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While research has long theorized how residential racial segregation increases crime rates, a burgeoning literature has begun to examine crime and victimization as a source of residential mobility. Building on this line of research, I ask whether the prevalence of racially stigmatized and sympathized drugs shapes urban landscape. In particular, by exploiting time variation in coca production in major cocaine smuggling countries and cross-sectional variation in the cocaine smuggling routes in the U.S, I study the effects of the crack epidemic on residential racial segregation and white suburbanization in major U.S. cities. The epidemic may have affected segregation through three channels: (i) increasing whites’ prejudice toward blacks and Hispanics, given that the epidemic disproportionally affected them; (ii) lowering the future expectation of neighborhood quality, which then may have discouraged whites to moved in crack-damaged cities; and (iii) differentially affecting the ability for residential mobility, due to the difference in socioeconomic resources by race and ethnicity. Overall, this study helps to understand how racially stigmatized crimes reproduce racial inequality.