Neighbourhood Effects in Large and Smal Neighbourhoods

Neighbourhood Effects in Large and Smal Neighbourhoods
Henry G. Overman
[Paper Žrst received, November 1999; in Ž nal form, March 2001]
Summary. This paper uses data from a sample of Australian teenagers to test for neighbour- hood effects on school dropout rates. The data alow us to test for neighbourhood effects at two different spatial scales. We Ž nd that the educational composition of the larger neighbourhood can in uence the dropout rate. We argue that this is most likely to re ect the structure of local labour market demand. We also Ž nd that the low socioeconomic status of the immediate neighbourhood has an adverse impact on dropout rate. This suggests that government policy may need to consider the socioeconomic composition of quite smal geographical areas if it considers interfering in the market to create greater income-mixing within neighbourhoods.

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