Why are the social problems of ghettos so bad? This article proposes that ghettos are communities that have experienced epidemics of social problems. One important implication of this theory is that the pattern of neighborhood effects on social problems should be nonlinear in large cities. As neighborhood quality decreases, there should be a sharp increase in the probability that an individual will develop a social problem. The jump should occur somewhere near the bottom of the distribution of neighborhood quality. This hypothesis is tested by analyzing the pattern of neighborhood effects on dropping out and teenage childbearing. The analysis strongly supports the hypothesis, with exceptions for certain subgroups. Even after controlling for individual characteristics, black and white adolescents are exposed to sharp increases in the risk of dropping out and having a child in the worst neighborhoods in large cities.
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