nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2005‒06‒14
27 papers chosen by
Steve Ross
University of Connecticut

  1. Métodos de análise regional e urbana: diagnóstico aplicado ao planejamento By Rodrigo Ferreira Simões
  2. Industrial cores and peripheries in Brazil By Edson Paulo Domingues; Ricardo Machado Ruiz
  3. Bank Lending and Property Prices in Hong Kong By Gerlach, Stefan; Wensheng, Peng
  4. Does Distance Matter in Spillover? By Balázs, Muraközy; Halpern, László
  5. Location Choice and Employment Decisions: A Comparison of German and Swedish Multinationals By Becker, Sascha O.; Ekholm, Karolina; Jäckle, Robert; Muendler, Marc-Andreas
  6. Regional Wage and Employment Responses to Market Potential in the EU By Head, Keith; Mayer, Thierry
  7. City Structure, Job Search and Labour Discrimination. Theory and Policy Implications By Selod, Harris; Zenou, Yves
  8. A Simple Model of Economic Geography à la Helpman-Tabuchi By Murata, Yasusada; Thisse, Jacques-François
  9. Marriage and the City By Gautier, Pieter A; Svarer, Michael; Teulings, Coen N
  10. Do Locational Spillovers Pay? Empirical Evidence from German IPO Data By Audretsch, David B; Lehmann, Erik E
  11. Information Channels in Labour Markets. On the Resilience of Referral Hiring By Casella, Alessandra; Hanaki, Nobuyuki
  12. Intermodal and Intramodal Competition in Passenger Rail Transport By Ivaldi, Marc; Vibes, Catherine
  13. Peer Effects in Austrian Schools By Schneeweis, Nicole; Winter-Ebmer, Rudolf
  14. Agglomeration and the Adjustment of the Spatial Economy By Combes, Pierre-Philippe; Duranton, Gilles; Overman, Henry G.
  15. Why and Where do Headquarters Move? By Strauss-Kahn, Vanessa; Vives, Xavier
  16. The French Zones D'Education Prioritaire: Much Ado About Nothing? By Bénabou, Roland; Kramarz, Francis; Prost, Corinne
  17. Is the Division of Labour Limited By the Extent of the Market? Evidence from French Cities By Duranton, Gilles; Jayet, Hubert
  18. Do localization economies derive from human capital externalities? By Christopher H. Wheeler
  19. Technology and industrial agglomeration: evidence from computer usage By Christopher H. Wheeler
  20. The delinquency of subprime mortgages By Michelle A. Danis; Anthony Pennington-Cross
  21. Education subsidies and school drop-out rates By Lorraine Dearden; Carl Emmerson; Chris Frayne; Costas Meghir
  22. Urban Colossus: Why is New York America's Largest City? By Edward L. Glaeser
  23. Firm-Level Social Returns to Education By Pedro S. Martins
  24. The relationship between firm mobility and tax level: Empirical evidence of fiscal competition between local governments By Fredrik Carlsen, Bjørg Langset and Jørn Rattsø
  25. Population Growth in European Cities: weather matters – but only nationally By Paul Cheshire; Stefano Magrini
  26. Tax Cuts and Employment Growth in New Jersey: Lessons From a Regional Analysis By W. Robert Reed; Cynthia L. Rogers
  27. The Role of Industry, Geography and Firm Heterogeneity in Credit Risk Diversification By M. Hashem Pesaran; Til Schuermann; Björn-Jakob Treutler

  1. By: Rodrigo Ferreira Simões (Cedeplar-UFMG)
    Abstract: This paper intends to identify the most important methodological advances on urban and regional methods of analysis for the last fifty years. The aim of the paper is to carry out an applied analysis of the main urban and regional techniques in order to contribute to diagnosis and economy policy on urban and regional economic development. These techniques are divided into three parts: 1) traditional methods; 2) multivariate analysis applied on urban and regional economics; and 3) recent developments. For each technique we will emphasize the most important properties, limits and potentialities to urban and regional development economic policies
    JEL: R00
    Date: 2005–05
  2. By: Edson Paulo Domingues (Cedeplar-UFMG); Ricardo Machado Ruiz (Cedeplar-UFMG)
    Abstract: There is considerable evidence to demonstrate that the industrial localization in developing countries shows high level of spatial concentration, and the industrial decentralization is quite restricted to few isolated regions. The aim of this paper is to analyze the Brazilian case to identify the industrial cores and to find out whether Brazil follows this conventional view on industrial location in developing countries. This study is based on a database that merges two sets of data: the first describes 35600 industrial firms, and the second has information on the economic, social and urban structure of 5507 cities (year 2000). Based on these datasets, the industrial cores and their respective peripheries are identified, classified, and discussed. The conclusions are: (1) Brazil has several industrial cores with different scales, structures, and regional level of integration; (2) there are large regions with growing industrial peripheries that are strongly tied to the primary cores; these are what we called "spatial industrial agglomerations"; however, we also identified (3) regions that did not manage to build peripheries able to assimilate spillovers generated by its industrial centers; these are the “industrial enclaves”, (4) and also regions that are fully marginalized of the industrialization. Our main conclusion is: the Brazilian economic space is a mixed case. It is not a set of disconnected or isolated industrial islands, but it is still behind a full regional economic integration.
