Income Inequality and Income Segregation

Elizabeth E. Bruch, University of Michigan
Eric Provins, University of Michigan

Both neighborhood poverty and income inequality increased substantially in the United States between 1970 and 1990. Income inequality continued to increase through 2000, while neighborhood declined somewhat in the 1990s. Some researchers argue that increasing income inequality caused the increase in neighborhood poverty in the 1990s. However, these studies rely purely on descriptive information regarding levels of income segregation and levels of income inequality; none of them analytically explore the relationship between income inequality and the concentration of poverty for a given pattern of residential mobility. In this paper, we use a simple agent-based model to explore the relationship between increases in income inequality and income segregation. We first extend Schelling's classic racial segregation model to understand economic segregation, and then explore how actual changes in income distributions between 1980-2000 for a set of U.S. metro areas could have affected segregation dynamics, assuming behavior remained constant over this period.