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|dc.description.abstract||Standard explanations for the income heterogeneity within neighborhoods rely on differencesof preferences across households and heterogeneity of the housing stock. We propose analternative and complementary explanation. We construct a stochastic equilibrium sortingmodel where (1) income is the sole dimension of household heterogeneity, (2) householdsform state-contingent housing location plans that may involve moves over their lifetimes, (3)households choose whether to own or rent depending on the housing expenditure riskassociated with each tenure mode, and (4) there is a probability that newcomer householdsmove in and compete for homes with native households. Income mixing within neighborhoodarises for two reasons. First, allowing natives to form state-contingent housing location plansbreaks the indivisibility of housing consumption implicit in the literature where householdschoose their location once and for all. Second, natives can insure themselves against rentfluctuations by buying their home prior to the realization of the population shock; newcomerscannot. As a result, poorer natives stay in the more desirable communities and only richernewcomers move in these communities. Evidence from U.S. metropolitan areas supports theeffects predicted by the model.||en_US|
|dc.publisher|||aCenter for Economic Studies and Ifo Institute (CESifo) |cMunich||en_US|
|dc.relation.ispartofseries|||aCESifo Working Paper |x1465||en_US|
|dc.title||Heterogeneity within communities : a stochastic model with tenure choice||en_US|
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