poor, or relatively affluent, neighborhoods—neighborhoods that affect our understanding of America as a country of the middle class. Three additional points bear mention in this short brief.

First, neighborhood disadvantage is durable. Segregated neighborhoods are difficult to escape, especially for African Americans. Nearly three quarters of African American children who grow up in America’s poorest neighborhoods live in similar neighborhoods as adults.15 A lack of sufficient resources in the poorest neighborhoods, such as high-quality schools, contributes to the intergenerational transmission of individual poverty and neighborhood disadvantage.16

Second, the concentration of affluence deserves more attention. The geographic isolation of the affluent is connected to the geographic isolation of the poor. Recent American Community Survey data show that, nationally, the school district at the 10th percentile of the income distribution has a median household income of $34,000 while the 90th percentile district has a median income of $74,000. The median household incomes in the very wealthiest districts exceed $200,000, and fall below $20,000 in the very poorest.17 These income gaps are not the whole story, but the gaps are representative of bundles of advantages and disadvantages comprised of parental education levels and employment status, teacher quality, school facilities, and safety. This matters, in part, because children from poor and affluent neighborhoods are competing for the same seats at elite colleges and universities, and for the opportunity to be leaders in politics, business, academic research, and the arts. The presence of highly polarized neighborhoods ensures that children spend important developmental years in severely unequal environments.

Third, the vast majority of research on the causes and consequences of neighborhood poverty and economic segregation relies exclusively on income as a metric for financial resources. Wealth data are harder to obtain, but it is even more unequally distributed than income and it can be a major factor in residential choice. In 2010, 44 percent of all income in the United States went to the highest-earning 10 percent of the workforce, whereas the top 10 percent of wealth holders controlled 74 percent of all U.S. wealth. Similarly, the income-based Gini coefficient (a widely used measure of inequality in which 1 signifies absolute inequality and zero absolute equality) was 0.55 but the wealth-based figure was 0.87.18 Wealth segregation may be relatively severe due to the extreme level of wealth inequality in the United States, but less is known about the degree to which families are spatially separated by wealth.

How can public policy address the geography of economic inequality? I offer two brief comments. First, economic segregation and the concentration of poverty are not narrowly local issues. They are regional issues that need regional solutions. This may require collaboration across multiple municipalities, or the formation of regional governance structures that have the authority and mandate to address the division of resources that occurs through municipal fragmentation. Policy tack and the appropriate level of government intervention depend on the boundaries of the geographic inequality—across neighborhoods within a municipality, across schools within a school district, across municipalities and school districts within a metropolitan area, or even between cities or counties within a state or nationwide.

Second, there are remedies for the problem itself, and there are ways to mitigate its negative effects. Policies that encourage mixed-income communities or reduce income inequality refer to the former, while school integration programs and monetary redistribution refer to the latter. These types of policies are not mutually exclusive—society can both pursue bold long-term plans to equalize children’s neighborhood contexts while also embracing short-term programs to mitigate the effects of segregation and concentrated poverty.

End Notes

1. Sean F. Reardon and Kendra Bischoff, “Income Inequality and Income Segregation,” American Journal of Sociology 116, no. 4 (2011):1092-1153.

2. Middle-income is defined as neighborhoods with median family incomes between 80 percent and 125 percent of the metropolitan area’s median family income. Poor and affluent neighborhoods have median family incomes that are less than 67 percent, and greater than 150 percent, of the metropolitan median family income, respectively. The sample includes metropolitan areas with greater than 500,000 people (N=117).

3. Elizabeth Kneebone, “The Growth and Spread of Concentrated Poverty, 2000-2008, ” (Washington, DC: The Brookings Institution, 2014), available at (last accessed July 2016).

4. Kendra Bischoff, “School District Fragmentation and Racial Residential Segregation: How Do Boundaries Matter?” Urban Affairs Review 44, no. 2 (2008):182-217. See also: David M. Cutler and Edward L. Glaeser, “Are Ghettos Good or Bad?” Quarterly Journal of Economics 112 (1997):827-871; Paul A. Jargowsky,“Take the Money and Run: Economic Segregation in U.S. Metropolitan Areas,” American Sociological Review 61, no. 6 (1996): 984‐998; J. T. Rothwell and Douglas S. Massey, “Density Zoning and Class Segregation in U.S. Metropolitan Areas,” Social Science Quarterly (2010), 91:1123–1143; Tara Watson, “Inequality and the Measurement of Residential Segregation by Income,” Review of Income and Wealth (2009), 55 no. 3(2009): 820‐844; Rebecca Yang and Paul A. Jargowsky, “Suburban Development and Economic Segregation in the 1990s,” Journal of Urban Affairs, 28 (2006): 253-273; Reardon and Bischoff, “Income Inequality and Income Segregation.”

