Neighbourhood effect on poverty dynamics in the city of Santiago, Chile

Presenter: Jose Prieto, Alberto Hurtado University

Author: Jose Prieto

Co-author(s): Isabel Brain

This paper addresses the neighbourhood effect on the income dynamics of poor households living in the Metropolitan Area of Santiago, Chile. The hypothesis suggests that given that the quality of private and public services, urban infrastructure and the degree of segregation of low-income households are unevenly distributed within the city, the likelihood that a household experiences upward income mobility is significantly conditioned by the location of their home. The paper uses data from the Chilean Socio-economic Household Panel Survey 2006-2009, and data on land value from the Internal Revenue Service as proxies to the attributes associated to different areas. The analysis is carried out on a balanced subsample of 11448 persons covered in four waves with multivariate hazard models, and considers the 34 municipal districts that comprise the metropolitan area, divided in three groups based on their land value (high, moderated and low land-value). The main contribution of this work lies in estimating the weight that residential location has in the income trajectory of households. Preliminary results show that, after controlling for initial conditions as well as for the characteristics of households and individuals, households living in areas with high land value increase their probability of escaping poverty. Conversely, for households residing in areas of low land value the likelihood of overcoming poverty decreases significantly. Results demonstrate that the urban context doesn’t play a neutral role in household income dynamics but rather has an active and significant role in explaining the income mobility of low-income households.