Identifying neighbourhood effects on social exclusion

Interest in the influence of the neighbourhood on the life-chances of individuals has been increasing. However, methodological problems in identifying causal models of these influences suggest the need for caution in such inference. This paper uses data from the British Household Panel Study linked to local area characteristics to explore how far there is evidence that outcomes associated with social exclusion (non-monetary poverty measures, measures of labour market engagement, entry into jobs and flows in and out of poverty) may be associated with neighbourhood characteristics. The paper finds significant associations even when controlling for a substantial range of individual characteristics. There is also limited evidence of a non-linear effect with worse outcomes in the very worst areas for at least one measure. Analysis of the spatial scale of associations suggests mixed results, with stronger associations at the most local scales for some but not all outcomes.