Residential Mobility, Neighborhood Effect and Educational Attainment of Blacks and Whites

The paper exams if and how much the educational attainment gap between blacks and whites are due to the difference in their neighborhoods. We study neighborhood effect by allowing the unobserved components to be correlated across the decisions to the educational attainment and to the residential mobility. Meanwhile, we assume two heterogeneous correlations: zero correlations and nonzero correlation. Zero correlation means the mobility decision is orthogonal to the educational attainment decision (the exogenous type) and non-zero correlation means two processes are interrelated (the endogenous type). We find that about 84 percent of the moving process is positively correlated with the educational attainment choice and the neighborhood has significant effects on education for those people. However, with the exogenous moving, the neighborhood does not have significant effects on the educational attainment. Finally, we find that the neighborhood effect contributes about 25% of the education gap between blacks and whites.