Dynamics of neighborhood formation and segregation by income

Osiris Jorge, Parcero and Adolfo, Cristobal-Campoamor (2009): Dynamics of neighborhood formation and segregation by income.

Abstract

This paper analyzes some determinant conditions under which neighborhood formation gives rise to segregation by income. In contrast to the literature, we explore the sequential arrival of poor and rich individuals to neighborhoods exploited by oligopolistic land developers. These developers try to maximize a discounted flow of lot prices during neighborhood formation, taking advantage of the local externalities generated by the rich and the poor. Under a speedy arrival of new potential inhabitants and/or low discount rates, competing developers are more likely to concentrate rich people in the same neighborhood. This happens because the benefits from early agglomeration are outweighed by a more profitable matching of rich neighbors within nearby lots.

• Item Type: MPRA Paper
• Language: English
• Keywords: land developers; segregation; income distribution; arrival rates
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand

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