nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2005‒02‒13
twenty papers chosen by
Steve Ross
University of Connecticut

  1. Trade Costs versus Urban Costs By Cavailhès, Jean; Gaigné, Carl; Thisse, Jacques-François
  2. Social Networks and Labour Market Transitions By Bramoullé, Yann; Saint-Paul, Gilles
  3. Spatial Determinants of Productivity: Analysis for the Regions of Great Britain By Rice, Patricia; Venables, Anthony J.
  4. Heterogeneous Firms, Agglomeration and Economic Geography: Selection and Sorting By Baldwin, Richard; Okubo, Toshihiro
  5. Neighbourhoods, Households and Income Dynamics: A Semi-Parametric Investigation of Neighbourhood Effects By Bolster, Anne; Burgess, Simon; Johnston, Ron; Jones, Kelvyn; Propper, Carol; Sarker, Rebecca
  6. The Dynamics of City Formation: Finance and Governance By Henderson, J Vernon; Venables, Anthony J.
  7. The Political Economy of Urban Transport System Choice By Brueckner, Jan; Selod, Harris
  8. Employment Concentration Across US Counties By Desmet, Klaus; Fafchamps, Marcel
  9. Agglomeration and Welfare: The Core-Periphery Model in the Light of Bentham, Kaldor and Rawls By Charlot, Sylvie; Gaigné, Carl; Robert-Nicoud, Frédéric; Thisse, Jacques-François
  10. Is There Regional Tax Competition? Firm Level Evidence for Belgium By Crabbé, Karen; Janssen, Boudewijn; Vandenbussche, Hylke
  11. Equilibrium Search Unemployment With Explicit Spatial Frictions By Wasmer, Etienne; Zenou, Yves
  12. School Choice and Quality By Checchi, Daniele; Jappelli, Tullio
  13. Rule-Based and Case-Based Reasoning in Housing Prices By Gabrielle Gayer; Itzhak Gilboa; Offer Lieberman
  14. People People: Social Capital and the Labor-Market - Outcomes of Underrepresented Groups By Borghans,Lex; Weel,Bas,ter; Weinberg,Bruce A.
  15. Community empowerment and scaling-up in urban areas By Garrett, James
  16. Race, equity, and public schools in post-apartheid South Africa By Yamauchi, Futoshi
  17. Bayesian Modeling of School Effects Using Hierarchical Models with Smoothing Priors By Li, Mingliang; Tobias, Justin
  18. Marriage and the City By Pieter Gautier; Michael Svarer; Coen Teulings
  19. Property Tax Limitations and Mobility: The Lock-in Effect of California's Proposition 13 By Nada Wasi; Michelle J. White
  20. Pupil achievement, school resources and family backgr By Torbjørn Hægeland, Oddbjørn Raaum and Kjell G. Salvanes

  1. By: Cavailhès, Jean; Gaigné, Carl; Thisse, Jacques-François
    Abstract: We analyse how the interplay between urban costs, wage wedges and trade costs may affect the inter-regional location of firms as well as the intra-urban location, within the central business district or in a secondary employment centre (SEC) of the selected region. In this way we investigate, on the one hand, how trade may affect the internal structure of cities and, on the other hand, how decentralizing the production and consumption of goods to subcentres changes the intensity of trade by allowing large metropolitan areas to maintain their predominance. We show that, despite low commuting costs, SECs may emerge when the urban population is large and communication technologies are efficient, two features that seem to characterise modern economies. Moreover, when trade costs fall from high levels, the economy moves gradually from dispersion to agglomeration, favouring the formation of SECs. In an integrating world, however, the centre of a small monocentric city could be more attractive than subcentres of large polycentric cities. Nevertheless, the core retains its predominance through the relative growth of its main centre, which occurs at the expense of its subcentres.
