Place, Peers, and the Teenage Years: Long-Run Neighborhood Effects in Australia

Abstract

I use variation in the age at which children move to show that where an Australian child grows up has a causal effect on their adult income, education, marriage, and fertility. In doing so, I replicate the findings of Chetty and Hendren (2018a) in a country with less inequality, more social mobility, and different institutions. Across all outcomes, place typically matters most during the teenage years. Finally, I provide suggestive evidence of peer effects using cross-cohort variation in the peers of permanent postcode residents: those born into a richer cohort for their postcode tend to end up with higher incomes themselves. (JEL D63, J13, J62, R23, Z13)

The Opportunity Atlas: Mapping the Childhood Roots of Social Mobility

“…Under the identifying assumption that unobservable determinants of children's outcomes in adulthood are uncorrelated with the age at which they move to a different area -an assumption that we validate using sibling comparisons and a set of placebo tests, as in Chetty and Hendren (2018a) -this result implies that neighborhoods have causal effects on children's outcomes. Growing up in a better neighborhood is beneficial throughout childhood, but where children live as adolescents (rather than at very early ages) is particularly influential in determining their later outcomes, consistent with Deutscher's (2018) recent findings in Australian data. The quasi-experimental estimates imply that about 62% of the observational variation across tracts in the national data is due to causal effects.…”

“…higher predicted income ranks at age m. The declining pattern of the coefficients implies that neighborhoods have causal effects on children's outcomes in proportion to childhood exposure prior to age 23. The slope of this relationship is somewhat steeper between ages 13 and 23 than it is at earlier ages, suggesting that where a child lives as an adolescent may be particularly influential in determining his earnings outcomes, consistent with the findings of Deutscher (2018) in Australian data.…”

“…Recent experimental and quasi-experimental studies have established that the neighborhood in which a child grows up has substantial causal effects on his or her prospects of upward income mobility Chetty and Hendren 2018a;Chyn 2018;Deutscher 2018;Laliberté 2018;Nakamura et al 2019). 1 The emerging consensus that neighborhoods play a key role in shaping children's outcomes (Sharkey 2016) raises a natural question: which neighborhoods in the United States currently offer the best and worst opportunities for children?…”

Partners in Crime

“…Patterns of crime across neighborhoods and over time display strong evidence of social interactions (Glaeser, Sacerdote, and Scheinkman 1996). 1 Peer effects in criminal activity have been found within neighborhoods, schools, and juvenile corrections facilities (Ludwig, Duncan, and Hirshfield 2001;Kling, Ludwig, and Katz 2005;Ludwig and Kling 2007;Bayer, Hjalmarsson, and Pozen 2009;Patacchini and Zenou 2009;Deming 2011;Billings, Deming, and Rockoff 2014). 2 The available evidence suggests that concentrating disadvantaged youth together in the same environment leads to more total crime (Jacobson 2004;Cook and Ludwig 2005;Carrell and Hoekstra 2010;Deming 2011;Imberman, Kugler, and Sacerdote 2012;Billings, Deming, and Rockoff 2014;Damm and Dustmann 2014).…”

“…While there is strong evidence of agglomeration externalities for criminal behavior, the exact mechanism remains unclear. Proposed mechanisms for peer and spillover effects in crime include strained monitoring resources (Levitt 1997, Jacobson 1 For examples of social interactions in other markets, see Bertrand, Luttmer, and Mullainathan (2000) on welfare program participation, Bayer, Ross, and Topa (2008) on labor referrals, Grinblatt, Keloharju, and Ikäheimo (2008) on automobile consumption, and Fletcher and Ross (2012) on health behaviors.…”