An Estimable General-Equilibrium Structural Model of Immigrants’ Neighborhood Sorting and Social Integration
Immigration is increasing fast but many immigrants live in segregated neigh-
borhoods without much social contact with natives. This paper denes social
integration as a state where nationally representative population is equally pre-
ferred as neighbors as a culturally similar group, and quantitatively assesses how
residential integration policy may improve social integration. For that aim, a
quantitative dynamic model of neighborhood sorting and immigrants' cultural
assimilation is developed and estimated from a micro panel dataset. The result
nds that the residential integration policy, in the form of location-based rent
subsidy, can induce further immigrants' cultural assimilation, reduce neighbor-
hood segregation, improve social integration but may harm social welfare. It is
better to restrict the subsidy to apply to non White British only and to keep the
subsidy factor at reasonable amount to minimize ineciency. It should be noted
that the welfare calculation may have underestimated the true welfare gain from
social integration, for example, due to better coordination in public expenditure,
less social conicts, and higher trusts.