Neighborhood circumstances and children’s life chances: Landmark study from Harvard

 
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One of the most difficult and complex questions in social science revolves around the precise ways in which geographical circumstance affects people’s life chances — the role of “neighborhood effects.” The question has been studied for decades now, with researchers struggling to disentangle the geographic variable from others that might also influence people’s life chances and outcomes. The cliché in popular discourse is that poor neighborhoods frequently function as “traps,” while better locations are sometimes a springboard to success in life. But to what extent are these notions empirically true? How much do the geographical circumstances of our upbringing affect our ability to succeed later in life?

A landmark 2015 study by Harvard’s Raj Chetty and Nathaniel Hendren, “The Impacts of Neighborhoods on Intergenerational Mobility: Childhood Exposure Effects and Country-Level Estimates,” provides some of the best evidence to date on this issue by analyzing anonymized U.S. tax records (over the period 1996 to 2012) from more than 5 million families. The scholars were able to analyze both tax returns (1040 forms) as well as third-party returns such as W-2 forms, and to compare the long-term results for families and their children that moved to new zip codes with families that did not move.

The study, part of the scholarly Equality of Opportunity Project, found the following:

  • Growing up in a good neighborhood improves children’s later professional and earnings outcomes directly in proportion to the time they live there; symmetrically, children who moved to worse neighborhoods had worse outcomes as adults.
  • For children growing up in households with the lowest 25% of incomes, growing up in a better county from birth increases future income by approximately 10%. Good neighborhoods also improve outcomes for wealthier children by a similar dollar amount, but because they tend to earn more anyway, the improvement is less significant as a proportion of their future wages.
  • Dupage County, Illinois, is the best neighborhood in which to grow up among the top 100 largest counties in the U.S. Each year growing up in Dupage County (Chicago’s western suburbs) raises a child’s household income as an adult by 0.8%, adding up to a 16% advantage for a whole childhood spent there.
  • In contrast, each year spent growing up in Baltimore, one of the lowest-ranking counties, is associated with a reduction in a child’s later earnings by 0.7%, generating a total earnings penalty of around 14% for a whole childhood spent in the county.
  • Children from high- and low-income families tended to do worse growing up in urban areas, particularly those with concentrated poverty, compared with those in suburban or rural areas.
  • Areas with a larger African-American population also tended to have lower rates of upward mobility, and these neighborhood differences have worsened racial inequality across generations. The authors estimate that “roughly one-fifth of the gap in earnings between blacks and whites can be attributed to the counties in which they grow up.”
  • Neighborhood circumstances ultimately “matter more for boys than girls,” with “some counties such as Baltimore and Wayne County in Detroit producing extremely negative outcomes for boys but less so for girls.” Further, “Areas with high degrees of segregation and sprawl generate particularly negative outcomes for boys relative to girls.”
  • Geography also produces “significant gender differences related to marriage rates. For example, Northern California generates high levels of individual earnings for girls, but produces lower levels of household income because fewer children get married in their 20s.”

Chetty and Hendren note that the best areas for social mobility tend to have lower levels of segregation by race and income, lower levels of income inequality, better schools, lower rates of violent crime, and a larger proportion of two-parent households. They conclude that “where children grow up affects their outcomes in adulthood in proportion to the time they spend in the place.… Our results highlight that it is exposure during childhood that appears to matter most, up to the early twenties — and that at least 50% of the variation in intergenerational mobility across the U.S. reflects the causal effects of childhood exposure.”

See the New York Times’ interactive graphic based on this research data: “The Best and Worst Places to Grow Up: How Your Area Compares.”

Related research: A corollary 2015 paper by Chetty and Hendren, along with Harvard’s Lawrence Katz, reviews the impact of the Moving to Opportunity (MTO) experiment from the 1990s, where randomly selected families living in high poverty housing projects in five U.S. cities were given the chance to move to lower-poverty neighborhoods. Unlike previous research, which found no impact of the program on earnings later in life, the study found that if children moved young enough (under 13), the program had a significant impact on their later earnings. Further, it improved their chances of going to college, and for females it improved the chance that they would not become a single parent. In contrast, children who moved later in life under the MTO program felt no such positive impacts on average.

Keywords: children, youth, parenting

Last updated: May 26, 2015

 

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Citation: Chetty, Raj; Hendren, Nathaniel. “The Impacts of Neighborhoods on Intergenerational Mobility: Childhood Exposure Effects and County-Level Estimates," Harvard University/NBER, May 2015.