Stuart Rosenthal, Stephen L. Ross

This paper reviews recent literature that considers and explains the tendency for neighborhood and city-level economic status to rise and fall. A central message is that although many locations exhibit extreme persistence in economic status, change in economic status as measured by various indicators of per capita income is common. At the neighborhood level, we begin with a set of stylized facts, and then follow with discussion of static and dynamic drivers of neighborhood economic status. This is mirrored at the metropolitan level. Durable but slowly decaying housing, transportation infrastructure, and self-reinforcing spillovers, all influence local income dynamics, as do enduring natural advantages, amenities and government policy. Three recurring themes run throughout the paper: (i) Long sweeps of time are typically necessary to appreciate that change in economic status is common; (ii) history matters; and (iii) a combination of static and dynamic forces ensure that income dynamics can and do differ dramatically across locations but in ways that can be understood.

JEL Codes
R10: General Regional Economics (includes Regional Data)
R20: Urban, Rural, Regional, Real Estate, and Transportation Economics: Household Analysis: General
R30: Real Estate Markets, Production Analysis, and Firm Location: General
Neighborhood income dynamics
city income dynamics
durable housing
transportation infrastructure
path dependence