The estimation of neighborhood effects in the social sciences: An interdisciplinary approach

This paper critically examines the interdisciplinary research of neighborhood effects. Neighborhood effects are community influences on individual social or economic outcomes. Examples include labor force activity, child outcomes, criminal behavior, and other socioeconomic phenomena. The existing theoretical and empirical literature is reviewed. Conceptual definitions from sociology are linked and contrasted with economic models. Early studies are criticized for failing to account for a number of endogeneity concerns. Recent empirical studies are also explored. The results of these papers demonstrate that although neighborhood characteristics are important, their influences are much smaller than suggested by previous research. An additional emphasis is dedicated to linking the neighborhood effects literature to other research of local or spatial activity within economics, sociology, and geography. In particular, the potential employment of local interaction game theory and spatial econometrics in neighborhood effects research is discussed. Additionally, a catalogue of existing empirical research is assembled. (C) 2002 Elsevier Science (USA). All rights reserved.