Correlations between Brothers and Neighboring Boys in Their Adult Earnings: The Importance of Being Urban

This study uses data on brothers and neighboring boys in the Panel Study of Income Dynamics to estimate brother and neighbor correlations in later earnings as adults. Because the neighbor correlation reflects the effects of somewhat similar family backgrounds as well as true neighborhood influences, it sets an upper bound on the proportion of earnings variation attributable to neighborhood effects. We find that the neighbor correlation in later earnings is about half the brother correlation, suggesting that the earnings resemblance between brothers stems more from growing up in the same family than from growing up in the same neighborhood. We also find that most of the neighbor correlation is explicable in terms of the large earnings differential between urban and non-urban areas combined with the strength with which urbanicity of childhood neighborhood predicts urbanicity of adult location. This pattern is subject to a variety of interpretations, but it is quite different from the usual view of neighborhood effects.