A few weeks ago, an elected representative of the Moradabad municipality in Uttar Pradesh provided a telling example of bias and segregation in Indian society when he managed to evict a Muslim family from a predominantly Hindu locality.

When the state police tried to intervene, the councillor from the Bharatiya Janata Party (BJP) told the policemen that “whatever be the case, Muslims can’t stay here. Brahmin families live in the locality and under no circumstances we will allow a Muslim family to live in between them".

With segregation, with the isolation of the injured and the robbed, comes the concentration of disadvantage, wrote Ta-Nahesi Coates in his famous essay on the modern history of racism in the US.

Segregation has always been part of Indian life through the ages. Urbanization provided, and perhaps still provides, a great hope that we will be able to transcend the narrow walls of caste, religion and language.

B.R. Ambedkar epitomized that faith when he exhorted Dalits to flee the countryside and move to the cities to escape the shackles of caste. “The love of the intellectual Indian for the village community is of course infinite, if not pathetic," wrote Ambedkar. “What is a village but a sink of localism, a den of ignorance, narrow-mindedness and communalism?"

But as recent research by Pranav Sidhwani of the Delhi-based Centre for Policy Research shows, Dalits remain segregated, and have unequal access to public goods such as tap water in some of the country’s biggest cities even in 21st-century India. Urbanization has not been as much of an equalizing force as Ambedkar had hoped it would be.

Sidhwani’s research is among the few empirical analyses of caste-based segregation in India. Surinder Mehta, a sociologist at the University of Massachusetts, Amherst, was the first to quantify the extent of segregation in an Indian city. Mehta used ward-level data from 1937 till 1964 for Pune and showed that residential segregation rose during the period.

Caste-based segregation persists despite rapid growth over the past few decades. Sidhwani’s research paper compiles newly released ward-level data on public, private and luxury goods for 10 cities—Mumbai, Delhi, Kolkata, Bengaluru, Ahmedabad, Chennai, Hyderabad, Surat, Pune and Jaipur—and computes the correlation between caste-based segregation and access to the following goods: water, toilets and two-wheelers.

Sidhwani measures segregation using an index called dissimilarity index, which captures the distribution of a particular caste within a ward vis-à-vis the caste population in the entire city. Cities not only exhibit a great degree of residential segregation but also seem to offer fewer amenities in localities where the proportion of scheduled castes and scheduled tribes is high.

The most influential economic explanation of segregation comes from the work of Nobel-winning economist Thomas C. Schelling. In a widely cited 1971 research paper, Schelling put forth a simple explanation as to why segregation exists. He showed that strong segregation at the level of the city as a whole can arise even when individuals have only a weak preference in favour of being surrounded by people of their own ethnic group. Imagine a Muslim tenant moving into an all-Hindu locality. The most rabid of the Muslim-haters among Hindus will relocate to some other locality. As Muslims keep streaming into the neighbourhood, all Hindus, beyond a threshold, what Schelling calls a tipping point, will leave the area completely. Very weak individual preferences can translate into pretty strong ones at the city level, Schelling’s model predicts.

What are the consequences of segregation? Three years before Schelling wrote his model of segregation, pioneering urban economist John F. Kain argued that segregation could lead to poor outcomes for the blacks. In an influential 1968 research paper, Kain detailed how segregation leads to a lower level of employment opportunities for the disadvantaged groups. Kain argued that since job and housing decisions are made simultaneously, housing discrimination is likely to add to the cost of travel, making it difficult for disadvantaged groups to get jobs in the prime locations of a city.

Kain pointed out that housing discrimination in US cities raises travelling costs for blacks, and makes it difficult for them to find jobs. Since most employers are whites and the jobs are located in the vicinity of white neighbourhoods, distance limits the labour market opportunities for the blacks. The implications of the model are pretty clear: segregation is virtually a tax on minorities.

Do Kain’s and Schelling’s models pass the test of data? Let’s look at the Kain hypothesis first. By and large, Kain’s predictions have been accurate. Economists have found enough evidence from the US to show that segregation does harm to poorer groups. In a highly cited research paper, Harvard University economists David Cutler and Edward Glaeser quantified the negative effects of segregation on schooling and employment of blacks in the US. They found that blacks who stayed in a relatively mixed neighbourhood did better than those who lived in an all-black locality.

Segregation affects social groups differentially. Glaeser, Cutler and Jacob Vigdor of the University of Washington in another paper find that segregation harms groups which have a lower level of human capital more.

Schelling’s model is attractive but it turns out from new studies that there’s little evidence to support the hypothesis. In 2009, New York University economist William Easterly put this theory to test using 30 years of US census data. He found no evidence of tipping point or flight of whites. Easterly suggested something more sinister—that whites indeed had a propensity to segregate rather than a tipping point forcing them to leave the neighbourhood.

A new National Bureau of Economic Research (NBER) working paper by economists Trevor Logan of the Ohio State University and John Parman of the College of William and Mary confirms some of Easterly’s results. While most of the existing evidence is based on the aggregate data on racial composition, this paper uses data on actual neighbours of a particular household. It presents a rather gloomy picture—segregation calculated using their measure is much more prominent than what previous results showed.

While blacks and whites resided within the same ward, it was unlikely that either had a next-door neighbour from the other race. Overall, within the US, segregation rose by 100% between 1880 and 1940, and there was little difference between segregation in villages and in cities, the paper finds. The authors remark that “the dramatic increase in segregation in the twentieth century was not driven by urbanization, black migratory patterns, or white flight to suburban areas, but rather resulted from a national increase in racial sorting at the household level".

The evidence from the theory as well as empiricals for the US is pretty clear: segregation is an outcome of preference to stay with people from the same ethnic group and, more often than not, segregation leads to a poverty trap for the minorities.

There are lessons for India as well. To repeat a cliché, India is increasingly moving towards its cities. It is important that policies are put in place so that cities don’t turn out to be “cesspools of narrow-mindedness" just like villages. Excluding Dalits or Muslims from the housing market is bad economics in the sense that it distorts supply and demand. It also increases the odds of conflict, which is clearly inimical to long-run growth and development.

One effective policy response could be to overhaul poor laws that perpetuate segregation and limit residential mobility. For instance, Gujarat’s Disturbed Areas Act, introduced in 1991 to prevent Hindus and Muslims selling houses in riot-prone areas, has been misused to keep Muslims out of certain pockets of cities. Better laws need to be put in place to deter housing discrimination. Legal scholars Alok Prasanna Kumar and Srijoni Sen suggest that the government can begin with an experiment: bring a law that lays clear rules for non-discriminatory housing access for its affordable housing scheme.

Segregation, to be very clear, is not an outcome of poverty but rather causes it. It’s time we have a clear debate on policies and laws that could lead to an integrated society.

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