When do neighborhoods matter? The role of race and neighborhood peers

Abstract

This study explores racial differences in the effect of neighborhood income on children’s test scores, self-esteem, and behavior, using data from both the Census and the Panel Study of Income Dynamics Child Development Supplement. This study finds that as neighborhood income increases, test scores and behavior improve significantly for white children but not for black children. Increased neighborhood income affects only black children when there is a high-proportion of blacks in the neighborhood. For white children, an increase in the number of neighborhood peers known by name increases the effects of neighbors’ income. In addition, neighborhood effects are strongest for children who have lived in their neighborhoods for three or more years. This study makes progress toward explaining the mechanisms by which neighborhoods affect children and how these mechanisms differ by race.