Economics Seminar Series

Devin Bunten, Board of Governors of the Federal Reserve

When the Neighborhood Goes: The Effects of Gentrification on Individuals and Communities

Seal of the Federal Reserve.

Abstract: Many urban neighborhoods in U.S. cities have been getting richer, better-educated, whiter, and more expensive—and often dramatically so, a process termed gentrification. In this paper, we provide a new dynamic framework to understand gentrification, derive novel predictions based on this framework and provide empirical confirmation, and then use this framework to study open empirical questions. The framework has two components: first, a gentrifiable neighborhood has attractive exogenous features and is occupied by low-income residents, and gentrification is the re-sorting of the neighborhood to high-income residents, in line with its exogenous attractiveness. Second, during gentrification, forward-looking house prices should rise in advance of income changes. We use these two components to identify gentrifying and other gentrifiable neighborhoods, and compare key outcomes between the two types of neighborhoods: We provide evidence that gentrifying neighborhoods experience higher rates of out-migration than non-gentrifying neighborhoods. We find that constructing new housing units does not slow or limit displacement within the same neighborhood, but that nearby construction may be more helpful. We also show that out-migration rates are elevated for both likely renters and likely homeowners, although the processes inducing these moves may be different. Finally, we highlight the potential costs beyond displacement that are felt by whole communities–in particular low-income communities and communities of color–when gentrification restricts access to central job-rich transit-oriented neighborhoods.

Friday, February 9, 2018
3:30pm – 5:00pm
Fronczak 444
Small reception to follow in Room 426. All are invited to attend.