IDEAS home Printed from https://ideas.repec.org/a/eee/jeeman/v74y2015icp71-93.html
   My bibliography  Save this article

An integrated model of regional and local residential sorting with application to air quality

Author

Listed:
  • Hamilton, Timothy L.
  • Phaneuf, Daniel J.

Abstract

We examine the interconnectedness of demand for regionally and locally varying public goods using a residential sorting model. We propose a version of the model that describes household choices at the city (MSA) level and, conditional on city, the neighborhood (census tract) level. We use a two-stage budgeting argument to develop an empirically feasible sorting model that allows us to estimate preferences for regionally varying air quality while accounting for sorting at the local level. Our conceptual and empirical approach nests previous sorting models as special cases, allowing us to assess the importance of accounting for multiple spatial scales in our predictions for the cost of air pollution. Furthermore our preferred specification connects the city and neighborhood sorting margins to the upper and lower elements of a nested logit model, thereby establishing a useful correspondence between two stage budgeting and nested logit estimation. Empirically we find that estimates from a conventional model of sorting across MSAs imply a smaller marginal willingness to pay for air quality than estimates from our proposed model. We discuss how the difference is attributable in part to the omitted variable problems arising when tract level sorting is ignored.

Suggested Citation

  • Hamilton, Timothy L. & Phaneuf, Daniel J., 2015. "An integrated model of regional and local residential sorting with application to air quality," Journal of Environmental Economics and Management, Elsevier, vol. 74(C), pages 71-93.
  • Handle: RePEc:eee:jeeman:v:74:y:2015:i:c:p:71-93
    DOI: 10.1016/j.jeem.2015.08.001
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0095069615000583
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bowland, Bradley J. & Beghin, John C., 2001. "Robust estimates of value of a statistical life for developing economies," Journal of Policy Modeling, Elsevier, vol. 23(4), pages 385-396, May.
    2. Bayer, Patrick & McMillan, Robert, 2012. "Tiebout sorting and neighborhood stratification," Journal of Public Economics, Elsevier, vol. 96(11), pages 1129-1143.
    3. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 588-638, August.
    4. Holger Sieg & V. Kerry Smith & H. Spencer Banzhaf & Randy Walsh, 2004. "Estimating The General Equilibrium Benefits Of Large Changes In Spatially Delineated Public Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(4), pages 1047-1077, November.
    5. Sieg, Holger & Smith, V. Kerry & Banzhaf, H. Spencer & Walsh, Randy, 2002. "Interjurisdictional housing prices in locational equilibrium," Journal of Urban Economics, Elsevier, vol. 52(1), pages 131-153, July.
    6. Allen Klaiber, H. & Phaneuf, Daniel J., 2010. "Valuing open space in a residential sorting model of the Twin Cities," Journal of Environmental Economics and Management, Elsevier, vol. 60(2), pages 57-77, September.
    7. Walsh, Randy, 2007. "Endogenous open space amenities in a locational equilibrium," Journal of Urban Economics, Elsevier, vol. 61(2), pages 319-344, March.
    8. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    9. Nicolai V. Kuminoff & Jaren C. Pope, 2013. "The Value of Residential Land and Structures during the Great Housing Boom and Bust," Land Economics, University of Wisconsin Press, vol. 89(1), pages 1-29.
    10. Gordon B. Dahl, 2002. "Mobility and the Return to Education: Testing a Roy Model with Multiple Markets," Econometrica, Econometric Society, vol. 70(6), pages 2367-2420, November.
    11. Bayer, Patrick & Keohane, Nathaniel & Timmins, Christopher, 2009. "Migration and hedonic valuation: The case of air quality," Journal of Environmental Economics and Management, Elsevier, vol. 58(1), pages 1-14, July.
    12. Joshua K. Abbott & H. Allen Klaiber, 2011. "An Embarrassment of Riches: Confronting Omitted Variable Bias and Multi-Scale Capitalization in Hedonic Price Models," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1331-1342, November.
    13. Bayer, Patrick & Khan, Shakeeb & Timmins, Christopher, 2011. "Nonparametric Identification and Estimation in a Roy Model With Common Nonpecuniary Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(2), pages 201-215.
    14. Tra, Constant I., 2010. "A discrete choice equilibrium approach to valuing large environmental changes," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 183-196, February.
    15. Gamper-Rabindran, Shanti & Timmins, Christopher, 2013. "Does cleanup of hazardous waste sites raise housing values? Evidence of spatially localized benefits," Journal of Environmental Economics and Management, Elsevier, vol. 65(3), pages 345-360.
    16. Steven Berry & Ariel Pakes, 2007. "The Pure Characteristics Demand Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1193-1225, November.
    17. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
    18. Blomquist, Glenn C & Berger, Mark C & Hoehn, John P, 1988. "New Estimates of Quality of Life in Urban Areas," American Economic Review, American Economic Association, vol. 78(1), pages 89-107, March.
    19. Daniel McFadden, 1977. "Modelling the Choice of Residential Location," Cowles Foundation Discussion Papers 477, Cowles Foundation for Research in Economics, Yale University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sinha, Paramita & Caulkins, Martha L. & Cropper, Maureen L., 2018. "Household location decisions and the value of climate amenities," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 608-637.
    2. Austin M. Williams & Daniel J. Phaneuf, 2019. "The Morbidity Costs of Air Pollution: Evidence from Spending on Chronic Respiratory Conditions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(2), pages 571-603, October.
    3. Nicolai V. Kuminoff, 2018. "Can Understanding Spatial Equilibria Enhance Benefit Transfers for Environmental Policy Evaluation?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(3), pages 591-608, March.
    4. Connolly, Cristina & Livy, Mitchell R., 2016. "The Impact of Pollution Burden on Micro-Level Residential Sorting," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235654, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    Residential sorting; Air pollution; Value of public goods; Hedonic price analysis;

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeeman:v:74:y:2015:i:c:p:71-93. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Haili He). General contact details of provider: http://www.elsevier.com/locate/inca/622870 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.