The Micro Foundations of Macro Sorting Models

Oct 22, 2012, 10:00am - 11:30am

Daniel Phaneuf
Photo Credit: University of Wisconsin-Madison
Daniel Phaneuf, Associate Professor in the Department of Agricultural and Applied Economics at the University of Wisconsin-Madison, will present the Havlicek Memorial Seminar as part of the AEDE Seminar Series on October 22nd in Room 105 of the Agricultural Administration Building (2120 Fyffe Road).  His presentation will focus on "The Micro Foundations of Macro Sorting Models", which is based on research that he co-authored with Timothy L. Hamilton from the University of Richmond.

Abstract: Sorting models use households' residential location choices to infer values for local public goods. Existing models have operated at either the macro (city choice) or micro (neighborhood choice) levels, but not both. Intuition suggests, however, that the two choices are related in that households choose a city and subsequently select a neighborhood within that city.  In this paper, we use the theory of two-stage budgeting to develop an empirically feasible sorting model that reflects this stylized reality. Our application focuses on households' willingness to pay to reduce regionally varying ambient air quality.  Our results point to a heretofore unmeasured tradeoff between air pollution and neighborhood-level amenities that increases the marginal willingness to pay for clean air. We also show that allowing for heterogeneity in preferences for local public goods has a considerable impact on the estimated value of clean air.

This event is open to the public and no RSVP is required.  If you have any questions, please contact us.

Post-Seminar Update:

Click here to read a recap of this event.

Click here to access Daniel Phaneuf's seminar presentation.