We argue that market failure is a major and growing source of income inequality in the United States and in liberal market economies (LMEs) more generally. This market failure takes the form of occupational, educational, managerial, and capital rents that are generated by institutional barriers that restrict the free flow of capital or labor.

Residential segregation, by definition, leads to racial and socioeconomic disparities in neighborhood conditions. These disparities may in turn produce inequality in social and economic opportunities and outcomes. Because racial and socioeconomic segregation are not independent of one another, however, any analysis of their causes, patterns, and effects must rest on an understanding of the joint distribution of race/ethnicity and income among neighborhoods.

We combine two approaches to gauge the achievements of the Mexican-origin second generation: one the intergenerational progress between immigrant parents and children, the other the gap between the second generation and non-Latino whites. We measure advancement of the Mexican-origin second generation using a suite of census-derived outcomes applied to immigrant parents in 1980 and grown children in 2005, as observed in California and Texas. Patterns of second-generation upward mobility are similar in the two states, with important differences across outcome indicators.