An Equilibrium Analysis of the Effects of Neighborhood-Based Interventions on Children

This paper studies housing vouchers and urban redevelopment programs by incorporating neighborhood effects into a general equilibrium overlapping-generations model with endogenous location choice and child development. We calibrate the model using US data and estimate impacts of large-scale implementations of rental voucher and place-based subsidy policies. Our core finding is that vouchers generate long-run welfare gains by reducing inequality and generating skill improvements that offset higher taxation and other GE effects. Although vouchers lead to larger welfare gains on average, we find that place-based subsidies may be preferable in cities with constrained housing supply.