College Graduates Tend to Live in the Best Places

Thanks to Justin Stoler for linking me to a news release from Stanford University with the bold, but somewhat misleading title "Is college education segregating US Cities?" The reference is to a new report just put out by Rebecca Diamond, an Assistant Professor of Economics at the Stanford Graduate School of Business.

America’s cities are dividing themselves into two distinct groups, with college-educated workers clustering in places that less-educated people cannot afford.

This wage gap has rippled across American cities. From about 1980 to 2000, cities that initially had a large share of college graduates (Boston and Atlanta, for example) increasingly attracted larger numbers of them, while cities with less-educated workers (Albany, NY, and Harrisburg, Penn.) gained fewer graduates.

Do the large increases in wage inequality over the past three decades point to a similar increase in economic well-being inequality? The answer is yes, Diamond says. “In fact, the increase in wage inequality understates the true increase in economic well-being inequality.”

The reason is that high-skill cities also offer residents more amenities for quality living—entertainment, educational opportunities, better air quality, and lower crime rates. The higher housing costs do not fully dilute the real amount of consumption that college workers derive from their high wages.

This, of course, is not a linear process. College-educated people are likely to demand different things from their environment than will the less-educated, and will be in a better position to effect change within their community.

Looking ahead, Diamond would like to examine this issue at the neighborhood level—”who’s willing to live next door to whom”—and how people segregate themselves in the particular places they live.

On this score, it turns out that she is "living next door" to one of the world's foremost authorities on the topic--Sean Reardon, Professor in Stanford's Graduate School of Education. Diamond did not reference his work in her report, but I suspect we'll see future collaborations.