On February 28, as part of the Becker Brown Bag speaker series, Booth Professor Veronica Guerrieri discussed her working paper co-authored with Alessandra Fogli, The End of the American Dream? Inequality and Segregation in US Cities.
Since the ’80s the US has experienced both an increase in income inequality and an increase in residential segregation by income. After documenting this fact, Guerrieri and Fogli develop a general equilibrium model where parents choose the neighborhood where to raise their children. Segregation and inequality amplify each other because of local spillovers that affect the education returns. They calibrate the model using 1980 US data and the estimates for neighborhood exposure effects in Chetty and Hendren (2018b). They then show that segregation contributes to 28% of the increase in inequality between 1980 and 2010 after an unexpected permanent skill premium shock.
BFI’s Becker Brown Bag Series invites prominent economists to present cutting-edge research and engage MBA students, undergraduates, and faculty in discussion. The talks highlight the practical use of economics for answering real-world questions pertinent to businesses and policy makers.