This paper considers how identity, a person’s sense of self, affects economic outcomes. We incorporate the psychology and sociology of identity into an economic model of behavior. In the utility function we propose, identity is associated with different social categories and how people in these categories should behave. We then construct a simple game-theoretic model showing how identity can affect individual interactions. The paper adapts these models to gender discrimination in the workplace, the economics of poverty and social exclusion, and the household division of labor. In each case, the inclusion of identity substantively changes conclusions of previous economic analysis. I.

This paper surveys the modern economics literature on the role of neighborhoods in influencing socioeconomic outcomes. Neighborhood effects have been analyzed in a range of theoretical and applied contexts and have proven to be of interest in understanding questions ranging from the asymptotic properties of various evolutionary games to explaining the persistence of poverty in inner cities. As such, the survey covers a range of theoretical, econometric and empirical topics. One conclusion from the survey is that there is a need to better integrate findings from theory and econometrics into empirical studies; until this is done, empirical studies of the nature and magnitude of neighborhood effects are unlikely to persuade those skeptical about their importance.

We analyze a unique data set detailing the financial activities of a drug-selling street gang on a monthly basis over a four-year period in the recent past. The data, originally compiled by the gang leader to aid in managing the organization, contain detailed information on both the sources of revenues (e.g. drug sales, extortion) and expenditures (e.g costs of drugs sold, weapons, tribute to the central gang organization, wages paid to various levels of the gang). Street-level drug dealing appears to be less lucrative than is generally thought. We estimate the average wage in the organization to rise from roughly $6 per hour to $11 per hour over the time period studied. The distribution of wages, however, is extremely skewed. Gang leaders earn far more than they could in the legitimate sector, but the actual street-level dealers appear to earn less than the minimum wage throughout most of our sample, in spite of the substantial risks associated with such activities (the annual violent death rate in our sample is 0.07). There is some evidence consistent both with compensating differentials and efficiency wages. The markup on drugs suggests that the gang has substantial local market power. Gang wars appear to have an important strategic component: violence on another gang’s turf shifts demand away from that area. The gang we observe responds to such attacks by pricing below marginal cost, suggesting

While confounding factors typically jeopardize the possibility to use observational data to measure peer effects, field experiments offer the possibility to obtain clean evidence. In this paper we measure the output of four randomly selected groups of individuals who were asked to fill letters in envelopes, with a remuneration completely independent of output. For two of these groups the output of peers was exoge- nously manipulated (low or high) by making individuals aware of the number of letters previously produced by artificial colleagues. In the third group individuals were set up to work one in front of the other, while the fourth group gave the baseline output for independent not manipulated work. Our first finding is that effort of the less productive workers reacts in a sizeable and statistically significant way to peer pressure. Second, there is strong evidence of peer effects when individuals work in pairs. Third, these peer effects work in the direction of making the least productive individuals work harder, thereby increasing overall productivity.

Throughout social science, non-market interactions are increasingly being recognized as central. The endogenous growth literature argues that the flow of ideas between innovators is critical for progress. The social capital literature argues that relationships between ordinary citizens determine the quality of government. The literature on poverty is increasingly emphasizing neighborhood effects and that the intellectual isolation of the ghettos leads to the worst problems of the inner city. pointing to the importance of non-market interactions. These three literatures are all There are two connections between these critical, non-market interactions and urban economics. First, the demand for cities is to a large extent driven by these sorts of nonmarket interactions. The appeal of locating in Wall Street or Silicon Valley lies, in part, in their roles as centers of information flows. The New Urbanism, which lay behind the planning of Celebration, argues that density can be critical in creating a highly desirable

I am indebted to this paper for provoking some of the observations made here. I thank Dilip

This paper investigates the association between family poverty, the level of deprivation in electoral wards and children’s cognitive test scores using data from the second generation in the 1991 sweep of the British National Child Development Study (1958 birth cohort). Family poverty has a significant association with lower test scores in children of all ages (4-18 years). Neighbourhood poverty has a significant association with lower test scores in children aged 4-5 years which, though somewhat attenuated, is independent of other socioeconomic indicators. Among children aged between 6 and 9 years, the association with neighbourhood deprivation is statistically accounted for by individual characteristics. Among children aged between 10 and 18 years, levels of neighbourhood deprivation were for the most part statistically insignificant. The family poverty – test score association among children aged between 10 and 18 years was mediated by the home environment. Mediated effects were stronger for family poverty – test score associations than for neighbourhood poverty. Explanations for the links

This article explores immigrants ’ socioeconomic success consequential to their choice of neighborhood. We describe and analyze seven aspects of socioeconomic success during the 1980s for 14 immigrant groups in five metropolitan areas. Exposure indices measuring aspects of the census tracts in which these groups lived in 1980 are calculated and analyzed. Multiple regression explores the degree to which 1980s neighborhood context explains socioeconomic advances of pre-1980 immigrants during the 1980s, controlling for group starting position in 1980 and metropolitan area of residence. Findings support the notion that a neighborhood of poorly educated, welfare-assisted, nonworking residents retards educational, professional, and employment prospects of immigrants. We also find evidence that a higher incidence of residential exposure to other members of one’s immigrant group leads to higher rates of poverty and, perhaps, lower gains in employment during the subsequent decade. These findings should be interpreted cautiously, however, because of data limitations, specification shortcomings, and ambiguities in interpreting causation.

Acknowledgments: The inspiration for this paper was a conversation with John Kain in which he encouraged me to write a theoretical paper strengthening the microfoundations of the spatial mismatch hypothesis. An earlier version of this paper was presented at the 1996 TRED Conference on "Transportation and Land Use. " I am grateful to the participants and especially my discussant Vernon Henderson for helpful comments and criticisms. I would also like to thank Sanche Llewellyn and Michael Hansen, two Boston College Ph.D. students, whose term essays on the topic stimulated my thinking, Alexander Kalenik and An Yan for research assistance, seminar participants at Boston College for insightful comments, and the editor and two referees for helpful comments on an earlier draft. Sadly, I associate this paper with Bill Vickrey’s death since Bill died en route to the

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