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On the Equivalence of Location Choice Models: Conditional Logit, Nested Logit and Poisson

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Author Info
Kurt Schmidheiny ()
Marius Brülhart ()

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Abstract

It is well understood that the two most popular empirical models of location choice - conditional logit and Poisson - return identical coefficient estimates when the regressors are not individual specific. We show that these two models differ starkly in terms of their implied predictions. The conditional logit model represents a zero-sum world, in which one region's gain is the other regions' loss. In contrast, the Poisson model implies a positive-sum economy, in which one region's gain is no other region's loss. We also show that all intermediate cases can be represented as a nested logit model with a single outside option. The nested logit turns out to be a linear combination of the conditional logit and Poisson models. Conditional logit and Poisson elasticities mark the polar cases and can therefore serve as boundary values in applied research.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2726.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2726

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Related research
Keywords: firm location; residential choice; conditional logit; nested logit; Poisson count model;

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Find related papers by JEL classification:
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects
R30 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - General

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  3. List, John A., 2001. "US county-level determinants of inbound FDI: evidence from a two-step modified count data model," International Journal of Industrial Organization, Elsevier, vol. 19(6), pages 953-973, May. [Downloadable!] (restricted)
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  6. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," NBER Working Papers 13236, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Schmidheiny, Kurt, 2006. "Income segregation and local progressive taxation: Empirical evidence from Switzerland," Journal of Public Economics, Elsevier, vol. 90(3), pages 429-458, February. [Downloadable!] (restricted)
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  10. Randy Becker & Vernon Henderson, 2000. "Effects of Air Quality Regulations on Polluting Industries," Journal of Political Economy, University of Chicago Press, vol. 108(2), pages 379-421, April. [Downloadable!] (restricted)
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  14. Holl, Adelheid, 2004. "Manufacturing location and impacts of road transport infrastructure: empirical evidence from Spain," Regional Science and Urban Economics, Elsevier, vol. 34(3), pages 341-363, May. [Downloadable!] (restricted)
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  16. Devereux, Michael P. & Griffith, Rachel & Simpson, Helen, 2007. "Firm location decisions, regional grants and agglomeration externalities," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 413-435, April. [Downloadable!] (restricted)
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  18. Ellickson, Bryan, 1981. "An alternative test of the hedonic theory of housing markets," Journal of Urban Economics, Elsevier, vol. 9(1), pages 56-79, January. [Downloadable!] (restricted)
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