Are ghettos good or bad?

Spatial separation of racial and ethnic groups may theoretically have positive or negative effects on the economic performance of those groups. We examine the effects of segregation on outcomes for blacks in schooling, employment, and single parenthood. We find that blacks in more segregated areas have significantly worse outcomes than blacks in less segregated areas. We control for the endogeneity of location choice using instruments based on political factors, topographical features, and residence before adulthood. A one standard deviation decrease in segregation would eliminate one-third of the black-white differences in most of our outcomes.