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Title: A Multi-Level Residential Sorting Model with an Application to Cost of Living Indices

Citation Type: Dissertation/Thesis

Publication Year: 2012

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Abstract: Sorting models to date have operated at the macro level or micro level. Regardless of the scale, all existing sorting models analyze a single choice from a single set of alternatives. Intu- ition suggests, however, that households choose a city and subsequently select a neighborhood within that city. This stylized reality is absent from conventional sorting models, which ignore information at one of these stages. In addition, due to the size of the full choice set, capturing this entire sorting process in a single model can be prohibitive in terms of computation and data collection. I use the theory of two-stage budgeting to develop an empirically feasible sorting model that more accurately replicates household behavior. Empirically, I focus on the cost of air pollution. Results point to an additional tradeoff between air pollution and neighborhood- level amenities that increases the marginal willingness to pay for clean air by a considerable amount. I also show that allowing for heterogeneity in preferences for local public goods has a considerable impact on the estimated value of clean air. This dissertation also explores an application of the model in which I construct spatially explicit measures of the cost of living that can be used to adjust income and calculate a broad measure of welfare. The analysis focuses on the distribution of such welfare across the popu- lation, as well the change in this distribution followings simulated reductions pollution concen- trations. Empirical results suggest that accounting for public goods leads to a distribution of adjusted income that has a wider spread than that of pure monetary income. This implies that households with less income tend to face higher costs of living, determined by an inferior set of public goods relative to housing prices paid to obtain such goods.

Url: https://repository.lib.ncsu.edu/bitstream/handle/1840.16/7757/etd.pdf?sequence=2&isAllowed=y

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Authors: HAMILTON, TIMOTHY, L

Institution: North Carolina State University

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Degree: Doctor of Philosophy Economics

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Pages: 155

Data Collections: IPUMS USA

Topics: Housing and Segregation

Countries: United States