    Keywords: city structure; commuting costs; polycentric city; relocation; trade costs
    JEL: F12 F22 R12 R14
    Date: 2004–08
  2. By: Bramoullé, Yann; Saint-Paul, Gilles
    Abstract: We study the influence of social networks on labour market transitions. We develop the first model where social ties and job status co-evolve through time. Our key assumption is that the probability of formation of a new tie is greater between two employed individuals than between an employed and an unemployed individual. We show that this assumption generates negative duration dependence of exit rates from unemployment. Our model has a number of novel testable implications. For instance, we show that a higher connectivity among unemployed individuals reduces duration dependence and that exit rates depend positively on the duration of the last job held by the unemployed worker.
    Keywords: duration dependence; economic inbreeding; social capital; social networks; unemployment; z13
    JEL: E24 J6
    Date: 2004–08
  3. By: Rice, Patricia; Venables, Anthony J.
    Abstract: This Paper uses NUTS3 sub-regional data for Great Britain to analyse the determinants of spatial variations in income and productivity. We decompose the spatial variation of earnings into a productivity effect and an occupational composition effect. For the former (but not the latter) we find a robust relationship with proximity to economic mass, suggesting that doubling the population of working age proximate to an area is associated with a 3.5% increase in productivity in the area. We measure proximity by travel time, and show that effects decline steeply with time, ceasing to be important beyond approximately 80 minutes.
    Keywords: clustering; productivity; regional disparities
    JEL: O40 R10
    Date: 2004–08
  4. By: Baldwin, Richard; Okubo, Toshihiro
    Abstract: A Melitz-style model of monopolistic competition with heterogeneous firms is integrated into a simple NEG model to show that the standard assumption of identical firms is neither necessary nor innocuous. We show that re-locating to the big region is most attractive for the most productivity firms; this implies interesting results for empirical work and policy analysis. A ‘selection effect’ means standard empirical measures overestimate agglomeration economies. A ‘sorting effect’ means that a regional policy induces the highest productivity firms to move to the core while the lowest productivity firms to move to the periphery. We also show that heterogeneity dampens the home market effect.
    Keywords: economic geography; estimation of agglomeration economies; heterogeneous firms; home market effect
    JEL: H32 P16
    Date: 2004–09
  5. By: Bolster, Anne; Burgess, Simon; Johnston, Ron; Jones, Kelvyn; Propper, Carol; Sarker, Rebecca
    Abstract: Using a unique dataset, we present evidence on income trajectories of people living in micro neighbourhoods. We place bounds on the influence of neighbourhood making as few parametric assumptions as possible. The Paper offers a number of advances. We exploit a dataset that is large, representative, longitudinal with very local neighbourhoods. We analyse income growth over one, five- and ten-year windows. We analyse the whole distribution of income growth and track large gainers and losers as well as average outcomes. We consider the appropriate definition of neighbourhood. We find little evidence of a negative relationship between neighbourhood and subsequent income growth.
    Keywords: income dynamics; neighbourhood effects; small scale neighbourhoods
    JEL: D31 I30
    Date: 2004–09
  6. By: Henderson, J Vernon; Venables, Anthony J.
    Abstract: This Paper examines city formation in a country whose urban population is growing steadily over time, with new cities required to accommodate this growth. In contrast to most of the literature there is immobility of housing and urban infrastructure, and investment in these assets is taken on the basis of forward-looking behaviour. In the presence of these fixed assets cities form sequentially, without the population swings in existing cities that arise in current models. Equilibrium city size, absent government, may be larger or smaller than is efficient, depending on how urban externalities vary with population. Efficient formation of cities involves local government borrowing to finance development. The institutions governing land markets, leases, local taxation, and local borrowing and debt affect the efficiency of outcomes. The Paper explores the effects of different fiscal constraints, and shows that borrowing constraints lead cities to be larger than is efficient.
    Keywords: city governance; city size; urban developers; urbanization
    JEL: H70 O18 R10 R50
    Date: 2004–09
  7. By: Brueckner, Jan; Selod, Harris
    Abstract: This Paper analyses the political economy of transport-system choice, with the goal of gaining an understanding of the forces involved in this important urban public policy decision. Transport systems pose a continuous trade-off between time and money cost, so that a city can choose a fast system with a high money cost per mile or a slower, cheaper system. The Paper compares the socially optimal transport system to the one chosen under the voting process, focusing on both homogeneous and heterogeneous cities, while considering different landownership arrangements. The analysis identifies a bias toward over-investment in transport quality in heterogeneous cities.
