Location of the poor: Neighborhood versus household characteristics. The case of Bogotá
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Abstract
"In Latin American cities there is a high correlation between the location chosen by poor households and their income level, however, it is difficult to identify to what extent they live there by choice because it maximizes the returns to their efforts- or by restrictions that pull them to locations that make them poorer. We define the former case as unrestricted sorting in the urban economics context, while the latter is assumed to be the commonly used definition of segregation. Distinguishing between these alternatives is difficult because of the circularity between poverty and location. People can freely choose a location that makes them poor, else they can choose a location because they are poor. This circular causation or endogeneity puts policy making in a complicated spot since it questions the reach of placed-based policies to alleviate poverty and exposes the need to prioritize between these actions and those directed to improving households portable assets. Hence, there is a disjunctive between investing in education -that can be ported if location drives poverty- an investing in local infrastructure. This paper begins establishing a mincerian profile of households income level as the result of its portable assets and their returns. Then an Oaxaca-Blinder decomposition of the income equation over two locations a periphery and the rest of the city- is used. Based on differences in returns to individual characteristics between the two alternative locations impact from space is separated from the impact from portable assets."
Abstract
"In Latin American cities there is a high correlation between the location chosen by poor households and their income level, however, it is difficult to identify to what extent they live there by choice because it maximizes the returns to their efforts- or by restrictions that pull them to locations that make them poorer. We define the former case as unrestricted sorting in the urban economics context, while the latter is assumed to be the commonly used definition of segregation. Distinguishing between these alternatives is difficult because of the circularity between poverty and location. People can freely choose a location that makes them poor, else they can choose a location because they are poor. This circular causation or endogeneity puts policy making in a complicated spot since it questions the reach of placed-based policies to alleviate poverty and exposes the need to prioritize between these actions and those directed to improving households portable assets. Hence, there is a disjunctive between investing in education -that can be ported if location drives poverty- an investing in local infrastructure. This paper begins establishing a mincerian profile of households income level as the result of its portable assets and their returns. Then an Oaxaca-Blinder decomposition of the income equation over two locations a periphery and the rest of the city- is used. Based on differences in returns to individual characteristics between the two alternative locations impact from space is separated from the impact from portable assets."