Firm Location Choice Versus Job Location Choice in Microscopic Simulation Models

Traditionally, land-use models simulate employment at the aggregate level. More recently, some models microsimulate single employees. Such models allow capturing the interaction between location decisions of different employees, such as a new agglomeration of office employment may attract additional restaurant or office supply employment. Within the last decade, a few models were developed that simulate location choice of firms rather than single employees. These models acknowledge that location decisions are not made at the level of individual employees, but rather the firm as a whole is the entity that relocates. From an academic point of view, the progress in simulating location choice of economic activity has been remarkable. However, stochastic variability between different model runs has questioned the validity of such models, at least at a detailed geographic scale. This chapter provides a brief history of employment modelling and describes the ILUMASS approach, which microsimulates firms, in more detail. Following, a synthetic city is described and two models are implemented and contrasted: One that simulates businesses and one that simulates employees as the decision-making unit. Recommendations are given for a reasonable level of disaggregation.