Neighborhood impacts on human capital accumulation of adolescents and young adults in Montevideo

This paper explores the causal impacts of the neighborhood of residence on education outcomes for adolescents and young adults (15–24 years old) in Montevideo. We analyze educational trends from 1992 to 2019, revealing persistence and pronounced geographical segmentation between the affluent southeast and the more disadvantaged outskirts of the city. We model the neighborhood effects through the neighborhood average education level. We estimate their causal impact using a control function for addressing selection on unobservables. We find statistically significant results of a relatively large magnitude. We address heterogeneity of the effects and find that neighborhood effects are stronger for boys than girls, that family income buffers neighborhood effects, and that household education level and neighborhood education level are complements.