Methodological and empirical challenges in modelling residential location choices

The modelling of residential locations is a key element in land use and transport planning. There are significant empirical and methodological challenges inherent in such modelling, however, despite recent advances both in the availability of spatial datasets and in computational and choice modelling techniques. One of the most important of these challenges concerns spatial aggregation. The housing market is characterised by the fact that it offers spatially and functionally heterogeneous products; as a result, if residential alternatives are represented as aggregated spatial units (as in conventional residential location models), the variability of dwelling attributes is lost, which may limit the predictive ability and policy sensitivity of the model. This thesis presents a modelling framework for residential location choice that addresses three key challenges: (i) the development of models at the dwelling-unit level, (ii) the treatment of spatial structure effects in such dwelling-unit level models, and (iii) problems associated with estimation in such modelling frameworks in the absence of disaggregated dwelling unit supply data. The proposed framework is applied to the residential location choice context in London. Another important challenge in the modelling of residential locations is the choice set formation problem. Most models of residential location choices have been developed based on the assumption that households consider all available alternatives when they are making location choices. Due the high search costs associated with the housing market, however, and the limited capacity of households to process information, the validity of this assumption has been an on-going debate among researchers. There have been some attempts in the literature to incorporate the cognitive capacities of households within discrete choice models of residential location: for instance, by modelling households’ choice sets exogenously based on simplifying assumptions regarding their spatial search behaviour (e.g., an anchor-based search strategy) and their characteristics. By undertaking an empirical comparison of alternative models within the context of residential location choice in the Greater London area this thesis investigates the feasibility and practicality of applying deterministic choice set formation approaches to capture the underlying search process of households. The thesis also investigates the uncertainty of choice sets in residential location choice modelling and proposes a simplified probabilistic choice set formation approach to model choice sets and choices simultaneously. The dwelling-level modelling framework proposed in this research is practice-ready and can be used to estimate residential location choice models at the level of dwelling units without requiring independent and disaggregated dwelling supply data. The empirical comparison of alternative exogenous choice set formation approaches provides a guideline for modellers and land use planners to avoid inappropriate choice set formation approaches in practice. Finally, the proposed simplified choice set formation model can be applied to model the behaviour of households in online real estate environments.Open Acces

Random load fluctuations and collapse probability of a power system operating near codimension 1 saddle-node bifurcation

For a power system operating in the vicinity of the power transfer limit of its transmission system, effect of stochastic fluctuations of power loads can become critical as a sufficiently strong such fluctuation may activate voltage instability and lead to a large scale collapse of the system. Considering the effect of these stochastic fluctuations near a codimension 1 saddle-node bifurcation, we explicitly calculate the autocorrelation function of the state vector and show how its behavior explains the phenomenon of critical slowing-down often observed for power systems on the threshold of blackout. We also estimate the collapse probability/mean clearing time for the power system and construct a new indicator function signaling the proximity to a large scale collapse. The new indicator function is easy to estimate in real time using PMU data feeds as well as SCADA information about fluctuations of power load on the nodes of the power grid. We discuss control strategies leading to the minimization of the collapse probability.Comment: 5 pages, 1 figure, submission to IEEE PES General Meeting 201

Economic Dynamics and Forest Clearing: A Spatial Econometric Analysis for Indonesia- Working Paper 280

This paper uses a large panel database to investigate the determinants of forest clearing in Indonesian kabupatens since 2005. Our study incorporates short-run changes in prices and demand for palm oil and wood products, as well as the exchange rate, the real interest rate, land-use zoning, forest protection, the estimated opportunity cost of forested land, the quality of local governance, the poverty rate, population density, the availability of communications infrastructure, transport cost, and local rainfall and terrain slope. Our econometric results highlight the role of dynamic economic factors in forest clearing. We find significant roles for lagged changes in all the short-run economic variables—product prices, demands, the exchange rate and the real interest rate—as well as communications infrastructure, some types of commercial zoning, rainfall, and terrain slope. We find no significance for the other variables, and the absence of impact for protected-area status is particularly notable. Our results strongly support the model of forest clearing as an investment that is highly sensitive to expectations about future forest product prices and demands, as well as changes in the cost of capital (indexed by the real interest rate), the relative cost of local inputs (indexed by the exchange rate), and the cost of land clearing (indexed by local precipitation). By implication, the opportunity cost of forested land fluctuates widely with changes in international markets and decisions by Indonesia’s financial authorities about the exchange and interest rates. Our results suggest that forest conservation programs are unlikely to succeed if they ignore such powerful force.

