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The Social Costs of Concentrated Poverty: Externalities to Neighboring Households and Property Owners and the Dynamics of Decline.

October 2006

George C. Galster, Wayne State University; Jackie M. Cutsinger, Wayne State University; and Ron Malega, University of Georgia

Download 'working_paper06-42.pdf'.


We investigate theoretically and empirically two interrelated potential
consequences of the spatial concentration of poverty: negative externalities to proximate residents (stimulation of socially harmful behaviors like crime) and property owners (reduced maintenance and, in the extreme, abandonment). Inasmuch as these consequences are capitalized into property values, we use changes in these values to make a rough estimate of the aggregate dollar costs to American society of the aforementioned externalities. We demonstrate the conceptual importance of threshold effects in the analysis of the potential costs of concentrated poverty to the society as a whole.

We develop three theoretical models of the consequences of concentrated poverty: (1) micro-level, explaining how/why such would affect household behavior; (2) micro-level, explaining how/why such would affect property owner behavior; (3) meso-level, explaining how concentrated poverty, household behaviors and owner behaviors interrelate when
aggregated to the neighborhood level in a mutually causal way.

Housing, Urban Poverty