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Working Paper, No. 2017-02, 2017
Neighborhood Choices, Neighborhood Effects and Housing Vouchers (Revised July 2017)

We study how households choose neighborhoods, how neighborhoods affect child ability, and how housing vouchers influence neighborhood choices and child outcomes. We use two new panel data sets with tract-level detail for Los Angeles County to estimate a dynamic model of optimal location choice for renting households and, separately, the impact of living in a given tract on child test scores, a proxy for child ability. We simulate optimal location choices and the resulting changes in child ability of the poorest households in our sample under various housing-voucher policies that incentivize households to relocate to tracts that beneficially impact child ability. When vouchers are restricted such that they can only be applied to units in the top 5% of tracts based on tract impact on child ability, we compute an “optimal" voucher amount of $300 per month where the benefits to child ability net of voucher costs are maximized. We also compute a “break-even" voucher amount of $700 per month in which benefits are equal to costs.

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