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Neighbourhood effects and endogeneity issues

Author

Listed:
  • DUJARDIN, Claire

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

  • PEETERS, Dominique

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

  • THOMAS, Isabelle

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

Abstract
A recent body of research suggests that the spatial structure of cities might influence the socioeconomic characteristics and outcomes of their residents. In particular, the literature on neighbourhood effects emphasizes the potential influence of the socioeconomic composition of neighbourhoods in shaping individual’s behaviours and outcomes, through social networks, peer influences or socialization effects. However, empirical work still has not reached a consensus regarding the existence and magnitude of such effects. This is mainly because the study of neighbourhood effects raises important methodological concerns that have not often been taken into account. Notably, as individuals with similar socio-economic characteristics tend to sort themselves into certain parts of the city, the estimation of neighbourhood effects raises the issue of location choice endogeneity. Indeed, it is difficult to distinguish between neighbourhood effects and correlated effects, i.e. similarities in behaviours and outcomes arising from individuals having similar characteristics. This problem, if not dequately corrected for, may yield biased results. In the first part of this paper, neighbourhood effects are defined and some methodological problems involved in measuring such effects are identified. Particular attention is paid to the endogeneity issue, giving a formal definition of the problem and reviewing the main methods that have been used in the literature to try to solve it. The second part is devoted to an empirical illustration of the study of neighbourhood effects, in the case of labour-market outcomes of young adults in Brussels. The effect of living in a deprived neighbourhood on the unemployment probability of young adults residing in Brussels is estimated using logistic regressions. The endogeneity of neighbourhood is addressed by restricting the sample to young adults residing with their parents. Then, a ensitivity analysis is used to assess the robustness of the results to the presence of both observed and unobserved parental covariates.

Suggested Citation

  • DUJARDIN, Claire & PEETERS, Dominique & THOMAS, Isabelle, 2009. "Neighbourhood effects and endogeneity issues," LIDAM Discussion Papers CORE 2009056, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2009056
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2009.html
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    Citations

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    Cited by:

    1. Thomas K. Bauer & Michael Fertig & Matthias Vorell, 2011. "Neighborhood Effects and Individual Unemployment," SOEPpapers on Multidisciplinary Panel Data Research 409, DIW Berlin, The German Socio-Economic Panel (SOEP).
    2. repec:zbw:rwirep:0285 is not listed on IDEAS
    3. Antonio Di Paolo & Anna Matas & Josep Lluís Raymond, 2014. "“Job Accessibility, Employment and Job-Education Mismatch in the Metropolitan Area of Barcelona”," IREA Working Papers 201419, University of Barcelona, Research Institute of Applied Economics, revised May 2014.
    4. Thomas K. Bauer & Michael Fertig & Matthias Vorell, 2011. "Neighborhood Eff ects and Individual Unemployment," Ruhr Economic Papers 0285, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    5. Bechara, Peggy & Eilers, Lea & Paloyo, Alfredo R., 2015. "In Good Company – Neighborhood Quality and Female Employment," Ruhr Economic Papers 535, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. Del Bello, Carlo L. & Patacchini, Eleonora & Zenou, Yves, 2015. "Neighborhood Effects in Education," IZA Discussion Papers 8956, Institute of Labor Economics (IZA).
    7. Brueckner, Jan K. & Luo, Dan, 2014. "Measuring strategic firm interaction in product-quality choices: The case of airline flight frequency," Economics of Transportation, Elsevier, vol. 3(1), pages 102-115.
    8. repec:zbw:rwirep:0535 is not listed on IDEAS
    9. Peggy Bechara & Lea Eilers & Alfredo R. Paloyo, 2014. "In Good Company – Neighborhood Quality and Female Employment," Ruhr Economic Papers 0535, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    10. David Kretschmer & Hanno Kruse, 2020. "Neighbourhood effects on acculturation attitudes among minority and majority adolescents in Germany," Urban Studies, Urban Studies Journal Limited, vol. 57(16), pages 3363-3380, December.

    More about this item

    Keywords

    neighbourhood effects; endogeneity; self-selection; sensitivity analysis; Brussels;
    All these keywords.

    JEL classification:

    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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