Searching for the Best Neighborhood: Mobility and Social Interactions

Abstract

The paper seeks to contribute to the social interactions literature by exploiting data on individual's self- selection into neighborhoods. We study a model in which households search for the best location in the presence of neighborhood effects in the formation of children's human capital and in the process of cultural transmission. We use micro data from the PSID which we have merged, using geocodes, with contextual information at the leves of census tracts and of counties from the 2000 US Census. We control for numerous individual characteristics and neighborhood attributes and find, consistently with neighborhood effects models, that households with children, but not those without, are more likely to move out of neighborhoods whose attributes are not favorable to the productin of human capital and the transmission of parents' cultural traits, and to move into neighborhoods which instead exhibit desireable such attributes.