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Cascade: No. 68, Spring/Summer 2008

Research Perspective: How Does Place Matter?

When a person considers a choice of residence (whether for purchase or rent), affordability and suitable living space are generally at or near the top of the list. However, the neighborhood in which you live might influence critical aspects of your well-being. A neighborhood’s characteristics might be associated with the crime level, the social interactions that take place there could affect criminal involvement, and the conditions in a neighborhood may have a profound effect on your physical and mental health. In addition, the current racial and ethnic makeup of a neighborhood could portend its future racial composition, especially whether segregated or integrated. These various neighborhood effects were addressed in presentations made at the Philadelphia Fed’s reinventing older communities conference. What follows is a brief summary of those presentations.1

Social Interactions and Crime

Two presentations were offered that discussed the interplay of neighborhood attributes and crime as well as the influence of social interactions in the neighborhood on criminal behavior. In the first presentation, Michael Stoll, of the University of California, Los Angeles, reviewed the evidence on the neighborhoodcrime connection. Stoll pointed out that although crime has trended downward recently, we should still be concerned because the monetary losses resulting from crime amount to nearly 1 percent of the country’s gross domestic product.2 He noted that the scholarly literature on neighborhoods and crime is not very extensive, which has resulted in policy prescriptions that are imprecise. Stoll stressed that a neighborhood defined by its amenities (businesses, jobs, schools, parks, etc.) can affect crime differently than one defined in terms of social interactions among families, peers, and networks. These alternative definitions in turn yield different types of policy interventions.

Stoll reported that cross-sectional data reveal strong correlations between indicators of disadvantaged neighborhoods and criminal propensity and victimization. These strong relationships are as expected. For example, more poor metropolitan areas and those with higher degrees of racial segregation have more violent crimes. But there is still the issue of causality. Also, it is difficult to determine the mechanism underlying the neighborhood-crime link: a neighborhood’s physical attributes or social interactions, or both. According to Stoll, these issues should be resolved before meaningful policy initiatives are formed.

The second presentation, by Robert Sampson of Harvard University, focused on how neighborhood social dynamics interact with outcomes of neighborhood violence and public safety. He also provided some valuable insights on the impact of immigrants on neighborhood crime. Sampson relied on extensive research he has done on Chicago, the results of which are useful for other large cities. He found that crime tends to be concentrated in poor neighborhoods, regardless of whether they are located in the inner city or the suburbs. This finding persists over time, even though overall crime declined during the 1990s. Sampson also pointed out that social networks and interaction in a neighborhood can produce both positive and negative effects on neighborhood crime.

In addition, Sampson commented on the structural changes taking place in cities through immigration. He indicated that, in contrast to popular stereotypes, neighborhoods of concentrated immigration have lower rates of violence. Moreover, first- and second-generation immigrants are less likely to commit crimes than third-generation Americans.

Neighborhoods and Health

Janet Currie, of Columbia University, was the first presenter to discuss the connection between residential location and health. Currie concentrated her remarks on the possible causal relationship between poor neighborhoods and bad health: Does the neighborhood cause poor health or do people with bad health cluster in the same neighborhood? Thus, she warned against assuming that a correlation between neighborhood location and health implies causality. But Currie suggested several ways in which residential location can affect health. She noted that neighborhoods with few job opportunities and higher prices (for food and transportation) can limit their residents’ investment in health. Also, neighborhoods with elevated levels of pollution, high crime rates, and a lack of parks or other opportunities for recreation can adversely affect the health of residents. However, the causal relationship is confounded by the well-documented connection between poverty and poor health. People choose their locations, and poor people (with poor health) are more likely to live in neighborhoods with undesirable characteristics (such as pollution and crime) because they are less expensive. Currie concluded, however, that there was evidence that pollution and crime were attributes of neighborhoods that did have a causal effect on health.

Rucker Johnson, of the University of California, Berkeley, approached the relationship between neighborhood and health from a long-term perspective. He observed that the present health outcomes of individuals are a product of past and current neighborhood exposures. Thus, it is necessary to examine the role played by neighborhood conditions over an entire lifetime, and it is especially important to look at how conditions during childhood can affect health later in life. Johnson discussed the results of his research using a nationally representative longitudinal data set to assess the relative contributions of individual family and neighborhood factors on health over a lifetime. He chose the case of hypertension for his analysis. Johnson compared the adult health status among siblings who grew up together and unrelated children who grew up in the same narrowly defined neighborhood. He found that neighborhood poverty during childhood increases the odds of the onset of hypertension through midlife (age 55) by 26 percent. He also determined that the greater part of the racial gap in the incidence of hypertension can be explained by differences in influential factors during childhood rather than adult socioeconomic conditions and neighborhood environment.

Patterns of Segregation

Research has shown that racial minorities that live in segregated neighborhoods tend to be disadvantaged in terms of access to jobs, quality education, medical care, and public amenities. One approach to improving the prospects of minorities is to promote racially mixed neighborhoods. Key to the stability of newly established integrated neighborhoods are the circumstances that initially generated and perpetuated the segregation. Alexandre Mas, of the University of California, Berkeley, presented his recent research on this issue. Originally it was thought (theoretically) that even if most white residents individually have relatively modest preferences for a neighborhood with a small percentage of minorities, their aggregate behavior in reaction to a small change in the percentage of minorities could tip the neighborhoods’ racial makeup either to all minorities through “white flight” or all white through “minority flight.” The fraction at which this transformation takes place is the tipping point. This two-sided tipping suggests that racially mixed neighborhoods are inherently unstable.

Mas’s work has dealt with whether this notion of a tipping point has empirical relevance for the development of neighborhoods over time. He investigated whether or not integrated neighborhoods with a level of minorities below the tipping point are perpetually stable. Using census data for major metropolitan areas during the 1970-2000 period, Mas determined that there appears to be a tipping point present in most cities and that these points tend to vary across cities and over time. In contrast to the view that integrated neighborhoods are unstable and characterized by two-sided tipping, he found that they are semi-stable with one-sided tipping (white flight). Thus, they can remain racially mixed as long as the minority share remains below the tipping point.

Fernando Ferreira, of the University of Pennsylvania, approached this issue by focusing specifically on Hispanics. Ferreira observed that while Hispanics are the largest minority group in the U.S., we know very little about their preferences for living in Hispanic neighborhoods. He investigated the relationship between Hispanics, residential segregation, and housing prices. Ferreira examined how housing prices change as the share of Hispanics in the neighborhood increases and the willingness of Hispanics to pay for an increase in the share of Hispanic neighbors. He pointed out the statistical difficulties inherent in estimating Hispanics’ residential preferences and their willingness to pay to live in Hispanic neighborhoods.

Ferreira relied on two studies with different approaches to the empirical complexities, both using data pertaining to the San Francisco Bay Area. Both studies reached similar results. Housing prices tended to decline as more Hispanics moved into predominately white neighborhoods but tended to increase as more Hispanics entered mostly Hispanic neighborhoods. Also Hispanics have strong preferences to live with other Hispanics and are willing to pay a premium in terms of house price to do so. Ferreira concluded that this dynamic can result in self-segregation, as witnessed in some areas.

  • 1 All of the presentations summarized here can be found on the Federal Reserve Bank of Philadelphia’s website:
  • 2 This does not include other costs of combating crime, such as expenditures on criminal justice activities (policing, judges, courts, and prisons).

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