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a blog from young economists at Nova SBE

Can new evidence concerning the long-term economic effects of moving out of bad neighbourhoods be used to mitigate long-term economic effects of the current migration movements towards Europe?

The neighbourhood in which children grow up is believed to influence economic success later in life. However, selection biases in efforts to measure the effects of bad neighbourhoods on poverty or economic success later in life led to difficulties in proving the causality for these disadvantages. Recent research by Eric Chyn reveals that the positive impact on the long run economic success of children moving out of disadvantaged neighbourhoods might have been underestimated in the past due to selection biases of participants in previous research. Thereby in previous research, the ‘Moving to Opportunity’ experiment, the participants were selected through a lottery in which prospective participants from disadvantaged neighbourhoods could voluntarily sign up to. However, whilst the experiment gave evidence to the positive effects of moving out of disadvantaged neighbourhoods at an early age, it is assumed to underestimate the effect. Thereby Mr Chyn and others argue that the participants that signed up might have had higher aspirations and were more concerned about moving out of bad neighbourhoods compared to people who did not sign up for the lottery, thus they might have done better even without taking part in the program. However, these selection biases can be countered if the participants would be selected randomly. The research by Eric Chyn achieves that as it is based on a sample of participants that were randomly selected. From 1995 to 1998 the Chicago Housing Authority demolished several public housing buildings due to structural damage but other public housing buildings in the area were left standing, thus people from the demolished buildings were relocated and families in the remaining buildings remained living in them. The people who remained living in the public housing are therefore constituting the control group. The relocated families received housing vouchers to find accommodation on the private housing market. These vouchers are a subsidy to cover the difference between rents on the private market and the family’s required rent contribution (30 percent of adjusted income). Since the people were selected based on whether their house was to be demolished or not it can be viewed as a random selection of participants, thus avoiding the selection bias problem of previous research. The results of Mr Chyn’s research are “that children displaced by public housing demolition have notably better adult labor market outcomes compared to their non-displaced peers”. Furthermore, these findings contrast the findings from the Moving to Opportunity project in such a way that the positive effects were observable irrespective of the age when the child moved.

Since Europe is currently faced with a vast influx of migrants coming to the European Union these recent findings might be helpful when thinking about possible ways to accommodate migrants within the European countries to achieve mutual economic gains for the migrants as well as for the receiving countries too._88578067_europe_migrant_numbers_mar2016

 

Whilst currently challenges still resolve around solving the humanitarian emergencies on a short-term basis it might be important to also develop plans for the long-run. Given the potential positive impact of migration for the receiving countries in the long-run, a successful integration and transition process will be important. Thereby the insights gathered from Mr. Chyn’s research regarding the positive impact of dispersing poorer households among less poor mixed neighbourhoods might also be applicable to placing migrants within less poor neighbourhoods. This could help to aid the integration process as well as help migrants to economically fair better in the long-run, thus reducing costs on social systems as well as generating tax revenues. Furthermore, if migrants are more dispersed within society this could also help to increase acceptance of migrants among the population of the receiving countries. However, this hypothesis concerning altered acceptance among residents in the receiving population might need further investigation and might also vary among different countries.

by Jonas Weber

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Author: studentnovasbe

Master student in Nova Sbe

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