Buying In: Positional Competition, Schools, Income Inequality, and Housing Consumption

Adam Goldstein, Princeton University
Orestes Hastings , Colorado State University

Social scientists have suggested a key socio-behavioral consequence of rising inequality is to intensify market competition for advantageous positions in the opportunity structure, such as residences with access to high-quality public schools. We assess the empirical implications of inequality-fueled positional competition theories by analyzing the relationships between income inequality, households’ efforts to live in desirable school districts, and their housing consumption behavior. We combine longitudinal data on households, school quality, income inequality, and the local real estate market. Greater inequality is associated with a steeper housing price premia for residences in desirable districts and greater salience of schools relative to other housing amenities in families’ housing expenditure functions. Families in high-inequality regions also exhibit greater willingness to pay more for a given improvement in school desirability. The analysis brings empirical nuance to oft-invoked but untested theories about positional competition as a mechanism by which inequality affects behaviors, consumption, and markets.

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 Presented in Session 124. Flash Session: Causes and Consequences of Educational Inequalities