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Unformatted text preview: N8. Segregation and Peer Group Effects 1 Introduction Environments where individuals care about neighbors Human capital spillovers (learn from neighbors). Classic peer group effect. So value having well educated neighbors. Scale economies and cultural differences leading to different tastes. When scale economies exist only certain kinds of goods are locally provided The goods that are offered are ones that appeal to the largest number of people So here have a benefit from neighbors with similar tastes Research by Waldfogel on radios, TV, and newspapers Networking benefits and immigrant ghettoes There is an aspect of housing that has a local public good component. ( Public good: means nonrivalrous and nonexcludable, local means this is true only nearby) Individuals get to look at neighbors houses all the time If one likes looking at big, well-cared for houses, then one values having affluent neighbors....
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