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Title: Income Sorting: Measurement and Decomposition

Citation Type: Conference Paper

Publication Year: 2004

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Abstract: Segregation of households on the dimension of income at the jurisdictional level is interesting to economists because, under some conditions, it is an equilibrium condition in the political economy models of jurisdiction choice that follow from Tiebout (1956). This paper addresses the measurement of household income sorting across jurisdictions and the attribution of observed sorting to a Tiebout mechanism. A standard decomposition of variance into within- and between-jurisdiction components is biased downward by roughly 50 percent due to measurement error. Adjusting US Census data accordingly, an average across MSAs of six to eight percent of income variation can be explained by differences across jurisdictions; approximately 21 percent in the much-studied Boston MSA. Variance decomposition overstates the role of locally provided public goods because jurisdictions are differentiated by both government and location. Comparing pairs of adjacent, randomly defined neighborhoods in the Boston MSA, I find that jurisdiction differences alone explain no more than three to four percent of income variation.

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Authors: Davidoff, Thomas

Conference Name: American Real Estate and Urban Economics Association

Publisher Location: Washington, DC

Data Collections: IPUMS USA

Topics: Housing and Segregation

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