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

Abstract

This paper empirically investigates the household's decision to reside and work either inthe central metropolitan area, or in the surrounding nonmetropolitan area, or to commutebetween the two regions. As economic theory suggests the location decisionamounts to trading off wages, housing costs, and commuting time. A mixed logit modelis employed to quantify the interaction effects of these economic factors in the jointresidential and job location choice. The empirical approach does not rely on the restrictiveIIA assumption and allows for arbitrary correlation patterns between coefficients.Using data from a recent survey of more than half a million German households, theelasticities of individual location choice with respect to wages, housing costs, and commutingtime are estimated. The results show that individual valuations of these factorsare of the expected signs but vary substantially in the population. Shifts in consumersurplus and in the spatial distribution of households that are associated with changes inthe determinants of location choice are calculated based on the empirical estimates.Location choice; commuting; metropolitan area; discrete choice models; mixed logit; simulation based estimation.