Residential sorting, local environments, and human capital

We consider the implications of unifying the distinct literatures on residential sorting and human capital dynamics. We argue that integrating insights from recent work in both areas has important implications for future research at the intersection of environmental and urban economics. To focus attention on these implications, we summarize stylized facts from recent empirical work on residential sorting and on the effects of exposures to environmental factors on human capital. Then we outline a simple overlapping generations model that reproduces these stylized facts and use it to guide our discussion on directions for future research. •A model is proposed for unifying literatures on residential sorting and human capital production.•Interactions between sorting and human capital can generate virtuous or destructive spirals.•Implications for efficiency and equity of environmental policies are discussed.