Place-Based Approaches to Promoting Upward Mobility: New Evidence from Big Data

There is growing concern that the United States is no longer the “land of opportunity” and that children from disadvantaged backgrounds do not have opportunities to succeed. While issues of social mobility are receiving increasing attention from policy makers, there is a scarcity of evidence on what determines rates of upward mobility and what policies can be most effective in improving disadvantaged children’s chances of success.

In this project, we use “big data” – large scale administrative datasets with detailed information on the U.S. population – to provide new evidence on how to improve equality of opportunity. In recent work (http://www.equality-of-opportunity.org), we used de-identified data from tax returns covering the U.S. population to study children’s chances of moving up the income ladder. We document dramatic variation across areas in the rate at which children from poor backgrounds rise out of poverty in the United States. For example, more than 12% of children in San Jose and Salt Lake City who are born to parents in the bottom fifth of the U.S. income distribution end up reaching the top fifth of the U.S. income distribution. In contrast, only 5% of children in Detroit and New Orleans rise from the bottom fifth to the top fifth.

Put differently, nearly three times as many poor children climb to the top of the income distribution in San Jose and Salt Lake City compared to children in Detroit and New Orleans. San Jose and Salt Lake City have rates of upward mobility comparable to countries such as Canada and Denmark, which have the highest rates of social mobility in the world. In contrast, the rates of upward mobility in cities such as Detroit and New Orleans or in certain states such as Mississippi are amongst the lowest rates of upward mobility ever documented in a developed county).

Importantly, we find that much of this variation in mobility reflects the causal effect of growing up in those places, as opposed to differences in the types of families who live in different areas. In work we plan to release in the coming months, we show that children whose families move to a better neighborhood have better outcomes in adulthood in proportion to the time they spend growing up in that area. Our results suggest roughly 75% of the variation in intergenerational mobility across the US reflects the causal effect of exposure to those areas from birth. We find similar results in a re-analysis of the well known Moving to Opportunity experiment. We find that moving to a lower-poverty neighborhood significantly improves college attendance rates and earnings for children who were young (below age 13) when their families moved.

Our prior work focused on characterizing how upward mobility varies across areas. In this proposal, we describe a project that seeks to take the next step and understand exactly why mobility varies so much and what policies can be most effective in changing rates of mobility.