Abstract
Over 60% of immigrant parents in Sweden start off in the bottom quintile of the income distribution, yet only about 30% of their children are still in the bottom income quintile in adulthood. This progress notwithstanding, we show using administrative data that immigrant children who grow up in the 20th income percentile place three income ranks lower than native children of similarly low-income parents. This income gap cannot be explained by differences in parent education levels, family structure, or municipality of residence. The gap can, however, be explained by differences in immediate, 100 × 100 - m neighborhoods. Immigrant children grow up in relatively denser neighborhoods with fewer native-born and high-earning neighbors. Data from Stockholm suggest that immigrant families sort into different neighborhoods than natives due to Sweden’s rental housing allocation mechanism that is based on waiting time rather than market rents.
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