Date: Wed 12th/Nov/2025 at 11 AM EST 

Speaker: Aradhya Sood (U of Toronto) 

Paper Title: Segregation by Choice? Separating Preferences from Restrictions in Housing Markets (Joint with Milena Almagro (Booth & NBER) 

Abstract: How much of the observed segregation in neighborhoods is attributed to restrictions in the households’ choice sets, such as those imposed by discrimination, versus household preferences? To answer this question, we build a two-sided housing matching model that combines admission rules with traditional discrete choice models and allows for heterogeneous choice sets across demographic groups. To estimate the model, we use a novel dataset that links households and developments to the historic street grid of the 1940 Minneapolis metro area. Using an instrumental variable approach, we first document that having de jure discriminatory restrictions in neighborhoods reduces the likelihood of non-White and White Eastern and Southern European immigrant households by 12.6 and 13.9 percentage points, respectively. Next, we demonstrate—both theoretically and through Monte Carlo simulations—that traditional discrete choice models of neighborhood demand with mis-specified choice sets produce biased estimates of preferences for neighborhood characteristics if there is selection in the characteristics of admissible neighborhoods. We estimate our two-sided housing matching model, which allows for the joint estimation of different choice sets and preference parameters. Our results suggest that different demographic groups faced substantially different choice sets: on average, minority households are 8 ppt less likely to have a neighborhood in their choice set compared to non-minority households even after controlling for de jure forms of discrimination and rents. We simulate a counterfactual world in which we remove choice set restrictions as well as preferences for co-patrons and compare segregation patterns.Our findings suggest that three-quarters of the observed segregation in 1940 was driven by household preferences.

Registration: https://us06web.zoom.us/webinar/register/WN_AlYpIkJcTfyAZzE8Wxz-7A