Income growth in poor neighborhoods influenced by the metro areas that surround them, say Cleveland Fed researchers

Just as an individual’s outcomes might be strongly influenced by the neighborhood in which he or she resides, a neighborhood’s outcomes might be influenced by broader trends in the surrounding metro area, say Federal Reserve Bank of Cleveland researchers Dionissi Aliprantis, Kyle Fee, and Nelson Oliver. The researchers found that low-income neighborhoods that experienced large improvements in income over the past three decades tended to be located in large, densely populated metro areas that grew in income and population.

The researchers say residential sorting -- changes in population and demographics within neighborhoods -- could help to explain this relationship. The population of the median low-income neighborhood in a high-growth metro area grew by 10.0 percent between 1980 and 2010, whereas the population of the median low-income neighborhood in a low-growth metro actually shrank by 20.9 percent.

Likewise, say the researchers, all low-income neighborhoods experienced increases in educational attainment, but the greatest gains occurred in large-improvement neighborhoods.  And although all low-income neighborhoods increased their share of Hispanic residents, large-improvement neighborhoods also reduced their shares of both black and white residents.  If large improvements in the incomes of low-income neighborhoods resulted from the inflow of new, higher-income residents over recent decades, then Hispanic residents were an important part of the inflow.

Read Which Poor Neighborhoods Experienced Income Growth in Recent Decades?