concentration in poor neighborhoods, where they may represent as much as two thirds of housing
units, allow us to use public housing accommodation as a powerful determinant of location in
these neighborhoods. Criteria used in the public housing assignment process do not only rely on
the household’s economic situation, but depends also strongly on its demographic characteristics
such as age of the spouse and composition. Those demographic criteria are used as exclusion
restrictions in our system. In order to deal with the endogeneity of tenure choice, we add to our
system a third probit equation of public housing accommodation. This strategy, that involves
considering both public housing tenants and other households, also allows us to test for poten-
tial damaging effects of public housing accommodation, which is known to reduce residential
mobility and may thus affect job search. Estimations of this simultaneous probit model are
performed on a sample of approximately 10,000 individuals, taken from the 1999 French Census
and representing about five percents of households’ heads participating in the labor-market in
Lyon, the third largest city in France.
The main contributions of this work are the treatment of neighborhood choice in a non-
linear model of neighborhood effects on unemployment and the test for a negative influence of
public housing accommodation on unemployment on European data. Our results show that
public housing does not have any detrimental effect on unemployment, thus complementing
Jacob’s (2004) results concerning public housing and educational outcomes in the U.S. Further,
living in a neighborhood displaying a combination of low-skilled population, high unemployment
rate, and high proportion of foreigners increases the unemployment probability significantly. Our
estimate is comparable to that Topa (2001) obtained for Chicago. These results also shed light
on the potential effects of a recent French law aimed at achieving a more even spatial distribution
of public housing units within cities. Indeed, our model enables us to simulate the impact of a
change in the location of public housing tenants on unemployment.
The paper is structured as follows. Section 2 presents our identification strategy, the
empirical model and the econometric method. Section 3 describes the database and gives a brief
description of the spatial structure of Lyon. Section 4 presents the main results and section 5
concludes.