Estimating equilibrium models of sorting across locations

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2007-03-01

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Abstract

While there is growing interest in measuring the size and scope of local spillovers, it is well understood that such spillovers cannot be distinguished from unobservable local attributes using solely 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. Our approach relies on an IV strategy derived from the internal logic of the sorting model itself. We show practically how the strategy is implemented, provide intuition for our instruments, discuss the role of effective choice-set variation in identifying the model, and carry-out a series of Monte Carlo simulations to demonstrate performance in small samples. © 2007 The Author(s). Journal compilation Royal Economic Society 2007.

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Published Version (Please cite this version)

10.1111/j.1468-0297.2007.02021.x

Publication Info

Bayer, P, and C Timmins (2007). Estimating equilibrium models of sorting across locations. Economic Journal, 117(518). pp. 353–374. 10.1111/j.1468-0297.2007.02021.x Retrieved from https://hdl.handle.net/10161/2026.

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Bayer

Patrick Bayer

Gilhuly Family Distinguished Professor in Economics

Bayer's research focuses on wide range of subjects including racial inequality and segregation, social interactions, housing markets, education, and criminal justice. His most recent work has been published in the Quarterly Journal of Economics, American Economic Review, Econometrica, and the Review of Financial Studies. He is currently working on projects that examine jury representation and its consequences, the intergenerational consequences of residential and school segregation, neighborhood tipping, gentrification, the effect of police and criminal justice interactions on families, and the impact of bail reform.


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