Beyond preference: Modelling segregation under regulation

Segregation models often focus on private racial preference but overlook the institutional context. This paper represents an effort to move beyond the preference centricity. In this paper, an ideal Pigovian regulatory intervention is emulated and added into Schelling's (1971) classic spatial proximity model of racial segregation, with an aim to preserve collective welfare against the negative externalities induced by the changing local racial compositions after individual relocations. A key discovery from a large number of cellular automata is that the Pigovian regulation tends to result in less segregated but also less efficient (in terms of aggregate utility) residential patterns than laissez faire. This finding, albeit from a highly stylized model, bears intellectual relations to an important practical question: What are the potential racial effects of Pigovian local planning interventions, such as financially motivated anti-density zoning or the collection of a development impact fee? On top of its modest policy implications, this paper demonstrates a bottom-up computational modelling approach to reconcile the preference-based and institution-orientated academic perspectives regarding racial residential segregation.