A Heterogeneous Schelling Model for Wealth Disparity and its Effect on Segregation

Abstract

The Schelling model of segregation was introduced in economics to show how micro-motives can influence macro-behavior. Agents on a lattice have two colors and try to move to a different location if the number of their neighbors with a different color exceeds some threshold. Simulations reveal that even such mild local color preferences, or homophily, are sufficient to cause segregation. In this work, we propose a stochastic generalization of the Schelling model, based on both race and wealth, to understand how carefully architected placement of incentives, such as urban infrastructure, might affect segregation. In our model, each agent is assigned one of two colors along with a label, rich or poor. Further, we designate certain vertices on the lattice as "urban sites," providing civic infrastructure that most benefits the poorer population, thus incentivizing the occupation of such vertices by poor agents of either color. We look at the stationary distribution of a Markov process reflecting these preferences to understand the long-term effects. We prove that when incentives are large enough, we will have "urbanization of poverty," an observed effect whereby poor people tend to congregate on urban sites. Moreover, even when homophily preferences are very small, if the incentives are large and there is income inequality in the two-color classes, we can get racial segregation on urban sites but integration on non-urban sites. In contrast, we find overall mitigation of segregation when the urban sites are distributed throughout the lattice and the incentives for urban sites exceed the homophily biases. We prove that in this case, no matter how strong homophily preferences are, it will be exponentially unlikely that a configuration chosen from stationarity will have large, homogeneous clusters of agents of either color, suggesting we will have racial integration with high probability.