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The Moving to Opportunity (MTO) program implemented in the ’90s offered vouchers to low-income people living in high-poverty neighborhoods to move to richer neighborhoods. We use a dynamic general equilibrium model with residential choice and endogenous local spillovers to explore the quantitative effects of scaling up this policy and compare them to those of alternative neighborhood-specific policies. We find that the MTO program generates large income gains for the children of the recipient families. However, as the scale of the policy increases, general equilibrium effects both dampen these gains and impose large welfare losses for the non-recipient families. An alternative place-based policy that invests resources in local institutions, such as public schools, is less effective on impact, but realizes larger welfare gains over time, while also reducing both inequality and residential segregation.
