Long-Term Effects of Children's Neighborhood Environs

by — Morgan Foy
Growing up around adults who are employed is predictive of higher earnings when children reach adulthood, but availability of jobs in neighborhoods where children grow up is not. 

Where an individual grows up can shape many aspects of life, including economic success in adulthood. To better understand the linkages between a neighborhood's attributes and the later-life outcomes of the children who live there, Raj Chetty, John N. Friedman, Nathaniel Hendren, Maggie R. Jones, and Sonya R. Porter create a searchable database of average adult outcomes for children from every neighborhood in the United States.

In The Opportunity Atlas: Mapping the Childhood Roots of Social Mobility (NBER Working Paper No. 25147), they focus on census tracts — geographic areas that somewhat resemble neighborhoods. They follow almost every individual born in the United States between 1978 and 1983 by analyzing individuals' tax records and the tax records of their parents. These records include residential addresses, which the researchers use to construct tract-level averages for earnings, incarceration rates on April 1, 2010 (the date of the U.S. Census that year), and teenage birth rates. 

They find significant variation in outcomes across census tracts, even for children with parents who earn equivalent incomes, and even when they consider different tracts within the same county or school district. In collaboration with the U.S. Bureau of the Census, the researchers have created an Opportunity Atlas, an online visualization tool which can be used to select various economic outcomes and to filter by race, gender, and parental income.

To illustrate the disparities across neighborhoods, the researchers highlight differences across two Los Angeles-area tracts that are less than three miles apart: one neighborhood in the city of Compton, the other a neighborhood in the Watts area of Los Angeles. The researchers then look at the long-term outcomes of children with parents at the 25th percentile of the income distribution — designated here as "low-income." Low-income black men who grew up in the Watts neighborhood earn just $7,000 a year, while similar men in the Compton neighborhood earn nearly three times as much. The men from Watts were also nearly five times more likely to be incarcerated on the day of the census. Among black men born to the lowest-income parents in the Watts neighborhood, more were incarcerated (44 percent) than were employed (39 percent). The data also show significant differences between groups within the same neighborhood. For instance, low-income Hispanic men in the same Watts neighborhood grew up to earn $34,000 on average with an incarceration rate of just 4.5 percent. The researchers find that growing up around employed adults and a larger fraction of two-parent households predicts children's improved future earnings, but local availability of jobs does not.

The researchers also show that moving to a tract with a higher likelihood of upward mobility causes improved outcomes for children, particularly when those moves occur before adolescence, even when the new tract is within the same county. Specifically, the lifetime income for a child from a low-income family living in a tract at the 25th percentile of upward mobility is about $200,000 lower than that of a child from a similar family living in a tract at the 75th percentile of upward mobility. This is without accounting for the average cost of living in the new tract, but the researchers find that many areas exist with better upward mobility at similar costs. To illustrate the mobility point, the researchers highlight the Chicago neighborhoods of Hyde Park and Alsip, which both had median rents of about $1,000 in 1990. Average income in adulthood for children from low-income families from Hyde Park was at the 24th percentile, while comparable individuals from Alsip reached the 47th percentile, equivalent to an additional $24,000 in annual income. The researchers' data can illuminate areas with better upward mobility, at similar costs of living, within the city where a family already lives.