Citation

Ananat EO. Am. Econ. J. Appl. Econ. 2011; 3(2): 34-66.

Copyright

(Copyright © 2011, American Economic Association)

DOI

10.1257/app.3.2.34

PMID

unavailable

Abstract

A striking negative correlation exists between an area's residential racial segregation and its population characteristics, but it is recognized that this relationship may not be causal. I present a novel test of causality from segregation to population characteristics by exploiting the arrangements of railroad tracks in the nineteenth century to isolate plausibly exogenous variation in areas' susceptibility to segregation. I show that this variation satisfies the requirements for a valid instrument. Instrumental variables estimates demonstrate that segregation increases metropolitan rates of black poverty and overall black-white income disparities, while decreasing rates of white poverty and inequality within the white population. (JEL I32, J15, N31, N32, N91, N92, R23)