Income Inequality, Residential Segregation, and Intergenerational Economic Mobility: Evidence From U.S. Tax Records, 1996-2018

This study investigates the relationship between local income inequality, residential segregation, and intergenerational economic mobility in U.S. commuting zones within the context of labor economics and economic sociology, an area of growing scientific importance given its implications for place-based antipoverty policy design, housing desegregation strategies, and early childhood intervention targeting. Using rank-rank intergenerational mobility estimation from linked parent-child IRS tax record panel data with commuting zone fixed effects, we examine residential segregation concentrating high-poverty schools and labor market networks, limiting upward mobility pathways for low-income children in 3.2 million tax-filing households from 741 commuting zones followed from 1996-2018 drawn from 741 U.S. commuting zones spanning all 50 states plus Washington DC. Results indicate that a one-unit increase in Gini coefficient is associated with a 0.12 reduction in rank-rank mobility slope, with residential segregation accounting for 38% of the inequality-mobility relationship in mediation analysis (p < 0.001), with 38% of inequality-mobility association mediated by residential segregation as the primary quantitative benchmark. Concordance between primary and confirmatory measurement approaches exceeded 93%, validating the analytical framework. These findings contribute empirically to labor economics and economic sociology and carry actionable implications for the design of programs and policies targeting place-based antipoverty policy design, housing desegregation strategies, and early childhood intervention targeting.