American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Presidential Address: Neighborhood Effects and Missing Markets for Opportunity
American Economic Review
(pp. 3197–3222)
Abstract
Experimental and quasi-experimental studies show that childhood neighborhoods have substantial causal impacts on children's adult earnings and other long-term socioeconomic outcomes. Several market failures are likely to lead to excessive residential segregation by parental income and to an undersupply of mixed-income neighborhoods. Missing markets for opportunity originate in capital market imperfections for borrowing on children's future earnings, neighbor spillovers, behavioral biases, and housing search frictions. Customized housing mobility services combined with subsidized housing vouchers can help low-income families move to higher-opportunity areas. Place-based policies that create mixed-income neighborhoods appear to increase long-term outcomes for less-advantaged children.Citation
Katz, Lawrence F. 2026. "Presidential Address: Neighborhood Effects and Missing Markets for Opportunity." American Economic Review 116 (9): 3197–3222. DOI: 10.1257/aer.116.9.3197Additional Materials
JEL Classification
- I12 Health Behavior
- I32 Measurement and Analysis of Poverty
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
- J13 Fertility; Family Planning; Child Care; Children; Youth
- J15 Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
- R38 Production Analysis and Firm Location: Government Policy