1 The Causal Question
Does the neighbourhood you grow up in—or live in as an adult—affect your economic and health outcomes? The question has occupied sociologists, economists, and urban planners for decades. The challenge is that neighbourhood sorting is profoundly endogenous: families with more resources live in better neighbourhoods, and families with fewer resources tend to live in areas with concentrated poverty, poor schools, and high crime. Separating the causal effect of neighbourhood quality from the characteristics of the families who choose to live there is one of the hardest identification problems in social science.
The Moving to Opportunity (MTO) experiment, launched by the U.S. Department of Housing and Urban Development in 1994, was designed to address exactly this problem. By randomly assigning housing vouchers that allowed families to move from high-poverty to lower-poverty neighbourhoods, MTO created the kind of variation that observational studies cannot.
2 The Experimental Design
MTO enrolled 4,604 low-income families living in public housing in five cities—Baltimore, Boston, Chicago, Los Angeles, and New York—between 1994 and 1998. Families were randomly assigned to one of three groups:
Experimental group: Received Section 8 housing vouchers that could be used only in census tracts with poverty rates below 10 per cent.
Section 8 comparison group: Received standard Section 8 vouchers with no geographic restrictions.
Control group: No vouchers; remained in public housing.
Randomisation was conducted within five strata (cities). The baseline sample was overwhelmingly African American and Hispanic, predominantly female-headed households with children, with high rates of welfare receipt and public housing residence.
2.1 Intention-to-Treat and LATE
Not all families in the experimental group actually used their vouchers to move. Approximately 48 per cent of experimental-group families moved to a low-poverty neighbourhood using the experimental voucher, while some control-group families moved to lower-poverty areas through their own means.
This introduces the standard noncompliance problem. Kling et al. [2007] estimate the intention-to-treat (ITT) effect—the average effect of being offered an experimental voucher—and then scale it by the first-stage compliance rate to recover the local average treatment effect (LATE) for compliers: families who moved to a low-poverty neighbourhood because of the experimental voucher and who would not have done so otherwise.
The first stage is:
and the LATE is estimated via two-stage least squares (2SLS)
where Zi is the randomly assigned experimental voucher offer, which serves as a valid instrument: it is randomly assigned (independence), strongly predictive of moving (relevance), and affects outcomes only through the relocation (exclusion restriction, justified by randomisation).
3 Data and Setting
The main evaluation data come from multiple follow-up surveys: a short-term follow-up survey approximately four years after random assignment (2001–2002) and a long-term follow-up survey ten to fifteen years after assignment (2008–2010). Outcomes include earnings, employment, receipt of public assistance, mental health, physical health (including obesity and diabetes), and risky behaviour.
Kling et al. [2007] also link administrative data on arrest records, earnings from Social Security Administration records, and educational outcomes from school records, providing more reliable measurement than self-reported surveys alone.
4 Key Findings
4.1 Short- and Medium-Term Results
The original evaluation by Kling et al. [2007] found strikingly heterogeneous effects by gender and outcome domain:
Behaviour and safety: Boys showed significant reductions in criminal behaviour and arrests in the short run, while girls showed improvements in mental health and reductions in distress.
Economic outcomes: Effects on earnings, employment, and public assistance receipt were small and statistically insignificant across most groups in the medium term. This null finding was widely reported and cited as evidence against strong neighbourhood effects on economic outcomes.
Physical health: Significant reductions in obesity and diabetes rates for adults who moved to low-poverty areas, particularly women. These effects emerged in the long-term follow-up and were not anticipated.
The mental health and physical health findings were important contributions to the literature on place-based effects on health, demonstrating that the benefits of neighbourhood upgrading are not primarily economic.
4.2 Long-Run Effects on Children: Chetty, Hendren, and Katz
The most influential reanalysis of MTO is Chetty et al. [2016], who link MTO records to federal tax returns to study long-run economic outcomes of the children who moved. Their key finding is a sharp interaction with the age at which the child moved.
Children who moved to lower-poverty areas before age 13 experienced large positive effects: higher earnings (approximately 31 per cent higher at age 26), higher rates of college attendance, and lower rates of single parenthood as adults. Children who moved after age 13 showed essentially no effects on adult earnings.
