Abstract
This paper studies racial segregation in schools using data from Add Health. I estimate a structural equilibrium model of friendship formation among students. Preferences depend on direct connections, but also indirect friendships and popularity. I find that students tend to interact with similar people. Homophily goes beyond direct links: students also prefer a racially homogeneous set of indirect friends. I simulate several counterfactual desegregation busing programs, showing that policies that transport minorities to other schools have nonlinear effects on within-school segregation and welfare. In some instances, these interventions increase segregation within schools.
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