Decision of localization of household in Spain: dormant class model vs. mixed model

Abstract

In this work the unobservable heterogeneity respect to the choice of household's residential location is analyzed, considering three alternatives: urban area, interurban area and rural area. It is employed latent class choice model to represent this behavior and the results are compared with the multinomial and mixed logit models. The more flexible structure of the latent class model allows us more deeply into the analysis of unobservable heterogeneity with respect to the more limited analysis of the randomness of the parameters of the mixed logit model. The empirical results indicate two classes or groups of households with differentiated behaviors regarding to the decision of location and associated to different lifestyles. Thus, certain attributes of the location of the dwelling, such as noise, pollution or delinquency, have an effect on household preference in a different way according to the class of belonging. Also, individual characteristics of the household's head, such as age, gender or educational level, have a different impact on the preference for location according to the class of belonging. The results allow us to distinguish two lifestyles associated with each class or group of preference: suburban and urban.