Analytics Stories

CHAPTER 44Does Where You Grow Up Matter?

Consider a child named Anna whose parents are low income (25th percentile of income for U.S. families). Anna grows up in the Roxbury neighborhood of South Boston. How would moving to the nearby Savin Hill neighborhood (three miles away from Roxbury) affect Anna's future income? The average adult income in Savin Hill is nearly double ($40,000 vs. $23,000) the average adult income in Roxbury. As Raj Chetty points out in his notes (see Lecture 2 notes at opportunityinsights.org/course/) for his great Stanford course “Using Big Data to Solve Economic and Social Problems,” the effects of the move to Savin Hill on Anna's future greatly depend on Anna's age when she moves to Savin Hill. The earlier that Anna moves, the higher her future income. Table 44.1 shows Anna's expected income at age 26 if her family moves when Anna is 2, 10, or 20.

Table 44.1 shows that if Anna's family moves early, Anna can capture most of the income difference between Roxbury and Savin Hill, whereas a later move makes much less difference for Anna. Chetty estimates that a child's adult income converges to the income in the destination at an average rate of 4% per year lived in the higher income neighborhood. Thus, if a child spends 20 years in a neighborhood where the average income ranks 1% higher than their birth neighborhood, then the child's expected adult income picks up 80% of the difference between the average income in the two neighborhoods.

Raj Chetty and ...