Pollution and Persistent Neighborhood Sorting

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it removed a random component (the location of social housing) which was bringing

neighborhoods closer to the city average.

The analysis of social housing in the data strongly supports this interpretation.

We use the Census in 1971, 1981, 1991, 2001 and 2011 and extract a LSOA-specific

share of households living in council housing. In order to study the realignment of social

housing with deprivation, we analyze the dynamics of social housing in formerly

polluted neighborhoods (see Table A6). While social housing was weakly correlated

with past pollution in 1971, it became increasingly present in formerly-polluted areas.

We find that social housing already appears more in formerly polluted areas

in 1981, two years after the deregulation, and it seems to reach a steady-state after

1991. In parallel, the home-ownership rate experiences a relative decrease in the

areas that were formerly affected by coal pollution. 35

While the original intent of Thatcher’s policy was to reduce inequality by providing

a route for working class households to step on the housing ladder, its consequence

appears to have been to lengthen the shadow of the Industrial Revolution

and set back the slow decay of neighborhood sorting. Our estimates suggest that

about 20% of the remaining gradient between polluted and spared neighborhoods

can be attributed to this reform.

Counterfactual experiments

We now provide two sets of counterfactual experiments

to understand the role of non-linearities in the dynamics of segregation.

In a first set of experiments, we use the baseline model and impose a hypothetical

construction boom in social housing in 1979, increasing the social housing stock

from 30% to 40% or 45%. As can be seen in columns 2 and 3 of Table X, even

a substantial investment in social housing would have been ineffective in reducing

significantly the persistence of segregation over the period.

With our estimated

neighborhood effects, social housing programs would appear to be a costly means

of reducing spatial inequalities. This result comes from the fact that there are not

many neighborhoods that are just above the tail threshold, and few of them would

revert back to the city average even with a more uniform distribution of low-skilled

workers, as implied by the social housing expansion. This intuition also holds in the

next set of experiments.

In a second set of experiments, we vary the initial pollution exposure for all neigh-

35 We also report the correlation between past pollution and the share of immigrants in Table

A6. We find that the share of immigrants steadily increases in formerly-polluted areas with a

sharp acceleration between the last two waves. In 1971, an additional standard deviation in past

pollution increases the share of immigrants by about 1 percentage point against 3.5 percentage

points in 2011 (about .25 of a standard deviation in both cases).

29

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