Escape from the City? The Role of Race, Income, and Local Public Goods in Post-War Suburbanization

The widening income gap between cities and suburbs throughout the twentieth century was an important cause of suburban growth. Many suburban towns have a wealthy electorate and a high tax base. I show that the marginal homeowner is willing to pay 3.7 percent more for an identical housing unit in a suburb whose median resident earned $10,000 more than the median city dweller. I compare neighboring houses that fall on opposite sides of city-suburban boundaries, thereby controlling for unobserved housing quality. The demand for wealthy co-residents is driven by lower property taxes, a smaller police budget and higher school quality.

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This paper was revised on January 21, 2010

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