Neighborhood Effects on Economic Outcomes of Youths

This paper analyzes the long-term neighborhood effects on incomes of youths in the United States. The working dataset comes from the National Longitudinal Survey of the Youths and consists of the youths between the age of 12 and 14 in 1997. Their neighborhood characteristics between 1998 and 2001 are analyzed to predict their household incomes in 2015. Using two-stage probit models and OLS regressions, this paper suggests two main findings. First, the youths in safe neighborhoods between 1998 and 2001 are 81.5 percentage- point more likely than the youths from risky neighborhoods to earn above the median household income in 2015. Also, living in safe neighborhoods increases the youths’ incomes in 2015 by 221.2 percentage- point. These results show that the neighborhood environment in which the individuals grow up as youths has a significant impact on their adulthood incomes. As a result, this paper supports policy initiatives that actively seek to assist low-income families to move into affluent neighborhoods to break the poverty trap