Inter-American Development Bank
facebook
twitter
youtube
linkedin
instagram
Abierto al públicoBeyond BordersCaribbean Development TrendsCiudades SosteniblesEnergía para el FuturoEnfoque EducaciónFactor TrabajoGente SaludableGestión fiscalGobernarteIdeas MatterIdeas que CuentanIdeaçãoImpactoIndustrias CreativasLa Maleta AbiertaMoviliblogMás Allá de las FronterasNegocios SosteniblesPrimeros PasosPuntos sobre la iSeguridad CiudadanaSostenibilidadVolvamos a la fuente¿Y si hablamos de igualdad?Home
Citizen Security and Justice Creative Industries Development Effectiveness Early Childhood Development Education Energy Envirnment. Climate Change and Safeguards Fiscal policy and management Gender and Diversity Health Labor and pensions Open Knowledge Public management Science, Technology and Innovation  Trade and Regional Integration Urban Development and Housing Water and Sanitation
  • Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer

Ideas Matter

  • HOME
  • CATEGORIES
    • Behavioral Economics
    • Environment and Climate Change
    • Macroeconomics and Finance
    • Microeconomics and Competitiveness
    • Politics and Institutions
    • Social Issues
  • Authors
  • Spanish
¿Cómo la segregación residencial fomenta la desigualdad y qué se puede hacer al respecto?

How Residential Segregation Fuels Inequality, and What Can Be Done about It

February 4, 2021 by Juan Pablo Chauvin Leave a Comment


The widespread inequalities of economic opportunities in Latin America and the Caribbean are a major concern for policymakers throughout the region. These inequalities are, in no small part, spatial. Where you live and where you work matters—often substantially—for your opportunities in life. Research is rapidly improving our understanding of the geographic dimension of inequality, and opening doors to new policy approaches to tackle it.  

The recently published IDB report The Inequality Crisis shows that household income and wages vary substantially across different subregions of many Latin American countries. Even in countries with relatively smaller spatial inequalities, such as El Salvador, the average salary in the richest region is 40% higher than in the poorest. The gap is substantially larger in more geographically-unequal countries. For instance, in Argentina’s Tierra del Fuego region, the average wages are close to three times those in Santiago del Estero. Ten percent of income inequality across individuals from 11 Latin American countries is explained by differences in average income across countries, and 7% by differences in average income across the main geographic regions within these countries. This is true despite the fact that mobility is not legally restricted within countries, unlike cross-border labor migration. While there is significant internal migration from low-opportunity to high-opportunity cities and regions, this appears to be insufficient to close the income per capita gap. 

Even though inequalities across large subnational regions in Latin America are considerable, they pale in comparison to inequalities within cities. For a closer look, Figure 1 decomposes Brazil’s total wage inequality in 2010 by geographic level. Even though there are large income disparities across the five macro-regions of the country and across its 27 states, average wage differences across these geographies only account for about 1% of national wage inequality. Differences across cities within the same state, in turn, account for an additional 2%. But average wage differences across neighborhoods within those cities explain about 9% of the country’s wage inequality. The distribution of within-city gaps to total labor income inequality in Brazil remains disproportionately high whether we consider only human capital—that is, the fraction of wage differences related to schooling or experience—or only the component unrelated to workers’ observable human capital. 

An even starker picture emerges when considering differences in cost of living across localities. The bottom panel of Figure 1 shows the same geographic decomposition of inequality but adjusting nominal wages by the average rent for each city, which is typically a good approximation of overall cost of living. High-wage cities, where a large fraction of the country’s poor settle in search of better opportunities, also tend to be expensive. Because housing costs represent a relatively larger share of the budget for low-income households, their real wages tend to be even lower than for individuals from high-income households. This holds despite the significant residential segregation generated as low-income households avoid the most expensive (and better connected) neighborhoods and, instead, settle in areas with more affordable housing. 

Figure 1. Geographic Decomposition of Monthly Wage Inequality in Brazil, 2010 

Source: Matías Busso and Julián Messina (eds). 2020. The Inequality Crisis: Latin America and the Caribbean at the Crossroads.  

