A number of theories have been developed to explain the effect neighborhoods exert on their inhabitants.  However, little research has been conducted to test these theories.  This article explores several different theories of neighborhood effects to determine which holds greater credence in explaining the likelihood of leaving the AFDC program.   I examine three theories
on the consequences of living in particular neighborhoods:  the social isolation theory, the relative deprivation theory, and the epidemic theory. Data for this research come from linking the Panel Study of Income Dynamics with the 1970 and 1980 Censuses.  The results indicate that neighborhood conditions have a strong effect on the likelihood of leaving AFDC, especially for exits due to marriage, and primarily for African Americans and high school dropouts.  These results are in accordance with the social isolation theory.  Some evidence was also found for the epidemic theory of neighborhoods, but little evidence was found for the relative deprivation theory.