An Equilibrium Model of Sorting in an Urban Housing Market: The Causes and Consequences of Residential Segregation

This paper presents a new equilibrium framework for analyzing economic and policy questions related to the sorting of households within a large metropolitan area. We estimate the model using restricted-access Census data that precisely characterize residential and employment locations for households the San Francisco Bay Area, yielding accurate measures of preferences for a wide variety of housing and neighborhood attributes across different types of household. We use these estimates to explore the causes and consequences of racial segregation in general equilibrium. Our results indicate that, given the preference structure of households in the Bay Area, the elimination of racial differences in income and wealth would significantly increase the residential segregation of each major racial group, as the equalization of income leads, for example, to the formation of new wealthy, segregated Black and Hispanic neighborhoods. We also provide evidence that sorting on the basis of race itself (whether driven by preferences or discrimination) leads to large reductions in the consumption of housing, public safety, and school quality by Black and Hispanic households.Segregation, Sorting, Housing Markets, Locational Equilibrium, Residential Choice, Discrete Choice

A Framework for Robust Assessment of Power Grid Stability and Resiliency

Security assessment of large-scale, strongly nonlinear power grids containing thousands to millions of interacting components is a computationally expensive task. Targeting at reducing the computational cost, this paper introduces a framework for constructing a robust assessment toolbox that can provide mathematically rigorous certificates for the grids' stability in the presence of variations in power injections, and for the grids' ability to withstand a bunch sources of faults. By this toolbox we can "off-line" screen a wide range of contingencies or power injection profiles, without reassessing the system stability on a regular basis. In particular, we formulate and solve two novel robust stability and resiliency assessment problems of power grids subject to the uncertainty in equilibrium points and uncertainty in fault-on dynamics. Furthermore, we bring in the quadratic Lyapunov functions approach to transient stability assessment, offering real-time construction of stability/resiliency certificates and real-time stability assessment. The effectiveness of the proposed techniques is numerically illustrated on a number of IEEE test cases

A Semiparametric Estimator for Dynamic Optimization Models

We develop a new estimation methodology for dynamic optimization models with unobserved state variables Our approach is semiparametric in the sense of not requiring explicit parametric assumptions to be made concerning the distribution of these unobserved state variables We propose a two-step pairwise-difference estimator which exploits two common features of dynamic optimization problems: (1) the weak monotonicity of the agent's decision (policy) function in the unobserved state variables conditional on the observed state variables; and (2) the state-contingent nature of optimal decision-making which implies that conditional on the observed state variables the variation in observed choices across agents must be due to randomness in the unobserved state variables across agents We apply our estimator to a model of dynamic competitive equilibrium in the market for milk production quota in Ontario Canada

Productivity Growth and Worker Reallocation: Theory and Evidence

Dispersion in labor and factor productivity across firms is large and persistent, large flows of workers move across firms, and worker reallocation is an important source of productivity growth. The purpose of the paper is to provide a formal explanation for these observations that clarifies the role of worker reallocation as a source of productivity growth. Specifically, we study a modified version of the Schumpeterian model of growth induced by product innovation developed by Klette and Kortum (2002). More productive firms are those that supply higher quality products in the model. We show that more productive firms grow faster and the reallocation of workers across continuing firms contributes to aggregate productivity growth if and only if current productivity predicts future productivity. We provide evidence in support of the hypothesis that more productive firms become larger in Danish data. In addition, we provide estimates of the distribution of productivity at entry and the parameters of the cost of investment in innovation function and other structural parameters that all firms are assumed to face by fitting the model to observations on value added, employment, and wages drawn from a panel of Danish firms for the years 1992-1997.

Limited Participation in International Business Cycle Models: A Formal Evaluation

In this paper, we argue that limited asset market participation (LAMP) plays an important role in explaining international business cycles. We show that when LAMP is introduced into an otherwise standard model of international business cycles, the performance of the model improves significantly, especially in matching cross-country correlations. To perform formal evaluation of the models we develop a novel statistical procedure that adapts the statistical framework of Vuong (1989) to DSGE models. Using this methodology, we show that the improvements brought out by LAMP are statistically significant, leading a model with LAMP to outperform a representative agent model. Furthermore, when LAMP is introduced, a model with complete markets is found to do as well as a model with no trade in financial assets -- a well-known favorite in the literature. Our results remain robust to the inclusion of investment specific technology shocks.international business cycles, incomplete markets, limited asset market participation