A Wealth and Status-Based Model of Residential Segregation

We extend the classic ‘‘Schelling model’’ (1971, 1978) to incorporate the wealth and status of agents and the desirability and affordability of residences. We analyze the effects of 1) the degree of the status-wealth correlation, and 2) the extent to which the wealth of residents shapes the affordability of residences, on levels of status and wealth segregation. Both factors generally exert a positive effect on both forms of segregation and interact to produce higher levels of segregation. The greater the correlation between status and wealth, the more the agents tend to segregate, either due to choice (for the wealthy and high status) or exclusion (for the poor and low status). We also find that housing price endogeneity is a precondition for status segregation.