Racial Segregation, the College Premium, and Black College Attainment: Some Theory and Empirics

Recent research has found that differences in neighborhood segregation explain black-white inequality in education attainment and that these differences matter more than school characteristics. In recent years, neighborhood segregation has persisted at high levels in many metropolitan areas with high black populations and the black white achievement gap has stopped converging. This is somewhat puzzling since, at the same time, research on education supply has found that the college wage premium has increased in recent years providing a greater incentive for blacks to become educated. This paper synthesizes these findings and facts to offer a comprehensive theoretical explanation for the gap in black-white education attainment. I model neighborhood segregation as limiting black education attainment by increasing the discount rate of future returns and discuss research that supports that contention. Then I confirm the broadest prediction of the model by using individual data from IPUMs to predict the effect of segregation on black college attainment conditional on the return to college and other controls. The results are highly significant and imply that the black-white achievement gap is fully explained by residential segregation.