5. Ann Owens, “Inequality in Children’s Contexts: Income Segregation of Households with and without Children,” American Sociological Review 81 no. 3 (2016): 549-574.

6. Sean F. Reardon and Kendra Bischoff, “The Continuing Increase in Income Segregation, 2007-2012,” (Palo Alto, CA: Center for Education Policy Analysis, Stanford University, 2016). See also: Kendra Bischoff and Sean F. Reardon, “Residential Segregation by Income, 1970-2009,” in J. Logan (Ed.), Diversity and Disparities: America Enters a New Century, (New York: The Russell Sage Foundation, 2014).

7. Julia Burdick-Will, Jens Ludwig, Stephen W. Raudenbush, Robert J. Sampson, Lisa Sanbonmatsu, and Patrick Sharkey, “Converging Evidence for Neighborhood Effects on Children’s Test Scores: An Experimental, Quasi-experimental, and Observational Comparison,” in Whither Opportunity? Rising Inequality and the Uncertain Life Chances of Low-Income Children, ed. Greg J. Duncan and Richard J. Murnane, (New York: Russell Sage Foundation, 2014); David J. Harding, “Counterfactual Models of Neighborhood Effects: The Effect of Neighborhood Poverty on Dropping Out and Teenage Pregnancy,” American Journal of Sociology 109, no. 3 (2003): 676–719; Robert J. Sampson, Patrick Sharkey, and Stephen W. Raudenbush, “Durable Effects of Concentrated Disadvantage on Verbal Ability Among African-American Children,” Proceedings of the National Academy of Sciences 105, no. 3 (2008): 845–52.

8. Geoffrey T. Wodtke, David J. Harding, and Felix Elwert, “Neighborhood Effects in Temporal Perspective: The Impact of Long-Term Exposure to Concentrated Disadvantage on High School Graduation” American Sociological Review 76, no. 5 (2011): 713-736.

9. Geoffrey T. Wodtke, Felix Elwert, and David J. Harding, “Neighborhood Effect Heterogeneity by Family Income and Developmental Period,” American Journal of Sociology 121, no. 4 (2016): 1168-1222.

10. Ibid.

11. Jeffrey R. Kling, Jeffrey B. Liebman, Lawrence F. Katz, “Experimental Analysis of Neighborhood Effects.” Econometrica 75, no. 1 (2007): 83-119. See also Jens Ludwig, Greg J. Duncan, Lisa A. Gennetian, Lawrence F. Katz, Ronald C. Kessler, Jeffrey R. Kling and Lisa Sanbonmatsu,“Long-Term Neighborhood Effects on Low-Income Families: Evidence from Moving to Opportunity,” American Economic Review 103, no. 3(2013):226-31.

12. Raj Chetty, Nathaniel Hendren, and Lawrence Katz, “The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Project,” American Economic Review 106, no. 4 (2016).

13. Heather Schwartz, “Housing Policy is School Policy: Economically Integrative Housing Promotes Academic Success in Montgomery County, Maryland,” (New York: The Century Foundation, 2010).

14. Susan E. Mayer, “How Economic Segregation Affects Children’s Educational Attainment,” Social Forces 81, (2002):153–76. See also: Susan E. Mayer and Ankur Sarin, “An Assessment of Some Mechanisms Linking Economic Inequality and Infant Mortality,” Social Science and Medicine 60 (2005):439–55; Raj Chetty, Nathaniel Hendren, Patrick Kline, and Emmanuel Saez, “Where is the Land of Opportunity? The Geography of Intergenerational Mobility in the United States,” Quarterly Journal of Economics (2014):1553-1623.

15. Patrick Sharkey, “The Intergenerational Transmission of Context,” American Journal of Sociology 113, no. 4 (2008): 931-969. See also: Patrick Sharkey and Felix Elwert, “The Legacy of Disadvantage: Multigenerational Neighborhood Effects on Cognitive Ability,” American Journal of Sociology 116, no. 6 (2011): 1934-81; Patrick Sharkey, Amy Ellen Schwartz, Ingrid Gould Ellen, and Johanna Lacoe, “High Stakes in the Classroom, High Stakes on the Street: The Effects of Community Violence on Students’ Standardized Test Performance,” Sociological Science 1 (2014): 199-220; Patrick Sharkey, Nicole Strayer, Andrew Papachristos, and Cybele Raver, “The Effect of Violence on Children’s Attention and Impulse Control,” American Journal of Public Health 102, no. 12 (2012): 2287-93.

16. Steven Durlauf, “A Theory of Persistent Income Inequality,” Journal of Economic Growth 1 (1996): 75–93.

17. Author’s calculations from the School District Demographic System (census data in school district boundaries) using 2007-11 ACS data, excluding elementary school districts, and only including districts with more than 100 households.

18. Lisa Keister, “The One Percent,” Annual Review of Sociology 40, (2014): 347-67.



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