    Keywords: income heterogeneity; multiple transport systems; over-investment in transport quality
    JEL: H41 R42
    Date: 2004–10
  8. By: Desmet, Klaus; Fafchamps, Marcel
    Abstract: This Paper examines the spatial distribution of jobs across US counties and investigates whether sectoral employment is becoming more or less concentrated. The existing literature has found deconcentration (convergence) of employment across urban areas. Cities only cover a small part of the US though. Using county data, our results indicate that deconcentration is limited to the upper tail of the distribution. The overall picture is one of increasing concentration (divergence). While this seemingly contradicts the well-documented deconcentration in manufacturing, we show that these aggregate employment dynamics are driven by services. Non-service sectors – such as manufacturing and farming – are indeed becoming more equally spread across space, but services are becoming increasingly concentrated.
    Keywords: economic geography; ergodic distribution; spatial distribution of employment; US counties
    JEL: R11 R12
    Date: 2004–10
  9. By: Charlot, Sylvie; Gaigné, Carl; Robert-Nicoud, Frédéric; Thisse, Jacques-François
    Abstract: The objective of this Paper is to apply different welfare approaches to the canonical model developed by Krugman, with the aim of comparing the only two possible market outcomes, i.e. agglomeration and dispersion. More precisely, we use the potential Pareto improvement criteria, as well as the utilitarian and Rawlsian welfare functions. No clear answer emerges for the following two reasons: (i) in general, there is indetermination when compensation schemes are used and (ii) the best outcome heavily depends on societal values regarding inequalities across individuals. However, simulations undertaken for plausible values of the main parameters suggest that there might be excessive agglomeration.
    Keywords: agglomeration; compensation mechanism; economic geography; welfare
    JEL: F12 R13
    Date: 2004–10
  10. By: Crabbé, Karen; Janssen, Boudewijn; Vandenbussche, Hylke
    Abstract: This is the first Paper that looks at regional tax competition within one single country. In many countries in Europe, regions within a country differ substantially in their economic development and attractiveness to firms. Belgium is a typical example of a country where the economic situation of its three regions is very different. Our findings are indicative of regional tax competition, with a lower Effective Tax Rate (ETR) in the peripheral region of Wallonia than in Flanders. In addition to location variables, our empirical model explaining firm level heterogeneity in ETRs includes firm characteristics, sector membership and variables capturing statutory tax breaks.
    Keywords: Belgian firms; company accounts; effective tax rates
    JEL: C50 F36 H25
    Date: 2004–10
  11. By: Wasmer, Etienne; Zenou, Yves
    Abstract: Assuming that job search efficiency decreases with distance to jobs, workers’ location in a city depends on spatial elements such as commuting costs and land prices and on labour elements such as wages and the matching technology. In the absence of moving costs, we show that there exists a unique equilibrium in which employed and unemployed workers are perfectly segregated but move at each employment transition. We investigate the interactions between the land and the labour market equilibrium and show under which condition they are interdependent. When relocation costs become positive, a new zone appears in which both the employed and the unemployed co-exist and are not mobile. We demonstrate that the size of this area goes continuously to zero when moving costs vanish. Finally, we endogenize search effort, show that it negatively depends on distance to jobs and that long and short-term unemployed workers coexist and locate in different areas of the city.
    Keywords: job matching; local labour markets; relocation costs; search effort
    JEL: E24 J41 R14
    Date: 2004–11
  12. By: Checchi, Daniele; Jappelli, Tullio
    Abstract: The 1993 Survey of Household Income and Wealth, a large cross-section of the Italian population covering 24,000 individuals, reports detailed information on children’s attendance of public and private schools and parents’ assessments of the quality of public schools in the city of residence. The survey also provides detailed information on the household’s demographic structure, income and parents’ education. The empirical analysis indicates that the quality of schools is one of the driving factors in the choice between private and public schools. The results are robust with respect to the particular quality indicator used and the presence of fixed provincial effects.
