Joint Model of Choice of Residential Neighborhood and Bicycle Ownership: Accounting for Self-Selection and Unobserved Heterogeneity

This paper presents a joint model of residential neighborhood type choice and bicycle ownership. The objective is to isolate the true causal effects of the neighborhood attributes on household bicycle ownership from spurious association due to residential self-selection effects. The joint model accounts for residential self-selection due to both observed socio-demographic characteristics and unobserved preferences. In addition, the model allows for differential residential self-selection effects across different socio-demographic segments. The model is estimated using a sample of more than 5000 households from the San Francisco Bay Area. Further, a policy simulation analysis is carried out to estimate the impact of neighborhood characteristics and socio-demographics on bicycle ownership. The model results show a substantial presence of residential self-selection effects due to observed socio-demographics such as number of children, dwelling type, and house ownership. It is shown for the first time in the self-selection literature that ignoring such observed self selection effects may not always lead to overestimation of the impact of neighborhood attributes on travel related choices such as bicycle ownership. In the current context, ignoring selfselection due to socio-demographic attributes resulted in an underestimation of the impact of neighborhood attributes on bicycle ownership. In the context of unobserved factors, no significant self-selection effects were found. However, it is recommended to test for such effects as well as heterogeneity in such effects before concluding that there are no unobserved factors contributing to residential self-selection.