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Long Run Consequences of Living in a Poor Neighbourhood

Long Run Consequences of Living in a Poor Neighbourhood. By: Phillip Oreopolous Presented by: Julian Joca , Daria Pavlova, Laura Jaczenko, Andrew Nguyen, Jocelyn Gillespie , Zachary Goodbaum. Goals of the Study.

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Long Run Consequences of Living in a Poor Neighbourhood

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  1. Long Run Consequences of Living in a Poor Neighbourhood By: Phillip Oreopolous Presented by: Julian Joca, Daria Pavlova, Laura Jaczenko, Andrew Nguyen, Jocelyn Gillespie, Zachary Goodbaum

  2. Goals of the Study • Does the quality of the neighbourhood affect a child’s long run labour market outcome • Examine effects on the long run labour market outcomes adults assigned to different residential housing projects as children

  3. Main Findings • Neighbourhood quality plays little role in determining a youth’s… • Eventual earnings • Unemployment likelihood • Welfare participation

  4. Background of the Study • Why Toronto projects? • Size, location, and neighbourhood surroundings • Metro Toronto Housing Corporation • Reason for the study • Determine if neighbourhoods really have an impact on the individual • No paper focused on Canadian neighbourhood quality before

  5. Neighbourhood Importance • Outcomes expected to be affected by • Peer groups/role model effects • Social network • Personal contacts • Resources for local public goods • Conformism

  6. Data Sources • Metro Toronto Housing Corporation (MTHC) • Subsidized housing from 1949-mid1970s • 29,000 households • 113 family projects • Intergenerational Income Database (IID) • Links tax data of children born 1963-1970 and their parents for years 1978-1999

  7. MTHC in 1996

  8. Methods • Dividing projects by neighbour quality and then compared mean outcomes across these categories • Correlation was estimated between unrelated neighbours who lived in the same project • Compared this with the correlation between siblings

  9. Application Process • Point System until 1995 • Given 2 offers • Can reject first relocation offer • Is the process truly random?

  10. Results – Difference of Means • Boys in wealthier neighbourhoods earn 24% more then boys in poorest neighbourhoods • Men make 17% more in smaller project compared to larger project • Welfare Participation fell by 30.4% if adults lived in low density projects

  11. Results – Family Differences • Family background through sibling correlation explain up to 30% of variance on income and wages • Neighbourhood quality does not make much of a difference on long run labour outcomes

  12. Criticisms • Unclear thesis statement • Families were given two offers without being removed from the waiting list • Applicants could specify six regional preferences

  13. Conclusion • Main findings • Neighborhood quality does not make much difference to labour market success in the long run • Family differences are the reasons for most of the variances in long run labour outcomes

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