SnapFact: Where you grew up can affect your income
Neighbourhoods with faster economic growth may not actually improve a child’s potential life income, showing there are other factors at play
Where you grow up can have a significant, enduring effect on important life outcomes, according to a new study from the US.
In a National Bureau of Economic Research (NBER) working paper, Raj Chetty of Harvard University and others use long-term data from the US census bureau to create an Opportunity Atlas mapping the impact of neighbourhoods on a range of outcomes, such as income, employment, imprisonment and teenage birth.
The authors track 20.5 million children born between 1978 and 1983 into their mid-30s and link this to the neighbourhoods where they grew up.They find that life outcomes of children vary sharply across neighbourhoods, even among children of the same race, gender or parental backgrounds. According to the authors, even small neighbourhood changes can have substantial effects on children’s long-term outcomes.
For instance, they show that a child moving to a neighbourhood just a mile away can change their average yearly earnings by several thousand dollars and have significant effects on other outcomes including criminal records and teenage birth rates.
However, the authors caution that neighbourhoods do not generate uniform effects. The effects of neighbourhoods can vary for different groups. For instance, black women have considerably higher rates of upward mobility than black men growing up in the same neighbourhoods in Los Angeles.
Surprisingly, the authors find that neighbourhoods with faster economic growth may not actually improve a child’s potential life income, suggesting that there are other conditions that drive income increases and upward social mobility.
According to the authors, this Opportunity Atlas highlights neighbourhoods where outcomes are weak and can serve as an important starting point for American policymakers to improve social mobility and development.
One potential policy that the authors discuss is rental assistance to low-income families that lets them move to better neighbourhoods.
For India, struggling with inequality and social mobility issues, these findings suggest that the impact of neighbourhoods on Indian lives could be worth exploring for both researchers and policymakers.
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