Income sorting: Measurement and decomposition

This paper addresses the measurement of income sorting across jurisdictions and the attribution of sorting to governmental differences. Measurement error and differences between transitory and permanent income bias variance decompositions' sorting estimates downward by approximately 50 percent. Adjusted US Census data show an average across Metropolitan Areas (MSAs) of approximately eight percent of income variation explained by differences across jurisdictions; approximately 28 percent in the Boston MSA. There, the role of politics in the sorting process seems small because boundaries between adjacent jurisdictions explain only approximately two percent of income variation.