It is hard to overstate the importance of the new study on intergenerational racial disparities by Raj Chetty and his colleagues at the Equality of Opportunity Project. Simply put, it will change the way we think the world works.

Making good use of big data—de-identified longitudinal data from the U.S. Census and the IRS covering nearly the entire U.S. population from 1989 to 2015—the Chetty team finds that while the economic differences between whites and Asians and whites and Hispanics are converging over time, black children have earnings disparities that persist across generations. These gaps are explained almost entirely by large gaps in employment rates and wages between black and white men, even after controlling for parental income.

But the most surprising findings on the intergenerational gap between black and white men are found in their data on neighborhood effects.  Chetty’s previous research clearly demonstrates that rates of intergenerational mobility hinge on where children grow up. So a focus on the neighborhood a child grows up in is justified.  Therefore, in this new study, Chetty and his colleagues begin with the assumption that within metro areas, black and white children grow up in very different neighborhoods, which could account for their different outcomes.  To test this hypothesis, they compare the outcomes of children living in the same neighborhoods. They find that “the vast majority of the black-white gap persists even among boys growing up in families with comparable incomes in the same neighborhood; differences in neighborhood quality explain at most 25% of the black-white gap.”

But we should take a pause here. Most social scientists working in this field would say that compelling results showing neighborhoods accounting for up to a quarter of the black-white gap are in fact pretty important. While not one of their headline findings, Chetty and his colleagues show that neighborhoods have causal effects on racial disparities.

Read the full article about racial disparities in intergenerational mobility by William Julius Wilson at Brookings.