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The Impacts of Neighborhoods on Intergenerational Mobility II: County-Level Estimates

Raj Chetty, Nathaniel Hendren

NBER Working Paper No. 23002
Issued in December 2016, Revised in May 2017
NBER Program(s):Children, Labor Studies, Public Economics

We estimate the causal effect of each county in the U.S. on children's incomes in adulthood. We first estimate a fixed effects model that is identified by analyzing families who move across counties with children of different ages. We then use these fixed effect estimates to (a) quantify how much places matter for intergenerational mobility, (b) construct forecasts of the causal effect of growing up in each county that can be used to guide families seeking to move to opportunity, and (c) characterize which types of areas produce better outcomes. For children growing up in low-income families, each year of childhood exposure to a one standard deviation (SD) better county increases income in adulthood by 0.5%. Hence, growing up in a one SD better county from birth increases a child's income by approximately 10%. There is substantial local area variation in children's outcomes: for example, growing up in the western suburbs of Chicago (DuPage County) would increase a given child's income by approximately 30% relative to growing up in Cook County. Areas with less concentrated poverty, less income inequality, better schools, a larger share of two-parent families, and lower crime rates tend to produce better outcomes for children in poor families. Boys' outcomes vary more across areas than girls' outcomes, and boys have especially negative outcomes in highly segregated areas. One-fifth of the black-white income gap can be explained by differences in the counties in which black and white children grow up. Areas that generate better outcomes have higher house prices on average, but our approach uncovers many “opportunity bargains” – places that generate good outcomes but are not very expensive.

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Document Object Identifier (DOI): 10.3386/w23002

Published: Raj Chetty & Nathaniel Hendren, 2018. "The Impacts of Neighborhoods on Intergenerational Mobility II: County-Level Estimates*," The Quarterly Journal of Economics, vol 133(3), pages 1163-1228.

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