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Despite the influential work of Cutler and Glaeser (QJE, 1997), whether ghettos
are good or bad is still an open and debatable question. In this paper,
we provide evidence that, in South Africa, ghettos can be good or bad for
income depending on the studied quantile of the income distribution. Segregation tends to be beneficial for rich Whites while it is detrimental for
poor Blacks. Even when we find it to be also detrimental for Whites, it
is still more detrimental for Blacks. We further show that the multitude
of results fuelling this debate can come from misspecification issues and selecting the appropriate sample for the analysis. Finally, we quantify the
importance of segregation in the income gap between Blacks and Whites in
the post-Apartheid South Africa. We find that segregation can account for
up to 40 percent of the income gap at the median. It is even often a larger
contribution than education all across the income distribution.
