School quality and income segregation in London: Their response to macro news through house prices

Examining the effect of macroeconomic shocks on school quality and income segregation through the house pricing channel in London

The effects of monetary policy shocks on communities are well documented globally. This study looks to examine how macroeconomic shocks generate school quality and income segregation through the house pricing channel in London. With a focus on small areas with an average of approximately 1500 residents or 650 households, this research aims to analyse the redistributive impact of macroeconomic policies on London neighbourhoods. It hopes to shed light on how monetary policy contributes to drivers of inequality, segregation in housing, income and educational attainment.




The challenge

There has been a significant effect on housing prices in London as a result of macroeconomic shocks, such as Brexit or COVID-19. Changes in the composition of communities in London tend to occur when higher-income households move to specific neighbourhoods, as housing prices increase across the city, whilst lower-income households remain in poorer neighbourhoods. Income and school quality segregation is seen to be higher in poorer, ethnically diverse parts of London. Areas whereby more money can be spent on schooling leads to a greater quality of education for the neighbourhood, and thus the prospects for university, careers, and eventually future income. On the other hand, in areas with limited investment in education, there is notable decline in school performance, which only further exacerbates income segregation.

The intervention

This research aims to examine the 4835 Lower Layer Super Output Areas (LSOAs) in London to understand the extent of income and social segregation in the city. LSOAs are small geographic units used in the United Kingdom for statistical and administrative purposes. A local projection will be used to estimate the response of income segregation and school quality to macroeconomic shocks through housing prices. The robustness of these results will then be compared to an event-study approach, following Coglianese, Olsson, and Patterson, to analyse statistical similarities. The examination of income segregation and school quality characteristics throughout time will also be explored, as well as the ethnic composition of each LSOA to determine which ethnicities are more affected by macroeconomics shocks.

The potential impact

Identifying the drivers of inequality, segregation in income as well as housing and educational attainment in London neighbourhoods will offer insights into the functioning mechanisms on economic and social challenges of households in the capital city. With growing concern for the socioeconomic impact of recent macroeconomic shocks globally, there is great incentive for more attentive redistributive policies. This study has the potential to offer evidence to monetary and government authorities in favour of designing counteractive measures which can mitigate income and educational segregation across cities beyond London.