S eparate When Equal?Racial Inequality and Residential Segregation Patrick Bayer Hanming Fang Robert McMillanOctober25,2005AbstractStandard intuition suggests that residential segregation in the United States will decline when racial inequality narrows.In this paper,we hypothesize that the opposite will occur.We note that middle-class black neighborhoods are in short supply in many U.S.metropolitanareas,forcing highly educated blacks either to live in predominantly white high-socioeconomicstatus(SES)neighborhoods or in more black lower-SES neighborhoods.Increases in the pro-portion of highly educated blacks in a metropolitan area may then lead to the emergence of newmiddle-class black neighborhoods,causing increases in residential segregation.We formalizethis mechanism using a simple model of residential choice that permits endogenous neighbor-hood formation.Our primary empirical analysis,based on across-MSA evidence from the2000Census,indicates that this mechanism does indeed operate:as the proportion of highly edu-cated blacks in an MSA increases,so the segregation of blacks at all education levels increases.Time-series evidence provides additional support for the hypothesis,showing that an increase inblack educational attainment in a metropolitan area between1990-2000signi…cantly increasessegregation.Our analysis has important implications for the evolution of both residential segre-gation and racial socioeconomic inequality,drawing attention to a negative feedback loop likelyto inhibit reductions in segregation and racial inequality over time.Keywords:Segregation,Racial Inequality,Racial Sorting,Neighborhood Formation.JEL Classi…cation Numbers:H0,J7,R0,R2.We are grateful to Joseph Altonji,Richard Freeman,Roland Fryer,Edward Glaeser,Caroline Hoxby,Jennifer Jue-Steuck,Matt Kahn,Larry Katz,Richard Rogerson,Kim Rueben,Will Strange,Matt Turner,Chris Udry,Jacob Vigdor,Bruce Weinberg and seminar/conference participants at Harvard,Minnesota,Penn State,UBC,USC,UVA, Wash U.,Yale and the NBER for helpful comments and suggestions.We are responsible for all remaining errors. Contact addresses:Bayer and Fang,Dept.of Economics,Yale University,P.O.Box208264,New Haven,CT06520-8264;McMillan,Dept.of Economics,University of Toronto,100St.George Street,Toronto,ON M5S3G3,Canada.
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