ALICE Z. XU

segregation and the Spatial externalities of inequality: A theory of collateral Cooperation for public goods in cities

What accounts for differences in public goods provision across cities? Conventional wisdom claims that racial diversity undermines public goods provision. In this paper, I show that class differences, instead, can generate a form of collateral cooperation for public goods. I argue that segregation along class lines determines patterns in spatial externalities of inequality (e.g., crime, sewage pollution, sewage-based diseases) that spill over from impoverished areas to the middle-class. In integrated (de-segregated) cities, the scale of such externalities undermines the relative efficacy of small-scale private services (e.g., private guards, private water wells), thereby, inducing middle-class preferences for public goods that address externalities. Thus, while segregation polarizes preferences, integration --through the externalities mechanism-- enables preference convergence on the public provision of services in place of private options.

The argument draws on ethnographic observations and qualitative evidence from focus groups with middle-class neighborhood associations living in different layouts of segregation. To test the argument on a larger scale, I propose an instrument for segregation that interacts rural-to-urban predicted migration of the poor with the destination locality's “urban form.” Drawing on literature for causally estimating the Great Migration of blacks in the U.S. (Boustan 2010; Derenoncourt 2021), I develop a shift-share instrumental variable of predicted migration of the rural poor to cities in Brazil, using a series of rural “push factors,” such as the share of different cash crops, exogenous adoption of genetically modified soy and maize, incidence of drought, and the colonial legacies of land tenure patterns, and land reforms in the 1980’s and 1990’s. I then interact this shift-share measure with different spatial properties (e.g., “urban form,” rivers, hilliness, porosity) of destination neighborhoods and cities.

I combine this quasi-experimental strategy with neighborhood-level measures of class- and race-based segregation and an original face-to-face survey of preferences with over 4,000 households across 420 of the total 456 neighborhoods in the megacity of São Paulo, Brazil. The analysis introduces self-interest in reducing intergroup externalities as a new mechanism that drives cooperation for public goods even in racially diverse societies. Using embedded mechanism vignettes, I distinguish the mechanism from the conventional affective mechanisms –e.g., racial tolerance, social affinity– of intergroup contact.