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Estimating Equilibrium Models of Sorting across Locations

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Author Info
Patrick Bayer () (Economic Growth Center, Yale University)
Christopher Timmins

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Abstract

With the growing recognition of the role played by geography in all sorts of economic problems, there is strong interest in measuring the size and scope of local spillovers (i.e., simple anonymous agglomeration or congestion effects, or more complicated interactions between individuals or firms of specific types). It is well-understood, however, that such spillovers cannot be distinguished from unobservable local attributes using just the observed location decisions of individuals or firms. We propose an empirical strategy for recovering estimates of spillovers in the presence of unobserved local attributes for a broadly applicable class of equilibrium sorting models. This approach relies on an instrumental variables strategy derived from the internal logic of the sorting model itself. We show practically how the strategy is implemented, provide intuition for our instrumental variables, and discuss the role of effective choice-set variation in identifying the model, and carry-out a series of Monte Carlo experiments to demonstrate the instruments' performance in small samples.

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Publisher Info
Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 862.

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Length: 31 pages
Date of creation: Jul 2003
Date of revision:
Handle: RePEc:egc:wpaper:862

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Related research
Keywords: Local Spillovers; Location Choice; Economic Geography; Natural Advantage; Social Interactions; Network Effects; Endogenous Sorting; Discrete Choice Models; Agglomeration; Congestion;

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Find related papers by JEL classification:
H7 - Public Economics - - State and Local Government; Intergovernmental Relations
R0 - Urban, Rural, and Regional Economics - - General
R2 - Urban, Rural, and Regional Economics - - Household Analysis
R3 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location

References listed on IDEAS
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  7. Glaeser, Edward L & Sacerdote, Bruce & Scheinkman, Jose A, 1996. "Crime and Social Interactions," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 507-48, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kuminoff, Nicolai V. & Parmeter, Christopher F. & Pope, Jaren C., 2008. "Hedonic Price Functions: Guidance On Empirical Specification," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6555, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  2. Patrick Bayer & Stephen L. Ross, 2006. "Identifying Individual and Group Effects in the Presence of Sorting: A Neighborhood Effects Application," Working papers 2006-13, University of Connecticut, Department of Economics, revised Jan 2009. [Downloadable!]
    Other versions:
  3. Patrick Bayer & Christopher Timmins, 2003. "A Note on the Equilibrium Properties of Locational Sorting Models," Working Papers 861, Economic Growth Center, Yale University. [Downloadable!]
    Other versions:
  4. John Yinger, 2009. "Hedonic Markets and Explicit Demands: Bid-Function Envelopes for Public Services, Neighborhood Amenities, and Commuting Costs," Center for Policy Research Working Papers 114, Center for Policy Research, Maxwell School, Syracuse University. [Downloadable!]
  5. Christopher Timmins & Jennifer Murdock, 2006. "A Revealed Preference Approach to the Measurement of Congestion in Travel Cost Models," Working Papers tecipa-213, University of Toronto, Department of Economics. [Downloadable!]
  6. Ellickson, Paul & Misra, Sanjog, 2006. "Supermarket Pricing Strategies," Working Papers 06-02, Duke University, Department of Economics. [Downloadable!]
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