Racial Enclaves and Density Zoning: The Institutionalized Segregation of Racial Minorities in the United States

Abstract

This paper attempts to explain two basic facts of segregation in the United States in recent decades. The segregation of blacks remains everywhere higher than the segregation of Latinos and Asians, but the levels are converging. Previous research stresses things like urban form and racial preferences. This paper finds that none of these are as important as a more institutional force: local land regulation. Zoning increases inter-jurisdictional inequality and economic segregation in metropolitan areas (MSAs), and it curtails the exit of minority groups from segregated communities by limiting the supply of affordable housing in integrated areas. Using two data sets of land regulations for the largest U.S. metropolitan areas, the results indicate that anti-density regulations are responsible for large portions of the levels and changes in segregation from 1990 to 2000. A hypothetical switch in zoning regimes from the most exclusionary to the most liberal would reduce the equilibrium gap between the most and least segregated MSAs by at least 35% for the OLS estimates. The level effects are robust to a variety of variables, but for Latinos and Asians, the effect can be explained by historical characteristics that are correlated and, in theory, should cause stricter zoning laws. The dynamic results are even more robust across racial groups. The use of an exogenous source of zoning — year of statehood — as an instrument makes the dynamic effect very large and provides some evidence of potential causality. In addition to zoning, Tiebout-style sorting incentives, and relative income differences are strong predictors of segregation, with the latter explaining roughly half the variation.