This paper is concerned with stability and change in neighborhoods in large metropolitan areas. During the past 20 years, economic inequality among neighborhoods has grown and may be a source of widening inequality in other realms as well (e.g., Reich 1991; Jargowsky 1996). Numerous studies have focused on the possible effects of residential neighborhoods on a variety of social and economic outcomes (e.g., Brewster 1994; Brooks-Gunn, Duncan, and Aber 1997). Likewise, persistent residential segregation among racial and ethnic groups is implicated in enduring racial and ethnic inequality (e.g., Massey and Denton 1993). Yet our understanding of the dynamics of how neighborhoods are formed and how they change remains limited. A long tradition of research has documented trends in economic and racial segregation in American cities, relying on cross section census data (e.g., Duncan and Duncan 1957, Taeuber and Taeuber, Frey and Farley 1996, Massey and Denton 1993, Jargowsky 1996; 1997). While descriptively valuable, these studies have not revealed the causal mechanisms behind neighborhood change. Inasmuch as change occurs through residential and socioeconomic mobility, a dynamic approach is required. More recently, others have examined survey data on residential preferences in an effort to understand the attitudinal underpinnings of residential segregation (e.g., Farley, Fielding, and Krysan 1997; Frey and Farley 1996; Charles 2000). The rationale for these studies is that segregation is, at root, the result of individual choices about where to live which are determined in part by individuals' attitudes and preferences about the characteristics of neighborhoods. Although these studies are informative, lacking a model of how individual attitudes lead to residential mobility and how mobility leads to neighborhood change, they provide limited insight into how change occurs. As Schelling (1971; 1972) observed 30 years ago, the dynamic links between individual preferences and residential segregation are by no means intuitive. Another promising line of research has been to use panel survey data on geographic mobility to measure mobility among neighborhoods of varying economic and racial composition (e.g., Gramlich, Laren, and Sealand 1992; Massey, Gross, and Shibuya 1993; Quillian 1999a; 1999b). While providing valuable information on patterns of neighborhood turnover, this work has not yet yielded plausible models of neighborhood dynamics. The neighborhood changes implied by the turnover rates estimated in these studies are unrealistic because they assume fixed mobility rates across neighborhood types. This assumption is unsatisfactory because it ignores a crucial feature of residential mobility, namely that changes in the characteristics of neighborhoods bring about changes in rates of movement in and out of these neighborhoods. In sum, the study of residential segregation and inequality remains a lively area of research in which many of the core analytic issues are unresolved.
