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Harvard Economist Raj Chetty: Improve Economic Opportunity Locally Through Investments in Education

By Crain’s Content Studio

Key Takeaways:

  • Professor Chetty and his colleagues use modern big data tools to examine ways to boost upward mobility.
  • Looking at improving economic outcomes should start at a hyperlocal level, as there are drastic local differences in rates of upward mobility.
  • Race matters when it comes to upward mobility – the rates are generally lower for Black Americans versus white Americans.
  • Local interventions, especially related to providing supportive housing and resources makes a difference in upward mobility outcomes.
  • In a pilot study based in Seattle, Chetty and his colleagues found that connecting families who received housing vouchers with additional support services made it more likely that these families would move to a higher-opportunity area than those who did not receive additional support services.

Professor Raj Chetty opened the second day of mainstage programming at the 2021 Mackinac Policy Conference on Wednesday, Sept. 22 with research and insights on how to improve economic opportunity on a national and local level. Chetty is the William A. Ackerman professor of public economics at Harvard University.

“I want to start at a much bigger picture level by talking about the American dream, which is, of course, a multifaceted, complex concept,” Chetty said. He described it as “the idea that we aspire to be a country where, through hard work, any child has the chance to rise up in the income distribution, relative to their parents.”

Chetty pointed to a fading of the American Dream over time, noting that in a study he completed several years ago, 92% of children born in 1940 went on to earn more than their parents, whereas children born in the 1980s have only a 50-50 chance as to whether they’ll be more financially successful than their parents.

Chetty and his colleagues are now focused on the big question of what is driving that fading of the American Dream, and how can we restore it through changes in policy in Detroit and throughout the U.S.?

“Our angle on it is to use the tools of modern big data to study how to increase upward mobility,” Chetty said.

Through extensive research, Chetty says that the path toward economic opportunity starts at the hyperlocal level. He points to solutions such as reducing segregation, making place-based investments that bring opportunity and ensuring that colleges and universities are better equipped to meet the needs of low-income students.

While the pandemic has led to even more extreme gaps in educational achievement, Chetty said now is the time to make effective policy changes.

“Similar to how in the Great Depression, there were fundamental changes in U.S. policy that led to decades of inclusive growth afterward … I think we’re well poised to do that at present.”

This article was written by Crain’s Content Studio for the 2021 Mackinac Policy Conference.