Institute for Research on Poverty
Discussion Paper no. 1056-95
Take the Money and Run:
Economic Segregation in U.S. Metropolitan Areas
Paul A. Jargowsky
School of Social Sciences
University of Texas at Dallas
January 1995
This research was supported by a grant to the Institute for Research on Poverty from the Office of the
Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services. I am
grateful for comments on earlier drafts of this paper from Kurt Beron, Maria Cancian, Chris Desai,
George Farkas, Janet Gamble, Robert Hauser, Don Hicks, Ron Mincy, Steven Sandell, Wim
Vijverberg, and the participants in the IRP/HHS Research Conference (5/13/94). However, the author
alone is responsible for the views expressed and any errors of fact or interpretation.
Abstract
Compared to racial segregation, economic segregation has received little attention in recent
empirical literature. Yet a heated debate has arisen concerning Wilson's hypothesis (1987) that
increasing economic segregation plays a role in the formation of urban ghettos. This paper presents a
methodological critique of the measure of economic segregation used by Massey and Eggers (1990)
and finds that it confounds changes in the income distribution with spatial changes. I develop a "pure"
measure of economic segregation and present findings on all U.S. metropolitan areas from 1970 to
1990. There have been steady increases in economic segregation for whites, blacks, and Hispanics in
both the 1970s and 1980s, but the increases have been particularly large and widespread for blacks and
Hispanics in the 1980s. The causes of these changes are explored in a reduced form, fixed-effects
model. Social distance theory and structural economic transformations do affect economic segregation,
but the large increases in economic segregation among minorities in the 1980s cannot be fully
explained within 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.
Take the Money and Run:
Economic Segregation in U.S. Metropolitan Areas
Racial segregation in the United States has been declining since 1970, but the decreases have
been so slow that segregation of African Americans is still very high (Farley and Frey 1994). At the
same time, economic inequality has been increasing since 1979, if not before (U.S. Bureau of the
Census 1992, 1993). Both phenomena have been extensively documented. A third dimension of
socioeconomic differentiation has received much less attention in recent years: economic segregation,
i.e., the spatial segregation of households by income or social class. The relative dearth of recent
studies in this area is surprising, in light of the importance ascribed to economic segregation by William
Julius Wilson in his classic work, The Truly Disadvantaged (1987).
In this paper I document the fact that economic segregation has been increasing, not only
among blacks, as Wilson alleges, but also within all major racial and ethnic groups, although the
increases were largest for blacks and Hispanics in the 1980s. Moreover, the phenomenon is incredibly
widespread, affecting virtually every metropolitan area in the United States. I also develop a causal
model which, though clearly incomplete, suggests that the rapid increases in economic segregation
among minorities represent a dramatic break from the pattern of previous decades. In other words, the
factors which explain the changes in economic segregation for all groups over the 1970 to 1980 period
consistently underpredict the changes for minorities in the 1980 to 1990 period. The breakdown of the
1970–1980 model represents a fundamental change in the processes that generate economic
segregation. Understanding the causes of these changes, I would argue, has become a prerequisite to
effective analysis of urban policies and programs.
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ECONOMIC SEGREGATION AND ASSIMILATION
A rich literature exists on the interrelationship of racial and economic segregation. Much of
this literature can be traced to the classic paper by Park, who predicted that "successful individuals [of
minority groups] move out and eventually find their places" so that "changes of economic and social
status . . . tend to be registered in changes of location" (1926: 9). More generally, Park argued that
"social relations are . . . inevitably correlated with spatial relations; . . . physical distances . . . are, or
seem to be, the indexes of social distances" (18). Subsequent research has followed up on two related
but conceptually distinct hypotheses stemming from this work: the first is the "social distance"
hypothesis and the second is the "assimilation" hypothesis (Massey 1981: 642–643). According to the
social distance hypothesis, racial or ethnic segregation is "positively associated with differences
between groups" (642). The assimilation hypothesis states that better-off strata within a minority group
will translate individual gains into spatial assimilation.
If the assimilation hypothesis is correct, then the degree of racial segregation should differ
among social classes within a minority group. And it follows that higher-status members of the
minority group will become more segregated from lower-status members of their own group as they
become assimilated. Erbe (1975) addressed the issue of the socioeconomic segregation by income
within racial groups. Responding to Kantrowitz, who found that "the better off black is as separated
from the poorer black residentially as the better off white is from the poor white" (Kantrowitz 1973:
v), Erbe argued that Kantrowitz's use of the index of dissimilarity (D) to measure economic
1
segregation is inadequate because the index is insensitive to the relative proportions of lower-, middle-,
and upper-class individuals in each group. She argued that "intergroup contact" is "a function both of
residential segregation of populations and their relative size in the total population" (1975: 803).
Erbe favored the use of a measure of "asymmetric intergroup contact," more commonly known
as the exposure index (P ), which for two groups gives the average probability of contact of members of
*
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one group with members of the other. Using Chicago census data, Erbe found that the indices of
dissimilarity by various measures of social class within racial groups differed little between whites and
blacks. In contrast, exposure measures showed that higher-status blacks were far more likely to come
into contact with lower-status members of their racial group than whites. Her conclusion:
Middle-class blacks are not randomly distributed throughout the ghetto and thus are
segregated from the black lower class in this sense. Nevertheless they live in much
closer propinquity with the lower class than do middle-class whites, simply because the
black lower class is proportionally larger than the white lower class. To the extent that
neighborhoods are the functional locus of many institutions, most especially schools,
this is of great consequence.... In particular, it may be one factor in accounting for the
low degree of occupational inheritance between high-status black fathers and their sons
and the high degree of intergenerational downward mobility among blacks compared to
whites (1975: 803).
How strange this quote sounds today, when the concern has been turned on its head: Wilson (1987)
argues that the out-migration of the black middle class has resulted in the social isolation of the inner-
city black poor, with attendant "concentration effects."
Erbe's results demonstrated that one must distinguish between measures of economic
segregation that are conditioned on income distribution and those that are not. Each type of measure
has a value, but they answer different questions. If the incomes of all black households were to rise by
a fixed amount, and nobody moved, the P* index measuring contact with persons in poverty would
change a great deal because there would be less black poverty to be exposed to. Assuming no changes
in the classifications of families by social class, the index of dissimilarity would not change, since no
one had moved. Thus, the exposure measure would accurately indicate that blacks were less likely to
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come into residential contact with poor persons, while the index of dissimilarity would correctly
indicate that the degree of sorting by social class had not changed.
Farley (1977) also examined the interactions of racial and economic segregation. In part of his
analysis, Farley applied the index of dissimilarity to years of education completed. He broke education
into ten categories and calculated the 45 pair-wise indices of dissimilarity among them. He also