STEVE INSKEEP, HOST:
The American dream is a promise of upward mobility, and it turns out that some neighborhoods make that easier. Others don't. Greg Rosalsky writes the Planet Money Newsletter, and he's got the story of a Harvard economist and a team at the research lab Opportunity Insights, who are trying to understand why.
GREG ROSALSKY, BYLINE: Over the last decade, Raj Chetty and his colleagues have found when disadvantaged kids move to better neighborhoods, they end up doing dramatically better later in life. But the reality is that many low-income families can't or won't move to better neighborhoods. And so the researchers wondered, basically, what if instead of moving disadvantaged kids to better neighborhoods, policymakers can move better neighborhoods to disadvantaged kids?
RAJ CHETTY: And that's a question that led to this study, where we essentially analyzed the largest effort ever in the U.S. to revitalize high-poverty neighborhoods.
ROSALSKY: That effort was a federal program that began in the 1990s, which had a name that sounds like a "Star Wars" sequel - Hope VI. Under the program, the government funded the demolition of the nation's most distressed public housing projects, and then it redeveloped them to create less dense and more mixed-income neighborhoods. Many families were displaced, but the ones that remained found themselves in a transformed, more economically integrated neighborhood, and it created a sort of real-world experiment for the researchers to study.
CHETTY: What we found is that adults did not benefit that much. However, very importantly, kids benefited substantially.
ROSALSKY: They found that kids were more likely to go to college and less likely to go to prison. And every year they spent being raised in a revitalized neighborhood, they earned about 3% more as adults. If they spent their entire childhood there, those annual income gains really added up.
CHETTY: So if you grew up after it was revitalized, you ended up earning about 50% more if you grew up from birth in one of these places than if you had grown up in the exact same place, pre-revitalization. So that's an enormous change.
ROSALSKY: So what was it about Hope VI that caused these better outcomes? Economist Matt Staiger, another co-author of this study, says they find evidence that they were driven by more social interactions between kids from different economic backgrounds.
MATT STAIGER: Prior to the intervention, the Hope VI sites were islands of disadvantage where kids growing up in public housing were largely interacting only with other families in public housing. What we found is that Hope VI broke down the barriers that led to this isolation and increased the degree to which kids in public housing were interacting and befriending kids who live nearby. And that is what appeared to be central in driving the long-run gains and their outcomes.
ROSALSKY: Why are social connections to higher-income peers so important for low-income kids to climb the economic ladder? The researchers have some theories. Maybe these connections help kids find jobs later in life. Maybe they provide kids with important information about how to succeed, or maybe higher-income peers and their families serve as role models who transform these kids' aspirations. Whatever the exact reason, this study suggests we could see a renewal of the American dream if policymakers did more to help low-income kids interact with and befriend higher-income kids.
Greg Rosalsky, NPR News.
INSKEEP: Greg has more about this story in the Planet Money Newsletter, which includes the downsides of Hope VI. Check out the newsletter and the Planet Money podcast at npr.org/planetmoneynewsletter.
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