Wednesday, May 6, 2015

The importance of neighborhoods in children's life outcomes

An excellent example of data journalism in the Times that highlight the works of Raj Chetty, Lawrence Katz and Nathaniel Hendren on how neighborhoods - schools, community, neighbors, local amenities, economic opportunities, and social norms - influence life outcomes. Briefly their two studies from the US show that not only do neighborhoods attract those who succeed (or fail), they also nurture success (or failure).

The first study tracked the life outcomes of the children in 4600 families in five large US cities in 1994-98 who won the Moving to Opportunity housing experiment (families living in public housing could enter a lottery in which the winners were offered a voucher to mover to better neighborhoods) lottery. The authors used the natural random selection experiment to track the outcomes of the move on younger and older children (the earlier studies clubbed both and found negligible effects). They also compared outcomes of those who won Section 8 subsidized housing vouchers which did not require moving to better parts of the city. The Times summarizes,
The children who moved when young enjoyed much greater economic success than similarly aged children who had not won the lottery. And the children who moved when they were older experienced no gains or perhaps worse outcomes, probably the result of a disruptive move, paired with few benefits from spending only a short time in a better neighborhood... those who moved as a result of winning this voucher before their teens went on to earn 31% more than those who did not win the lottery. They are also more likely to attend college. Other families were awarded Section 8 housing vouchers, which subsidize renting a housing or apartment. But because they did not require the winners to move to better parts of the city, people typically moved to neighborhoods that were better but perhaps by only half as much. As a result, the eventual income gains to the pre-teen children who won this lottery were about half as large... 
But those who were teens when their families won the lottery - the typical child was 15 - saw few years in their better neighborhoods and also had to deal with the disruption of moving. A result is that their incomes were 13-15% lower...the net present value of the extra earnings that will eventually accrue to a child who moved at age 8 is $99000, meaning that for a family with two children, the program yields $198,000 in extra earnings. 
The second study uses earnings records to effectively track the careers and neighborhoods of 5 million people over 17 years. It reinforces the MTO experiment,
The earlier a family moved to a good neighborhood, the better thee children's long-run outcomes. The effects are symmetric, too, with each extra year in a worse neighborhood leading to worse long-run outcomes. Most important, they find that ech extra year of childhood exposure yields roughly the same change in longer-run outcomes, but that beyond age 23, further exposure has no effect. That is, what matters is not just the quality of your neighborhood, but also the number of childhood years that you are exposed to it. 
This graphic is a cognitively striking description of the study.

Here is the interactive graphic that shows how much extra money a county causes children in families (at different income levels) to make when compared to children in poor families nationwide.
The challenge here is the difficulty of designing public policies that enable such mixing. As Thomas Schelling has shown, experiments with forced de-segregation face formidable challenges, and the headwinds are even more adverse in societies like India. I have blogged about it here, here, and here.

Update 1 (10.05.2015)

Mathew Martin has this to say about the findings,
Chetty and Hendren's dataset includes only families that voluntarily chose to move under the status quo. The fact that they chose to move suggest that they had something to gain from the move, such as, for example, relatives or a lucrative job opportunity--things that would benefit the kids. Take those away, and it's not clear that moving actually does benefit kids. I mean, surely, there exists someone who is better off living in Hamilton county than Warren.

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