Borrowing constraints and location choice - Evidence from the Paris Region

This paper investigates the determinants of residential segregation using a nested logit model to disentangle household preferences for local amenities, for dwelling type and for homeownership. The model is extended to account for unobservable borrowing constraints which might prevent some households from purchasing a dwelling. A counterfactual distribution of socio-demographic characteristics across the Paris region is then built by relaxing those constraints. The comparison of the actual and counterfactual distributions suggests that if their credit constraints were alleviated, households would tend to locate further from Paris. In particular if constraints were relaxed only on the poorest households, they would not be likely to mix with the richest households.