    Keywords: school choice
    JEL: I20
    Date: 2004–11
  13. By: Gabrielle Gayer (Tel Aviv University); Itzhak Gilboa (School of Economics, Tel Aviv University); Offer Lieberman (Technion-Israel Institute of Technology)
    Abstract: People reason about real-estate prices both in terms of general rules and in terms of analogies to similar cases. We propose to empirically test which mode of reasoning fits the data better. To this end, we develop the statistical techniques required for the estimation of the case-based model. It is hypothesized that case-based reasoning will have relatively more explanatory power in databases of rental apartments, whereas rule-based reasoning will have a relative advantage in sales data. We motivate this hypothesis on theoretical grounds, and find empirical support for it by comparing the two statistical techniques (rule-based and case-based) on two databases (rentals and sales).
    Keywords: Housing, similarity, regression, case-based reasoning, rule-based reasoning
    JEL: C1 C8 D8 R1
    Date: 2004–11
  14. By: Borghans,Lex; Weel,Bas,ter; Weinberg,Bruce A. (MERIT)
    Abstract: Despite indications that interpersonal interactions are important for understanding individual labor-market outcomes and have become more important over the last decades, there is little analysis by economists. This paper shows that interpersonal interactions are important determinants of labor-market outcomes, including occupations and wages. We show that technological and organizational changes have increased the importance of interpersonal interactions in the workplace. We particularly focus on how the increased importance of interpersonal interactions has affected the labor-market outcomes of underrepresented groups. We show that the acceleration in the rate of increase in the importance of interpersonal interactions between the late 1970s and early 1990s can help explain why women’s wages increased more rapidly, while the wages of blacks grew more slowly over these years relative to earlier years.
    Keywords: labour economics ;
    Date: 2005
  15. By: Garrett, James
    Abstract: "CARE began PROSPECT (Program of Support for Poverty Elimination and Community Transformation) in 1998. PROSPECT aims to reduce poverty in peri-urban areas of Lusaka. It employs a community-based approach to carry out three types of activities: social empowerment (institution building at the local level), personal empowerment (microfinance), and infrastructure improvement (mostly water supply schemes). PROSPECT has attempted to carry out these activities largely through its support of area-based organizations (ABOs) that now form part of city government. The zone development committees (ZDCs) and residents' development committees (RDCs) are the basic components of the ABO structure. These are community-level representations of municipal government; they are the community's mechanisms for expressing its voice and driving development. PROSPECT is itself an extension of an earlier project, PUSH II (Peri-Urban Self-Help Project). PUSH II and PROSPECT are fundamentally about developing community-based and community-driven development (CDD) mechanisms and strengthening community capacities to identify and respond to community needs. The paper examines the scaling-up experience of PUSH II and PROSPECT, looking especially at the mechanisms of CDD, the ABOs." Authors' Abstract
    Keywords: CARE ,Poverty alleviation ,Community organizations ,Urban poor ,Peri-urban areas ,
    Date: 2004
  16. By: Yamauchi, Futoshi
    Abstract: "This paper examines dynamic changes in educational quality and equity differences in the public school system between Black and other racial groups in post-apartheid South Africa, using the ratio of learners to educators in each school, available from the School Register of Needs, 1996 and 2000. The analysis incorporates school- and community-level unobservables and the endogenous movement of learners. This paper shows that (1) the learner-educator ratios significantly differ between formerly Black and White primary and secondary schools in 1996 and 2000, and (2) in the adjustment of educators in response to changes in the number of learners in this period, there are significant differences between formerly Black and non-Black (White, Coloured, and Indian) primary schools. The opportunities for education in public schools are still unequal between Black and White children, even after apartheid. Given that school quality affects returns to schooling and earning opportunities in labor markets, the inequality causes income inequality between Black and White. The empirical result calls for stronger policy intervention to support Black schools and children in South Africa. Author's Abstract
    Keywords: quality of education ,race ,apartheid ,
    Date: 2004
  17. By: Li, Mingliang; Tobias, Justin
    Abstract: We describe a new and flexible framework for modeling school effects. Like previous work in this area, we introduce an empirical model that evaluates school performance on the basis of student level test-score gains. Unlike previous work, however, we introduce a flexible model that relates follow-up student test scores to baseline student test scores and explore for possible nonlinearities in these relationships. Using data from High School and Beyond (HSB) and adapting the methodology described in Koop and Poirier (2004a), we test and reject the use of specifications that have been frequently used in research and as a basis for policy. We find that nonlinearities are important in the relationship between intake and follow-up achievement, that rankings of schools are sensitive to the model employed, and importantly, that commonly used specifications can give different and potentially misleading assessments of school performance. When estimating our preferred semiparametric specification, we find small but ``significant'' impacts of some school quality proxies (such as district-level expenditure per pupil) in the production of student achievement.