Notes: IDB staff calculations using microdata from the population census in Brazil. Labor income is defined as the monthly wage in the main occupation. To adjust monthly wages for local cost of living and obtain a measure of real wage, the logarithm of the average housing rent in the city multiplied by 0.3 (the typical share of housing rents in the total income of renters) is subtracted from the logarithm of the individual monthly wage. In both the nominal and the rents-adjusted wage measures the top bar reports the labor income inequality of male and females between 16 and 65 years of age. The next two bars report the human capital and residual labor income inequality accounting for years of education and potential experience. See the report for further technical details on the decomposition. 

How Segregation Limits Access to Economic Opportunities 

Geographic segregation within cities, in turn, frequently acts as a barrier to economic opportunity. Notwithstanding centrally located exceptions such as Villa 31 in Buenos Aires and favela Rocinha in Rio de Janeiro, low-income families in Latin America are disproportionally more likely to live on the periphery of a city than high-income families. This makes access to centrally-located jobs more costly: Residents of peripheral housing projects in cities in Brazil, Colombia, and Mexico spend around twice as much money and three times more time commuting than those living close to the city center. This is in line with what researchers have found in the U.S., where workers are significantly less likely to apply to jobs that are more than ten miles from their residence and less likely to remain unemployed following a mass layoff event if they live in better-interconnected neighborhoods.  

Distance to job centers also plays a role in the persistently high levels of labor informality in Latin America. Figure 2 illustrates this using commuting time and informality data from Brazilian workers at different wage levels. The commuting patterns of formal and informal workers are strikingly different. Among workers from the formal sector, those with lower wages tend to commute more than those with higher wages. But among informal workers, the opposite is true: lower wages are associated with shorter commutes. This reflects the fact that low-wage informal jobs tend to be more dispersed across the geography of the city, and are therefore more accessible to workers living far from central formal job locations. Similar patterns are observed in Mexico and other countries in the region. 

Figure 2: Commuting Time and Informality by Labor-Income Level in Brazil, 2010 

Source: Matías Busso and Julián Messina (eds). 2020. The Inequality Crisis: Latin America and the Caribbean at the Crossroads.

Notes: IDB staff calculations using microdata from the population census in Brazil. The graph depicts the average commuting time of workers employed in the formal and informal sectors, along with the informality rates of each hourly wage percentile at the city level. The sample is composed of employed working-age individuals in 2010. Average commuting time is estimated based on midpoints of the time intervals available in the census. Informal workers are defined as those without a signed working card, excluding the self-employed. 

Spatial inequality within cities not only affects the economic opportunities of workers today but also limits opportunities for future generations. A series of recent studies from the U.S. have found that growing up in a neighborhood with low vs. high economic opportunities makes a big difference in the long run. Children who moved to higher-opportunity communities as part of a large government program showed significantly better outcomes as adults—including improved university enrollment, earnings, and single-parenthood rates. Other events leading families to relocate to better neighborhoods, such as public housing demolitions in Chicago and housing lotteries in the Netherlands, have also created better future outcomes for the children who relocated. 

Policies to Alleviate Segregation-Fueled Inequality 

Multiple policies addressing spatial inequalities have proved successful at improving their beneficiaries’ socio-economic well-being in the short run. For example, land titling programs have been linked to more years of schooling for children in Argentina and increases in adult labor supply in Peru. Slum upgrading programs have led to improved health outcomes in El Salvador, Mexico, and Uruguay. And social housing programs have helped reduce the frequently severe housing deficits of various countries in the region. However, these policies have not necessarily helped reduce inequalities in access to economic opportunities. In some of these programs, initially positive effects disappear over time. This happened in Brazil’s Favela-Bairro slums upgrading program, where infrastructure rapidly deteriorated and had fully reversed to its initial conditions 10 years later. In others, efforts to solve one problem can aggravate others. For example, social housing is frequently built on the periphery of cities, where more and cheaper land is available. But beneficiaries of those programs tend to lose access to jobs and the informal support of their social networks. 

