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The Harvard College Economist Thank You

Using a panel data set on Chicago from 1940 to 1960, I attempt to empirically evaluate competing theories of residential segregation on the basis of race. Because the theories can be distinguished by their implications on the rents paid by different racial groups, I analyze how the racial composition of a block affects its price of housing, and moreover, how these rent effects vary by racial composition and thus reflect discrimination of a particular form. A detailed panel data set allows me to combat the issue of omitted variable biases that compound cross-section analyses on similar topics and to demonstrate conclusively that rent differentials are not simply the result of systematic differences in the housing consumed by the two races. The evidence from a robust fixed effects estimation seems to reflect a “ghetto premium,” strongly supporting the theory that in mid-20 century Chicago institutional or other collective means effectively limited the housing stock available to black residents.