Research

Abstract: We study segregation in health behavior and its welfare implications. We develop a general equilibrium life-cycle model with neighborhood choice and endogenous local spillover effects on education and smoking. Using tract-level data from Add Health, we document neighborhood-level smoking externalities and quantify how these local spillovers influence residential sorting. We find that the spillover effect on smoking accounts for half of the variation in life expectancy across neighborhoods and the spillover effect in education further amplifies this segregation. We also evaluate place-based policies that encourage integration, and find that a housing voucher program can reduce inequality in life expectancy across neighborhoods by 33% and improve aggregate social welfare by 1.5%.