American cities, after decades of decline, are regaining affluent and highly educated residents. This dissertation examines these trends at the neighborhood level and documents that resurgence, in the form of gentrification, is prevalent in cities, specifically in downtown neighborhoods near employment centers. My results indicate a fundamental shift from city center decline to growth around 1990, which motivates my focus on exploring two novel causes of gentrification.
In Chapter 1, I demonstrate that declining gender wage gaps since 1980, and the associated influence on female labor force participation and marriage decisions, are one cause of gentrification. As women increasingly invest in human capital and delay marriage they are more likely to move to, and remain in, urban neighborhoods close to employments areas, allowing these neighborhoods to develop high-quality amenities which facilitate further redevelopment. I document that as the gender wage gap declines so too does the probability of marriage and that, in turn, marital status factors heavily into family residential location decisions, with singles systematically opting to live closer to employment centers. Overall, I find that falling gender wage gaps had a significant but heterogeneous effect on neighborhood prosperity that benefited those neighborhoods nearest the city center. Specifically, I find that the drop in the gender wage gap from 1970 to 2010 can explain 40\% of the average national change in city center income over the same period. One potential factor that influenced the decline in gender wage gaps was a shift in the labor market returns to social skills, a shift that disproportionately aligned with female skill endowments relative to men. I return to this topic in Chapter 3.
In Chapter 2, I document the role that condominium development played in gentrification. The advent of condominiums offered high income individuals a legal form to own, rather than rent, high-density real estate close to employment centers. I use condominium conversion ordinances at the municipal level as a source of exogenous variation in condominium development. Using a differences-in-differences set-up, I find that the passage of ordinances limited the development of condominiums in cities subject to regulations that made it more costly to convert housing stock to condominiums. With this approach, I am able to establish a causal effect of condominium development on certain gentrification outcomes, including income and education.
In Chapter 3, I introduce a framework for estimating the labor market returns to social capital and explore related mechanisms. I find that the wage return to increasing one's high school network by approximately five friends is equivalent to the return to one additional year of schooling. To better understand the mechanisms that underlie this return, I introduce a game theory model wherein students optimize their time allocation between studying and socializing. Empirical results are consistent with model predictions, specifically in that students make social investments in activities, such as drinking alcohol, that generate friendships at the expense of academic achievement. As an application, I demonstrate baseline estimates that suggest there are positive returns to attending a so-called "party" school for college.