Dynamic Individuals, Static Neighborhoods: Migration and Earnings Changes in Poor Neighborhoods

This paper studies migration and earnings dynamics in poor neighborhoods using new administrative data linking residential location and earnings. Out-migration rates are higher in poor neighborhoods than elsewhere, and the majority of people who leave a poor neighborhood move to a richer one. Residents of poor neighborhoods also see significant earnings mobility, with average growth rates similar to richer areas. Estimates based on idiosyncratic, firm-specific pay changes show that increases in earnings are linked to migration to better neighborhoods. This results in the earnings of the cohort who lived in a poor neighborhood at baseline growing more than twice as fast as the earnings of these neighborhoods' contemporaneous residents. Overall, our results highlight an underappreciated reason why poor neighborhoods stay poor: initial residents whose earnings grow tend to move away.