Take the Money and Run: Economic Segregation in U.S. Metropolitan Areas

Compared to residential segregation by race, economic segregation has received relatively little attention in recent empirical literature. Yet a heated debate has arisen concerning Wilson's (1987) hypothesis that increasing economic segregation among African Americans plays a role in the formation of urban ghettos. I present a methodological critique of the measure of economic segregation used by Massey and Eggers (1990) and argue that their measure confounds changes in the income distribution with spatial changes. I develop a "pure" measure of economic segregation based on the correlation ratio and present findings for all U.S. metropolitan areas from 1970 to 1990. Economic segregation increased steadily for Whites, Blacks, and Hispanics in the 1970s and 1980s, but the increases have been particularly large and widespread for Blacks and Hispanics in the 1980s. I explore the causes of these changes in a reduced-form, fixed-effects model. Social distance and structural economic transformations affect economic segregation, but the large increases in economic segregation among minorities in the 1980s cannot be explained by the model. These rapid increases in economic segregation, especially in the context of recent, albeit small, declines in racial segregation, have important implications for urban policy, poverty policy, and the stability of urban communities.