    Date: 2005–02–08
  18. By: Pieter Gautier (Free University of Amsterdam); Michael Svarer (University of Aarhus); Coen Teulings (University of Amsterdam)
    Abstract: Do people move to cities because of marriage market considerations? In cities singles can meet more potential partners than in rural areas. Singles are therefore prepared to pay a premium in terms of higher housing prices. Once married, the marriage market benefits disappear while the housing premium remains. We extend the model of Burdett and Coles (1997) with a distinction between efficient (cities) and less efficient (non-cities) search markets. One implication of the model is that singles are more likely to move from rural areas to cities while married couples are more likely to make the reverse movement. A second prediction of the model is that attractive singles benefit most from a dense market (i.e. from being choosy). Those predictions are tested with a unique Danish dataset
    Date: 2005–02
  19. By: Nada Wasi; Michelle J. White
    Abstract: Proposition 13, adopted by California voters in 1978, mandates a property tax rate of one percent, requires that properties be assessed at market value at the time of sale, and allows assessments to rise by no more than 2% per year until the next sale. In this paper, we examine how Prop 13 has affected the average tenure length of owners and renters in California versus in other states. We find that from 1970 to 2000, the average tenure length of owners and renters in California increased by 1.04 years and .79 years, respectively, relative to the comparison states. We also find substantial variation in the response to Prop 13, with African-American households responding more than households of other races and migrants responding more than native-born households. Among owner-occupiers, the response to Prop 13 increases sharply as the size of the subsidy rises. Homeowners living in inland California cities such as Bakersfield receive Prop 13 subsidies averaging only $110/year and their average tenure length increased by only .11 years in 2000, but owners living in coastal California cities receive Prop 13 subsidies averaging in the thousands of dollars and their average tenure length increased by 2 to 3 years.
    JEL: H2 R2 H7 K2
    Date: 2005–02
  20. By: Torbjørn Hægeland, Oddbjørn Raaum and Kjell G. Salvanes (Statistics Norway)
    Abstract: Whether increasing resource use in schools has a positive effect on pupil performance has occupied governments, parents and researchers for decades. A main challenge when trying to answer this question is to separate the effects of school resources from the effects of pupils’ family background, since resources may be allocated in a compensatory manner, and pupils may sort into schools. We address these issues using a comprehensive dataset for two cohorts of pupils graduating from lower secondary school in Norway. The dataset is rich in performance measures, resource use variables and family background variables. As performance measures we use results at age 16 across 11 subjects, and we exploit the fact that we have both information from results from national exams and from continuous assessment in class. Controlling for family background, we find a positive but modest effect of resource quantity such as teacher hours per pupil, on pupil achievement. Observable teacher qualifications, within the variation present in lower secondary school in Norway, do not appear to have significant effects on school results. Resource quality as measured by teacher characteristics does not appear to have a significant impact on pupils’ marks. We find clear evidence of compensating resource allocation and teacher sorting as well as relative setting of marks.
    Keywords: Pupil acievement; school resources
    JEL: I21 I28 J24
    Date: 2004–12

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