Chapter

Who Benefits Whom in the Neighborhood?

Edited by Joel Waldfogel

in Agglomeration Economics

Published by University of Chicago Press

Published in print April 2010 | ISBN: 9780226297897
Published online February 2013 | e-ISBN: 9780226297927 | DOI: http://dx.doi.org/10.7208/chicago/9780226297927.003.0007
Who Benefits Whom in the Neighborhood?

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This chapter presents a sensitivity of the nearby availability of products to preferences, measured along multiple dimensions. This evidence indicates that agglomeration rewards members of agglomerating groups via the availability of products in the local market. It provides part of the explanation for residential segregation and a first step toward assessing the impact of private goods and the tendency to agglomerate. Persons of similar preferences who agglomerate experience greater availability of goods targeted to their tastes. The idea that agglomeration benefits consumers through supply-side nonconvexities suggests a possibility of nonlinear effects of group size on welfare. The chapter addresses three empirical questions. First, it asks how “preferences” differ across groups (race, education, income), and uses the 2004 Consumer Expenditure Survey, which shows how households allocate their expenditures across narrow product categories. The 2000 Census and the 2000 ZIP Business Patterns show that the availability of outlets in a category varies with the number of persons, by type, in local areas. Finally, the chapter discusses whether the mix of products is sensitive to the mix of local preferences, or whether people derive benefit through the product market from agglomerating with persons of similar preferences.

Keywords: agglomerating groups; local market; residential segregation; local preferences; nonlinear effects

Chapter.  8429 words.  Illustrated.

Subjects: Microeconomics

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