An Idea For Decreasing Income Segregation And Increasing Economic Mobility

Adam Ozimek:

One of the big and under-appreciated problems in this country is income segregation. One way this happens is that higher income neighborhoods use restrictive zoning to keep low-income housing out of their neighborhoods. This is bad for low-income households because it often means effectively keeping them out of better schools, and even keeps them away from areas with better job market access. In their massive study on economic mobility, Chetty et al (2014) found that income segregation and economic mobility at the commuting zone level were related with a correlation of -0.393. The graph below shows that this relationship is pretty clear in the data.

This suggests that decreasing income segregation is one way to improve economic mobility. Another obvious way to do this is to improve college attendance, and the quality of colleges attended, for low-income people. However, simply pursuing an aggressive income-based affirmative action strategy where colleges directly tie acceptance to household income has the perverse effect of disincentivizing higher earnings. That is, if you reward people for lower incomes, you’re effectively increasing the marginal tax rate.