In the recent edition of Yale Economic Review (link), Ed Glaeser, Matthew Kahn and Jordan Rappaport ponder one of the most difficult and challenging puzzles of urban economics:
"The 2000 U.S. Census shows that the average poverty rate in American cities drops signiﬁcantly, from about 20% to 7.5%, as you move from the CBD of a city to its suburbs. How can we tell that this connection between city residence and poverty comes from treatment – that is, cities make people poor – rather than from selection, where the poor disproportionately move to central cities? Here, the data support selection: although ghettos may exacerbate poverty, poor people move disproportionately to the center of the cit- ies, either when switching homes or moving to a new metropolitan area... Given the high proportion of the urban poor who are Black, one might think that inner-city poverty is really just another example of the segregation of minorities. However, [the authors] found that poor Whites have roughly the same central city - suburb poverty gap as Blacks, so it is unlikely that race plays an important role in the centralization of the poor."