Evidence of neighborhood effects from MTO: LATEs of neighborhood quality. Mimeo., Federal Reserve Bank of Cleveland

Abstract This paper finds evidence of positive neighborhood effects on adult labor market outcomes using the Moving to Opportunity (MTO) housing mobility experiment by studying the subpopulation induced by MTO to move to higher quality neighborhoods. Earlier studies have failed to find these effects because they have concentrated on broader populations and more restrictive models of neighborhood effects. We propose and implement a new strategy for identifying heterogeneous transition-specific effects that exploits the identification of the idiosyncratic component of an ordered choice model. We estimate Local Average Treatment Effects (LATEs) of the change in quality most commonly induced by MTO vouchers, that is, between the first and second deciles of the national distribution of neighborhood quality. Although MTO vouchers induced much larger changes in neighborhood quality than standard Section 8 vouchers, the evidence on neighborhood effects from MTO is restrictive: The LATEs we are able to identify pertain to a subpopulation representing under 10 percent of program participants. Motivatio