Neighbourhoods, households and income dynamics: a semi-parametric investigation of neighbourhood effects

Using a unique data set, we present evidence on income trajectories of people living in micro-neighbourhoods. We investigate neighbourhood influences making as few parametric assumptions as possible. The article offers a number of advances. We exploit a data set that is large, representative, longitudinal, with very local neighbourhoods. We analyse income growth over 1-, 5- and 10-year windows. We analyse the whole distribution of income growth and track large gainers and losers as well as averages. We consider the appropriate definition of neighbourhood. We find no evidence of a negative relationship between neighbourhood disadvantage and subsequent income growth; indeed, some evidence of a positive relationship.