How do credit standards on the mortgage market affect neighbourhood choice and the resulting level of urban segregation? To answer this question, we first develop a model of neighbourhood choice with credit constraints. The model shows that a relaxation of credit standards can either increase or...

The paper presents a dynamic model of neighborhood segregation where fee motivated real estate brokers match sellers optimally either to minority or to white buyers. In an initially all-white neighborhood, real estate brokers thus either keep the neighborhood in a steady-state white equilibrium...