Segregation and Life Satisfaction

Our aim is to cast light on socioeconomic residential segregation effects on life satisfaction (LS). In order to test our hypothesis, we use survey data from Chile (Casen) for the years 2011 and 2013. We use the Duncan Index to measure segregation based on income at the municipality level for 324 municipalities. LS is obtained from the CASEN survey, which considers a question about self-reported well-being. Segregation’s impact upon LS is not clear at first glance. On one hand, there is evidence telling that segregation’s consequences are negative due to the spatial concentration of poverty and all the woes related to it. On the other hand, segregation would have positive effects because people may feel stress, unhappiness, and alienation when comparing themselves to better-off households. Additionally, there is previous evidence regarding the fact that people prefer to neighbor people of a similar socioeconomic background. Hence, an empirical test is needed. In order to implement it, we should deal with two problems, first, the survey limited statistical significance at the municipal level, hence we use the small area estimation (SAE) methodology to improve the estimations’ statistic properties, and second, the double causality between segregation and LS; to deal with the latter, we include lagged LS as a regressor. Our findings indicate that socioeconomic segregation has a positive effect on LS. This result is robust to different econometric specifications.