Does income redistribution prevent residential segregation?

Abstract

Living in low-income neighborhoods can have adverse effects. Public policies that reduce income inequality might prevent residential segregation by income. However, previously documented associations between income inequality and residential segregation may not reflect residential sorting effects. We use rich full-population data for Sweden 1990–2017 and take advantage of how in-moving residents change the municipal income composition to rule out the influence of reverse causation and mechanical effects. We find that changing taxes and transfers has limited residential sorting effects on segregation. However, our results strongly suggest that raising the education levels of low-income residents is effective for fighting segregation.