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Mind the gap: explaining the London effect with sorting

Stephen Machin and Jack Blundell, LSE, and Brian Bell, King's College London

(Project no. 1008709)

Since the early 1990s, London has changed dramatically across many dimensions, both relative to its former self and to the rest of the United Kingdom. A substantial proportion of the change in school performance, health and crime rates can be explained, statistically speaking, by changes in the demographics of London. In this project, we first draw on a large selection of datasets on regional outcomes in the UK to build a picture of how London has changed. We then observe which measures are correlated with demographic changes and test the extent to which demographic changes can explain the difference between changes in London and the rest of the UK. To understand whether this effect is causal rather than purely descriptive, we next plan to estimate a full sorting model. This will allow us to understand fully the impact that changes in demographics have had on London relative to the rest of the UK. Understanding how and why London has changed is key to the policy debate over regional inequality in the UK and will be relevant for years to come, as London and other cities undergoe further shifts in demographics. This is particularly true given that London is being held internationally as an example of how good policy can improve a city's standing, with less weight put on the vast demographic change the city has experienced.