Estimating Equilibrium Models of Sorting Across Locations

Patrick Bayer and Christopher D. Timmins ()
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Christopher D. Timmins: Yale University, Faculty of Arts & Sciences, Department of Economics (Box 8268)

Yale School of Management Working Papers from Yale School of Management

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.

Keywords: Local Spillovers; Location Choice; Economic Geography; Natural Advantage; Social Interactions; Network Effects; Endogenous Sorting; Discrete Choice Models; Agglomeration; Congestion (search for similar items in EconPapers)
JEL-codes: H7 R0 R2 R3 (search for similar items in EconPapers)
Date: 2004-07-28
New Economics Papers: this item is included in nep-dcm, nep-geo and nep-ure
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Estimating Equilibrium Models Of Sorting Across Locations (2007)
Working Paper: Estimating Equilibrium Models of Sorting across Locations (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ysm:somwrk:ysm415

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