Estimating Ethnic Preferences Using Ethnic Housing Quotas in Singapore

Abstract

This paper estimates people’s taste for living with own-ethnic-group neighbors using variation from a natural experiment in Singapore: ethnic housing quotas. I develop a location choice model that informs the use of policy variation from the quotas to address endogeneity issues well-known in the social interactions literature. I assembled a dataset on neighborhood level ethnic proportions by matching more than 500,000 names in the phonebook to ethnicities. I find that all groups want to live with some own-ethnic-group neighbors but they also exhibit inverted U-shaped preferences so that once a neighborhood has enough own-ethnic-neighbors, they would rather add a new neighbor from other groups. Welfare simulations show that about 30% of the neighborhoods are within one standard deviation of the first best allocation of ethnic groups