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

Abstract

Social scientists have suggested that a key sociobehavioral consequence of rising inequality is intensifying market competition for advantageous positions in the opportunity structure, such as residences that afford access to high-quality public schools. We assess empirical implications of inequality-fueled positional competition theories (PCTs) by analyzing the relationships between metropolitan income inequality, households' efforts to secure residential positions in desirable school districts, and housing consumption behavior. We assemble a unique data set, which contains longitudinal information on household finances, residences, and geographic locations from the Panel Study of Income Dynamics; information on the quality of the school attendance areas in which these households reside; and information about the local real estate market. We find that greater inequality is associated with steeper housing price premia for residences in desirable areas, more pronounced social class sorting on school quality when relocating, and greater salience of schools relative to other housing amenities in families' housing expenditure functions. Families in high-inequality regions exhibit modestly greater willingness to pay more (relative to their own incomes) for a given improvement in school desirability. The analysis brings important empirical nuance to oft-invoked but untested theories about positional competition as a mechanism by which inequality affects behaviors, consumption, and markets.

Who feels it? Income inequality, relative deprivation, and financial satisfaction in U.S. states, 1973-2012

“…Recent studies from the Consumer Expenditure Survey (CEX) have reached mixed conclusions: some studies arguing consumption inequality has risen substantially (Aguiar and Bils 2015;Attanasio et al 2015) while others claiming the increase has been minimal (Krueger and Perri 2006;Meyer and Sullivan 2017) Complicating the matter is that the CEX has likely experienced greater measurement error in recent years (Meyer et al 2015) and, more generally, consumption data measures spending within categories, rather than the quality or quantity of the items purchased (see also Fisher et al 2013;Attanasio and Pistaferri 2016). However, studies examining specific positional goods such as neigborhoods (Frank 2007;Fligstein et al 2017;Goldstein and Hastings 2018), cars (Bricker et al 2014), and luxury goods (Walasek and Brown 2015; find that the focus on them seems to increase when and where income inequality is greater. Second, people may to some extent compare incomes directly.…”

Who Feels It? Income Inequality, Relative Deprivation, and Financial Satisfaction in U.S. States, 1973–2012

“…Recent studies from the Consumer Expenditure Survey (CEX) have reached mixed conclusions: some studies arguing consumption inequality has risen substantially (Aguiar and Bils 2015;Attanasio et al 2015) while others claiming the increase has been minimal (Krueger and Perri 2006;Meyer and Sullivan 2017) Complicating the matter is that the CEX has likely experienced greater measurement error in recent years (Meyer et al 2015) and, more generally, consumption data measures spending within categories, rather than the quality or quantity of the items purchased (see also Fisher et al 2013;Attanasio and Pistaferri 2016). However, studies examining specific positional goods such as neigborhoods (Frank 2007;Fligstein et al 2017;Goldstein and Hastings 2018), cars (Bricker et al 2014), and luxury goods (Walasek and Brown 2015; find that the focus on them seems to increase when and where income inequality is greater. Second, people may to some extent compare incomes directly.…”

The Curious Case of the Missing Tail: Trends Among the Top 1% of School Districts in the United States, 2000–2015

“…Overall, recent work suggest that the growth of income inequality increases anxiety among wealthy American about the transmission of advantage to their children (M. Nelson, 2010) and increases the use of housing expenditures to secure positional advantage through schooling (Goldstein & Hastings, 2019). Taken together, these trends suggest both how and why we might anticipate the richest school districts to accumulate fiscal resources at a faster rate than other districts.…”