This paper introduces a mechanism that, contrary to standard reasoning, may lead segregation in U.S. cities to increase as racial inequality narrows. Speci fically, when the proportion of highly educated blacks rises holding white education fi xed, new middle-class black neighborhoods can...

We provide evidence that graduating from college plays a direct role in revealing ability to the labor market. Using the NLSY79, our results suggest that ability is observed nearly perfectly for college graduates. In contrast, returns to AFQT for high school graduates are initially very close to...

"In traditional signaling models, education provides a way for individuals to sort themselves by ability. Employers in turn use education to statistically discriminate, paying wages that reflect the average productivity of workers with the same given level of education. In this paper, we provide...