Place-Based Redistribution in Location Choice Models
34 Pages Posted: 21 Jul 2020 Last revised: 12 Jul 2021
Date Written: July 11, 2021
In many recent location choice models, households randomly vary with respect to their utility of living in a location. We demonstrate that the distribution generating this randomness is fundamentally not identifiable from location choice data and as a result the optimal allocation as chosen by a social planner is not identified. We propose an algorithm for setting the distribution generating the random utility across locations that implies a planner will optimally choose no redistribution in the absence of externalities or equity motives between different groups of people. Our algorithm preserves a planner's motives to redistribute due to equity considerations between different types of people and efficiency in production, the focus of many recent studies.
Keywords: Redistribution, Urban Economics, Optimal Policies
JEL Classification: R10, R11, R13
Suggested Citation: Suggested Citation