Urban transportation projects appear to be particularly effective in tackling access to economic opportunities in segregated cities. Such projects have been linked to lower informality rates in Mexico and Brazil, better access to well-paying jobs in Colombia, and greater employment and earnings for women in Peru. The experience of TransMilenio in Bogota, however, shows that increased access to high-paying jobs for workers from peripheral neighborhoods does not necessarily translate into lower spatial inequality. The increased labor supply to these job centers kept wages from growing, and greater housing demand in neighborhoods with improved accessibility pushed prices up and eventually displaced lower-income households. This highlights the need for complementary policies that help preserve the initial inequality-reducing effects of transit and similar investments, such as zoning reforms that allow for greater housing supply in locations with better access to jobs. 

Recent research from the U.S. also suggests that low-cost interventions supporting families in their efforts to relocate to higher-opportunity neighborhoods may be effective. An experimental study randomly selected families from a pool of applicants to a housing voucher program in Seattle and provided them with support in the process of renting an apartment in high-opportunity neighborhoods—in addition to the monthly rental assistance all beneficiaries received. This support included customized housing search assistance, short-term financial assistance to cover application fees and security deposits, and an insurance fund for landlords covering potential property damages. As a result of the intervention, a significantly higher share of families chose high-opportunity neighborhoods (53% compared to 15% in the control group). One year later, these families were more likely to renew their leases and report higher satisfaction levels with their neighborhoods. Studies like this have yet to be conducted in Latin America and the Caribbean, but if similar interventions also prove effective here, they could help expand our policy toolkit to reduce the pervasive inequality of economic opportunities in the region. 


Filed Under: Social Issues, Social Issues Tagged With: #inequality

Juan Pablo Chauvin

Juan Pablo Chauvin is a Research Economist in the Research Department of the Inter-American Development Bank. He is also an associate at the Center for International Development at Harvard University. His research focuses on the economic development of cities and regions, with a focus on understanding the connections between labor markets, housing markets, and the industrial composition of places. In the past, he has been a consultant with the German Technical Cooperation Agency (GiZ), the World Bank, the OECD and the private sector; advising local and national governments in South America, Asia, the MENA region and South East Europe. He has also been an instructor at the Harvard Kennedy School and at Ecuadorian Universities. He holds a PhD in Public Policy and a Masters in Public Administration - International Development from Harvard, a Masters in Public Policy from FLACSO - Ecuador, and B.A.s in Sociology and Economics from Universidad San Francisco de Quito.

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Follow Us

Subscribe

Search

Related posts

  • Minimum Wages and the Fight Against Inequality
  • What Drives Rural Migration in Latin American and the Caribbean?
  • Understanding Social Unrest in Latin America
  • Did Changes Among Firms Reduce Wage Inequality in Latin America?
  • When Less Informality Means Less Inequality

About this blog

The blog of the IDB's Research Department shares ideas that matter on public policy and development in Latin America and the Caribbean.

Footer

Banco Interamericano de Desarrollo
facebook
twitter
youtube
youtube
youtube

    Blog posts written by Bank employees:

    Copyright © Inter-American Development Bank ("IDB"). This work is licensed under a Creative Commons IGO 3.0 Attribution-NonCommercial-NoDerivatives. (CC-IGO 3.0 BY-NC-ND) license and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed. Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC- IGO license. Note that link provided above includes additional terms and conditions of the license.


    For blogs written by external parties:

    For questions concerning copyright for authors that are not IADB employees please complete the contact form for this blog.

    The opinions expressed in this blog are those of the authors and do not necessarily reflect the views of the IDB, its Board of Directors, or the countries they represent.

    Attribution: in addition to giving attribution to the respective author and copyright owner, as appropriate, we would appreciate if you could include a link that remits back the IDB Blogs website.



    Privacy Policy

    Copyright © 2025 · Magazine Pro on Genesis Framework · WordPress · Log in

    Banco Interamericano de Desarrollo

    Aviso Legal

    Las opiniones expresadas en estos blogs son las de los autores y no necesariamente reflejan las opiniones del Banco Interamericano de Desarrollo, sus directivas, la Asamblea de Gobernadores o sus países miembros.

    facebook
    twitter
    youtube
    This site uses cookies to optimize functionality and give you the best possible experience. If you continue to navigate this website beyond this page, cookies will be placed on your browser.
    To learn more about cookies, click here
    X
    Manage consent

    Privacy Overview

    This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
    Necessary
    Always Enabled
    Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
    Non-necessary
    Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
    SAVE & ACCEPT