    Keywords: Brazil, Regional Economics, Industrial Agglomerations, Industry, Regional Development
    JEL: R11 R12 R23 R30 R58
    Date: 2005–05
  3. By: Gerlach, Stefan; Wensheng, Peng
    Abstract: This Paper studies the relationship between residential property prices and lending in Hong Kong. This is an interesting topic for three reasons. First, swings in property prices have been extremely large and frequent in Hong Kong. Second, under the currency board regime, monetary policy cannot be used to guard against asset price swings. Third, despite the collapse in property prices since 1998, the banking sector remains sound. While the contemporaneous correlation between lending and property prices is large, our results suggest that the direction of influence goes from property prices to bank credit rather than conversely.
    Keywords: bank lending; Hong Kong; property prices
    JEL: E32 E42 G21
    Date: 2004–12
  4. By: Balázs, Muraközy; Halpern, László
    Abstract: This Paper examines the technology transfer through FDI in Hungary, using a large panel dataset of 24,000 firm-level observations. We distinguish horizontal (intra-industry) and vertical (inter-industry) spillovers. Besides the sign and magnitude of these effects we are interested in the spatial structure of these technology transfers. For this we use distance data, correct for sample selection and for the endogeneity of input demand use Arellano-Bond dynamic panel data technique. Our main findings are that there are significant horizontal and backward spillovers for domestic-owned firms suggesting the presence of foreign competitors and customers is beneficial for domestic firms. The effect of regional and county boundaries is insignificant. Using the distance data we find clear spatial structure of spillovers: for domestic firms the foreign presence only matters in very small distance (25 km), for foreign-owned firms the stronger the spillover the larger the distance (50 and 100 km).
    Keywords: foreign direct investments; spillovers; technology transfer
    JEL: D24 F14
    Date: 2005–01
  5. By: Becker, Sascha O.; Ekholm, Karolina; Jäckle, Robert; Muendler, Marc-Andreas
    Abstract: Using data on German and Swedish multinational enterprises (MNEs), this paper analyses determinants of international location choice and the degree of substitutability of labour across locations. Countries with highly skilled labour forces strongly attract German but not necessarily Swedish MNEs. In MNEs from either country, affiliate employment tends to substitute for employment at the parent firm. At the margin, substitutability is the strongest with respect to affiliate employment in Western Europe. A 1% larger wage gap between Germany and locations in Central and Eastern Europe (CEE) is associated with 900 fewer jobs at German parents and 5,000 more jobs at affiliates in CEE. A 1% larger wage gap between Sweden and CEE is associated with 140 fewer jobs at Swedish parents and 260 more jobs at affiliates in CEE.
    Keywords: labour demand; location choice; multinational enterprises; multinominial choice; translog cost function
    JEL: F21 F23 J21 J23
    Date: 2005–02
  6. By: Head, Keith; Mayer, Thierry
    Abstract: Recent theoretical work on economic geography emphasizes the interplay of transport costs and plant-level increasing returns. In these models, the spatial distribution of demand is a key determinant of economic outcomes. In one strand, it is argued that higher demand gives rise to a more than proportionate increase in production, a result known as the home market effect. Another strand emphasizes the effects of market sizes on factor prices. In this paper we highlight the theoretical connection between these two strands. We use data on 57 European regions to show how wages and employment respond to differentials in what we call real market potential, a discounted sum of demands derived from the theory.
    Keywords: gravity equation; home market effects; new economic geography; wage equation
    JEL: F12 F15 R11 R12
    Date: 2005–02
  7. By: Selod, Harris; Zenou, Yves
    Abstract: We consider a search-matching model in which black workers are discriminated against and the job arrival rates of all workers depend on social networks as well as distance to jobs. Location choices are mainly driven by the racial preferences of households. There are two possible urban equilibrium and we show that, under some reasonable conditions, all workers are better off in the equilibrium where blacks are close to jobs. We then consider two policies: affirmative action and employment subsidies to the firms that hire black workers. We show that, in cities where black workers reside far away from jobs, the optimal policy is to impose higher quotas or employment subsidies than in cities where they live close to jobs.
