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The Determinants of Joint Residential and Job Location Choices: A Mixed Logit Approach

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  • Alexander Ebertz

Abstract

This paper empirically investigates the household's decision to reside and work either in the central metropolitan area, or in the surrounding nonmetropolitan area, or to commute between the two regions. As economic theory suggests the location decision amounts to trading off wages, housing costs, and commuting time. A mixed logit model is employed to quantify the interaction effects of these economic factors in the joint residential and job location choice. The empirical approach does not rely on the restrictive IIA assumption and allows for arbitrary correlation patterns between coefficients. Using data from a recent survey of more than half a million German households, the elasticities of individual location choice with respect to wages, housing costs, and commuting time are estimated. The results show that individual valuations of these factors are of the expected signs but vary substantially in the population. Shifts in consumer surplus and in the spatial distribution of households that are associated with changes in the determinants of location choice are calculated based on the empirical estimates.

Suggested Citation

  • Alexander Ebertz, 2009. "The Determinants of Joint Residential and Job Location Choices: A Mixed Logit Approach," ifo Working Paper Series 82, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
  • Handle: RePEc:ces:ifowps:_82
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    References listed on IDEAS

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    1. Buettner Thiess & Ebertz Alexander, 2009. "Spatial Implications of Minimum Wages," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(2-3), pages 292-312, April.
    2. Nechyba, Thomas J. & Strauss, Robert P., 1998. "Community choice and local public services: A discrete choice approach," Regional Science and Urban Economics, Elsevier, vol. 28(1), pages 51-73, January.
    3. Alois Stutzer & Bruno S. Frey, 2008. "Stress that Doesn't Pay: The Commuting Paradox," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(2), pages 339-366, June.
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    5. Kim S. So & Peter F. Orazem & Daniel M. Otto, 2001. "The Effects of Housing Prices, Wages, and Commuting Time on Joint Residential and Job Location Choices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 1036-1048.
    6. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
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    12. Takatoshi Tabuchi & Jacques-François Thisse, 2006. "Regional Specialization, Urban Hierarchy, And Commuting Costs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(4), pages 1295-1317, November.
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    Cited by:

    1. Sharma, Ajay & Chandrasekhar, S., 2014. "Growth of the Urban Shadow, Spatial Distribution of Economic Activities, and Commuting by Workers in Rural and Urban India," World Development, Elsevier, vol. 61(C), pages 154-166.

    More about this item

    Keywords

    Location choice; commuting; metropolitan area; discrete choice models; mixed logit; simulation based estimation.;

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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