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A cross-sectional simultaneous equation model is specified wherein metropolitan-wide levels of racial residential segregation, housing discrimination, interracial occupational dissimilarities, and black/white mean incomes are endogenous. Parameters are estimated via two-stage least-squares for a 1980 sample of 40 SMSAs. Results support the hypothesis of mutually causal interrelationships among the aforementioned urban racial phenomena. Simulations suggest that narrowing occupational differentials played a major role in reducing interracial income differences and segregation during the 1970s. Hypothetical policy simulations indicate the efficacy of an economic opportunity strategy for indirectly promoting desegregation, although direct approaches such as fair housing and dispersal of moderate-cost housing are also predicted to yield large reductions in segregation.
Galster et al. (Thu,) studied this question.