Three Essays on Household Residential Sorting

Abstract

This dissertation includes three essays that analyze factors affect residential sorting across neighborhood. Chapter 1 estimates the effect of crime on household location choice using a two-stage residential sorting model which incorporates the effect of mobility cost. The results from the second stage show that people are willing to pay more to move to a location with lower violent crime occurrences, but also willing to pay more to move to a place with higher property crime. When recovering the willingness to pay (WTP) for the two types of crime using elasticities, the results show that people are willing to pay $651 and $977 for a one hundred unit decrease in violent crime and $23 and $27 for a one hundred unit increase in property crime for 2005 and 2010 respectively. The difference-in-difference results show that people are willing to pay less to move to a location in which the police number increases, and pay more to move to a location where the crime rate decreases while police force increases. Chapter 2 analyzes whether or not, and to what degree local environmental risk impact household residential location choice. Employing a two-stage horizontal sorting model, the results indicate that black households are willing to pay $3438 more for a 1% increase in the faction of black than white households, and households of other races would like to pay $8613 more for a 1% increase in the fraction of same race neighbors than white households. With each $10000 increase in household income, household’s marginal willingness to pay increases by $591 for a decrease of 1000 pounds of releases in the neighborhood. The counterfactual simulation of turning off tastes over environmental risk shows that differential preferences for environmental risk by race serve to segregate households. Chapter 3 analyzes how environmental disamenities affect residential location choices using an equilibrium sorting model. The empirical analysis indicates that households are heterogeneous in their willingness to pay for housing and neighborhood characteristics, which shaped the way that households sort across neighborhood. Based on results from the first stage estimation, poor households are more likely to select houses closer to landfills, and black households are more probably to choose households located near a demolish landfill when keeping distance fixed. Counterfactual simulation results indicate that when switching off heterogeneous preferences for landfill disamenities there is little impact on housing consumption of white, but for black and poor households, I see more notable changes.