In contrast to conventional wisdom, this paper identifies a powerful mechanism which can lead to
persistent and even increasing residential segregation when racial differences in education and other
sociodemographics narrow. We document that middle-class black neighborhoods are in short supply
in many U.S. metropolitan areas, forcing highly educated blacks either to live in white
neighborhoods with high amenity levels or in more black neighborhoods with lower amenity levels.
A simple model then shows that increases in the proportion of highly educated blacks in a
metropolitan area may lead to the emergence of new middle-class black neighborhoods, relieving
the prior neighborhood supply constraint and causing increases in residential segregation. Cross-
MSA evidence from the 2000 Census indicates that this mechanism does in fact operate: as the
proportion of highly educated blacks in an MSA increases, so the segregation of educated blacks and
blacks more generally goes up. Our empirical findings are robust and have important implications
for the evolution of residential segregation.
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This paper was revised on November 18, 2005
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