Two-worker Households, Decentralized Employment, and Residential Segregation

Abstract

The last century was marked by a remarkable improvement in the economic position of women, as reflected in higher labor force participation and wages. This paper extends the Hybrid Tiebout models of residential choice to allow for two-worker households. Our model incorporates both residential choice and labor market choices of households simultaneously and, thus, gives us a unique opportunity to study the impact of changes in the labor market conditions for workers on residential segregation. We develop a general equilibrium model of residential choice with decentralized workplaces in which households face a trade-off among accessibility, space and a public good (education). Education is financed through property taxes, which are determined by majority voting. The quality of education is determined by the spending and the peer group effects. The model is interesting in the sense that (i) households consider the work locations of both male and female working members of the household while making residential choice decisions; (ii) the presence of decentralized workplaces offers an alternative job location to workers; and (iii) the endogenous labor supply decisions for workers. We find that the increase in educational attainment for women and the changes in wages for men and women have had a substantial impact on the spatial distribution of households across metropolitan areas and hence, segregation by income.