Raj Chetty
Raj Chetty speaking at CityLab Paris. Melanie Leigh Wilbur

The American Dream now comes down to a coin toss, explains economist Raj Chetty.

In 1940, 92 percent of kids in America could grow up to do better than their parents, economically-speaking. Today, that’s just 50 percent. The American Dream, in other words, comes down to a coin toss. This issue, it turns out, really comes down to the neighborhood inequalities.

“While this is a daunting national trend, its roots are really at the local level,”says Raj Chetty, an economist at Stanford University, speaking at CityLab Paris, an annual convening of city leaders. And because each locale has its own constellation of problems dragging down its residents, solutions need to be data-driven and super specific.

In recent years, Chetty’s groundbreaking research has shown just how much the ZIP code a child lives in can define his or her future. The longer a child lives in a neighborhood of opportunity—a racially integrated area with a large middle class, with stronger family structures, more social capital, and better schools—the more likely to they are to improve their standard of living as adults.

But upward mobility varies drastically across U.S. cities, and even within a city, odds can differ vastly from one block to the next. “There are some places that are lands of opportunity,” Chetty says, “and other places that can be better described as lands of chronic poverty.”

What Seattle needs, therefore, is very different from what Atlanta needs. In both places, Chetty has measured what he calls the “price of opportunity”—how expensive it is to move from a neighborhood where chances of succeeding are low to one where they are higher. Turns out: In Seattle, neighborhoods of comparable affordability can offer very different levels of opportunity. So, in this case, it makes sense to promote the use of housing vouchers as a policy lever to help people move to “opportunity bargain” areas.

In Atlanta, that approach doesn’t work because opportunity neighborhoods tend to be very expensive. So the next step is to hone in on exactly when the disparities between kids emerge and target place-based interventions to that age-group tailored to each neighborhood. Prenatal care, kindergarten preparedness, college counseling—all become “particular treatments for each patient on the basis of precise diagnosis,” Chetty says.

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