| Residential segregation remains a lasting scar on many urban centers. Past research has connected segregation to lower educational attainment, higher crime, and worse economic outcomes in black communities. However, many analyses on the effects of segregation suffer from omitted variable bias. In this paper, I use an instrumental variable approach to test the causality of residential segregation on the use of alternative financial services (AFS) by urban black households using the configuration of railroad tracks to isolate exogenous variation in segregation for cities outside of former slave states. Estimates using this instrumental approach demonstrate that residential segregation increases the use of AFS by black households. |
