The paper specifies a simultaneous-equation model of metropolitan racial residential segregation and economic disparities. The extent and centralized pattern of SMSA segregation and black-white median income ratios and occupational dissimilarity indices comprise endogenous variables in a four-equation model. Characteristics of the SMSA's population, industrial structure, and labor and housing markets serve as exogenous variables. Parameters are estimated using two-stage least-squares techniques on data for 40 SMSAs sampled by HUD's 1977 Housing Market Practices Survey. Results strongly support the simultaneous-equation specification and indicate the likely severe bias of previous studies. In general, segregation appeared to significantly abet economic disparities, although greater centralization of a larger black community was associated with greater diversity of black occupations. Conversely, income disparities were positively correlated with a more centralized pattern of black residences, and occupational disparities were positively correlated with the extent of segregation.
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