Neighbourhood and Family Effects in Educational Progress

Abstract

Increasing inequality in Australian cities has created the need for a deeper understanding of the interaction between spatial segmentation and economic outcomes. This paper offers a preliminary economic analysis of Australian neighbourhood externalities in the context of increasing segmentation. Theoretically, neighbourhoods can affect youths economic out-comes through their effects on school quality, information flows, job networks, and demonstration effects. We utilise a new survey of 171 year 12 students in ten Melbourne high schools to examine the impact of individual, family, and neighbourhood characteristics on the decision to attend post-secondary education. It is shown that there exist neighbourhood externalities that affecthuman capital investment decisions. Finally, we offer some tentative implications for public policy.

JEL Classification: I21