This age interaction, which was invisible in the original medium-term analysis (children were not yet old enough to have entered the labour market), provides strong evidence that neighbourhood quality has lasting effects on child development, but that the critical window closes in adolescence. The implication is important for policy: housing voucher programmes designed to help families with young children can have substantial long-run benefits, but similar programmes for families with teenage children may not.
5 Why Neighbourhood Effects? Exploring Mechanisms
The MTO findings are consistent with several mechanisms:
School quality. Moving to a lower-poverty area typically means access to better-resourced schools with higher test scores and more experienced teachers. Chetty et al. [2016] find that children who moved at young ages did show improvements in test scores, consistent with a schooling channel.
Social networks and peer effects. Concentrated poverty creates negative peer effects through direct social interactions, exposure to crime, and role models. Moving to a low-poverty area changes the social environment in ways that may reduce delinquency and improve aspirations.
Stress and physical environment. Exposure to neighbourhood violence, pollution, and overcrowding affects both physical and mental health. The significant reductions in obesity, diabetes, and psychological distress in MTO are consistent with this channel, though they do not distinguish between stress reduction and changes in diet and exercise habits that come with different neighbourhood environments.
Identifying the specific mechanism from the MTO design alone is difficult: the voucher shifted the entire neighbourhood environment, not just one dimension of it. Separate studies have tried to isolate individual channels (school quality via school choice lotteries, peer effects via classroom composition), but MTO itself remains a reduced-form estimate of the bundled effect of neighbourhood change.
6 Limitations
6.1 External Validity
MTO enrolled families in five large cities in the mid-1990s—a specific population at a specific time. The experimental-group families who complied were, by construction, families willing to move to lower-poverty areas. The LATE therefore applies to this particular complier group, which may differ systematically from families who would not accept a voucher even if offered.
Moreover, the housing voucher market in the 1990s differs from today. Tight housing markets in many cities now make it harder to use Section 8 vouchers in low-poverty areas even when offered. Replicating the MTO design today might identify a different LATE.
6.2 Equilibrium Effects
MTO moved a relatively small number of families in each city. If the programme were scaled to relocate large numbers of families from high- to low-poverty neighbourhoods, the recipient neighbourhoods themselves would change—schools would become more crowded, neighbourhood quality might decline, property values might shift. The LATE from a small experiment does not identify the equilibrium effect of a large-scale programme.
7 Conclusion
Moving to Opportunity remains one of the most important experiments in social science. It demonstrates, with the credibility of random assignment, that neighbourhood quality matters—for physical health, for mental wellbeing, and—with the long-run data—for children's economic futures, at least when the move happens before adolescence.
The design of MTO is a model for policy-relevant experimentation: it answered a sharp causal question (does moving to a lower-poverty area improve outcomes?) using a clean instrument (random voucher assignment), linked to administrative data for long-run follow-up, and was large enough to have statistical power across multiple outcomes and subgroups. The study's influence on housing policy—HUD's Choice Neighborhoods programme was designed in part to reflect MTO's lessons—demonstrates how rigorous causal research can translate into evidence-based policy.
References
- Chetty, R., Hendren, N., and Katz, L. F. The effects of exposure to better neighborhoods on children: New evidence from the Moving to Opportunity experiment. American Economic Review, 106(4):855–902, 2016.
- Kling, J. R., Liebman, J. B., and Katz, L. F. Experimental analysis of neighborhood effects. Econometrica, 75(1):83–119, 2007.
- Ludwig, J., Duncan, G. J., Gennetian, L. A., Katz, L. F., Kessler, R. C., Kling, J. R., and Sanbonmatsu, L. Long-term neighborhood effects on low-income families: Evidence from Moving to Opportunity. American Economic Review Papers and Proceedings, 103(3):226–231, 2013.
- Orr, L., Feins, J. D., Jacob, R., Beecroft, E., Sanbonmatsu, L., Katz, L. F., Liebman, J. B., and Kling, J. R. Moving to Opportunity: Interim Impacts Evaluation. U.S. Department of Housing and Urban Development, Washington, D.C., 2003.
- Sanbonmatsu, L., Kling, J. R., Duncan, G. J., Brooks-Gunn, J., Morris, P., Gennetian, L., Lindau, S. T., Whitaker, R. C., and McDade, T. W. Moving to Opportunity for Fair Housing Demonstration Program: Final Impacts Evaluation. U.S. Department of Housing and Urban Development, Washington, D.C., 2011.