The impact of neighborhood disparities on intergenerational mobility and economic growth in the United States


The neighborhoods and communities in which we grow up and live affect our future life outcomes. Yet the push for policymakers to address neighborhood disparities in health and economic outcomes has generally been slow even as economic inequality continues to worsen.

The accumulating evidence connecting neighborhood disadvantages and intergenerational mobility—coupled with the additional economic hardship exacerbated by the coronavirus pandemic—suggests a need for greater and more sustained public investments in disadvantaged neighborhoods. Such investments could address economic disparities in communities and pave the way for better outcomes for their residents in the future and for more sustainable future economic growth.

A working paper published earlier this year, “No Man is an Island: The Impact of Neighborhood Disadvantage,” offers some further insights on the influence of neighborhoods on the health outcomes of individuals in disadvantaged neighborhoods, compared to people in more affluent ones. This research, by economist Darrell J. Gaskin and his colleagues Kitty S. Chan, Rachel McCleary, and Benjo A. Delarmente at John Hopkins Bloomberg School of Public Health, Eric T. Roberts at the University of Pittsburgh Graduate School of Public Health, and Christine Buttorff at the Rand Corporation, studies whether neighborhood disadvantage and economic stress have a negative effect on life expectancy in disadvantaged communities.

The six co-authors not only answer this question affirmatively, but also develop a model that can help pinpoint how neighborhood disadvantage and economic stress go hand-in-hand for all the residents in disadvantaged neighborhoods. Let’s look at their model.

For their study, Gaskin and his co-authors define neighborhoods using geographic indicators, such as ZIP codes and county of residence, and further contextualize them using individual- and community-level data on income, the poverty rate, levels of education, violent crime, and air pollution. These factors, among others, are used to construct a neighborhood disadvantage score that could be applied to the sample data and then correlated to a hazard of dying. The individuals within the sample were term life policyholders of a national life insurance company, who were generally more White and higher-income than the national average.

The results of their study suggest that neighborhood disadvantage and economic stress increased the overall hazard of dying by 9.8 percent, after controlling for individuals’ socioeconomic and health status. So, even for a population that tends to be more affluent, there are significant harmful impacts of living in a disadvantaged neighborhood.

A number of other studies also find similar correlations between the neighborhoods in which people reside and their life outcomes. Harvard University economists Raj Chetty and Nathaniel Hendren’s work in intergenerational mobility looks at the outcomes of low-income children who moved from one county to another. In their research, neighborhoods are defined by counties, and they examine how features within these counties, such as residential segregation, income inequality, social capital, and school quality, influence outcomes for low-income children.

Chetty and Hendren find that each year a child from a low-income family is exposed to a one standard deviation better county is associated with a 0.5 percent increase in income in their adulthood. This demonstrates how location matters to outcomes throughout life and how improving characteristics within neighborhoods can have a broad, positive impact.

As policymakers look to improve community outcomes coming out of the coronavirus recession and amid the current economic recovery, it’s important to consider how to define “neighborhoods,” so that policies expand the equality of opportunity regardless of where one lives. More specifically, neighborhoods are made up of a multitude of social and environmental factors across geographic space that either enhance or inhibit our life outcomes. As a result, it’s important for policymakers to understand the geographic boundaries and the density of economic and social characteristics of neighborhoods to inform policy decisions to ameliorate or eliminate the disparities that exist in communities—disparities that inhibit economic growth and mobility.

Doing so also would enable researchers to isolate the neighborhood effects on outcomes. This kind of research is needed to inform better policymaking and is even more critical today amid the coronavirus pandemic, which has disproportionately impacted those in many disadvantaged communities. Many workers and their families in these communities have lost their homes, their jobs, or their lives. The research by Gaskin and his co-authors and Chetty’s work with his colleagues capture some of the disparities that already existed in neighborhoods prior to the pandemic’s start—disparities that have only worsened over the past 2 years.

Some policymakers argue that to address place-based inequality, we should target funds at specific places, but Equitable Growth grantee Robert Manduca makes compelling arguments for advancing universal policies that will reach the places most in need. In the case of underresourced neighborhoods characterized by high levels of unemployment and poverty, structural reforms to the Unemployment Insurance system, strengthening the Supplemental Nutrition Assistance Program, and ensuring that the recent reforms to the Child Tax Credit are made permanent would efficiently bring economic resources into disadvantaged neighborhoods.

These steps would not only improve the immediate economic and health conditions of all of our communities, but also would have long-run positive effects for the people living within them.

Patrick Edwards is a student at the Rochester Institute of Technology who joined Equitable Growth’s summer 2021 internship for experiential learning with the American Economic Association Summer Program.


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