Income Inequality, Externalities, and Housing Segregation
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The relationship between household income and housing segregation is examined, with a focus on the idea that higher income households disproportionately generate positive externalities that increase housing prices. A review of existing literature is provided. A series of models are also developed to capture and examine theory. The primary finding in the model is that, if higher income households do disproportionately generate positive externalities relative to lower income households, then the externalities can significantly exacerbate housing segregation that is naturally caused by income inequality.