COMMUTES, NEIGHBORHOOD EFFECTS, AND EARNINGS - AN ANALYSIS OF RACIAL-DISCRIMINATION AND COMPENSATING DIFFERENTIALS

Recent ''tester'' studies indicate that minority workers face restrict ed residential and employment opportunities because of racial discrimi nation in housing and labor markets. These restrictions may create a s patial mismatch between where urban minorities reside and where metrop olitan area jobs are located, resulting in reduced proximity of minori ty workers to jobs. Prior studies of racial discrimination and urban s patial mismatch, however, have paid little attention to the possibilit y that differences in employment commutes may be partially offset by c ompensating variations in neighborhood amenities, quality-adjusted hou se prices, and earnings. Such effects could help to mitigate the impac t of discrimination on minority workers. Using a unique subset of the 1985 and 1989 American Housing Surveys, we estimate a fixed effects co mmute time model that controls for quality-adjusted house prices, neig hborhood amenities, and earnings. Results indicate that although black s have longer commutes than comparably skilled white and Asian workers , roughly one-third of the estimated difference is offset by neighborh ood amenity and housing price differentials. However, even after contr olling for neighborhood fixed effects and earnings, educated black wor kers have significantly longer commutes than comparably skilled Asian and white workers. Additional findings indicate that regardless of rac e, household mobility is an important mechanism through which the mark et attains a spatial equilibrium, providing further support for argume nts that restricted proximity to residential opportunities and jobs re duces the economic welfare of minority households. (C) 1996 Academic P ress, Inc.