    Keywords: Affirmative Action; employment subsidies; racial preferences; social networks; spatial mismatch
    JEL: J15 J41 R14
    Date: 2005–02
  8. By: Murata, Yasusada; Thisse, Jacques-François
    Abstract: This paper explores the interplay between commodities’ transportation costs and workers’ commuting costs within a general equilibrium framework à la Dixit-Stiglitz. Workers are mobile and choose a region to work in as well as an intra-urban location in which to live. We show that a more integrated economy need not be more agglomerated. Instead, low transportation costs lead to the dispersion of economic activities. This is because workers are able to alleviate the burden of urban costs by being dispersed, while retaining a good access to all varieties. By contrast, low commuting costs foster the agglomeration of economic activities.
    Keywords: agglomeration; commuting costs; economic geography; transportation costs; urban costs
    JEL: F12 R12
    Date: 2005–02
  9. By: Gautier, Pieter A; Svarer, Michael; Teulings, Coen N
    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.
    Keywords: city; marriage; mobility; search
    JEL: J12 J64
    Date: 2005–03
  10. By: Audretsch, David B; Lehmann, Erik E
    Abstract: This study examines the impact locational spillovers have on firm performance. Based on a uniquely created dataset consisting of high-technology start-ups publicly listed in Germany, this paper tests the proposition of locational spillovers positively affecting firm performance, as measured by abnormally high profits on the stock market. The results provide evidence that geographic proximity and university spillovers are complementary determinants of firm performance. While neither geographic proximity nor academic research spillovers alone can explain firm performance, a combination of both factors results in significant higher stock market performance. The results also show academic spillovers are heterogeneous in their impact depending on the type. In particular, spillovers from social sciences have a different impact on firm performance than do spillovers from natural science.
    Keywords: firm performance; university spillover; university-firm collaboration
    JEL: L20 M13 R30
    Date: 2005–03
  11. By: Casella, Alessandra; Hanaki, Nobuyuki
    Abstract: Economists and sociologists disagree over markets’ potential to take over functions typically performed by networks of personal connections. First among them is the reliable transmission of information. In this paper we begin from a model of labour markets where social ties are stronger between similar individuals, and thus firms employing productive workers prefer to rely on personal referrals by their employees than to hire on the open anonymous market (Montgomery (1991)). However, we allow workers in the anonymous market to engage in a costly action that has the potential to signal their high productivity. We study the extent to which the possibility of signalling reduces the reliance on the network. We find that the network is remarkably resilient - only for a small minority of parameter values does the network disappear. The problem is that to be effective signalling must fulfill two contradictory requirements: unless the signal is extremely precise, it must be expensive, or it is not informative; but it must be cheap, or the network can undercut it.
    Keywords: networks; referral hiring; referral premium; signalling
    JEL: A14 D83 J31 J41
    Date: 2005–03
  12. By: Ivaldi, Marc; Vibes, Catherine
    Abstract: The objective of the paper is to elaborate a simulation model to analyse inter and intra-modal competition in the transport industry, based on game theory models. In our setting, consumers choose a transport mode and an operator to travel on a given city-pair; operators strategically decide on prices for the types of service they provide. We derive the market equilibrium and simulate potential scenarios. In particular we measure the impact of entry by a low cost train operator and the effect of a kerosene tax. Hence our framework could serve as a tool to measure the effectiveness of competition on a relevant market or to design marketing strategies. More generally it can be applied in cases of oligopolistic competition when detailed data are not available.
    Keywords: product differentiation; relevant transport market; simulation model
    JEL: C35 C81 L11 L13 L92 L93 L98
    Date: 2005–04
  13. By: Schneeweis, Nicole; Winter-Ebmer, Rudolf
    Abstract: This study deals with educational production in Austria and is focused on the potential impact of schoolmates on students’ academic outcomes. We used PISA 2000 data to estimate peer effects for 15 and 16 year old students. The estimations yield substantial positive effects of the peer groups’ socioeconomic composition on student achievement. Furthermore, quantile regressions suggest peer effects to be asymmetric in favour of low-ability students, meaning that students with lower skills benefit more from being exposed to clever peers, whereas those with higher skills do not seem to be affected much. Social heterogeneity, moreover, has no big adverse effect on academic outcomes. These results imply considerable social gains of reducing stratification in educational settings.
    Keywords: education; peer effects; PISA study
    JEL: I21
    Date: 2005–04
  14. By: Combes, Pierre-Philippe; Duranton, Gilles; Overman, Henry G.
    Abstract: We consider the literatures on urban systems and New Economic Geography to examine questions concerning agglomeration and how areas respond to shocks to the economic environment. We first propose a diagrammatic framework to compare the two approaches. We then use this framework to study a number of extensions and to consider several policy relevant issues.
    Keywords: diagrammatic exposition; New Economic Geography; urban and regional policy; urban systems
    JEL: R00 R58
    Date: 2005–04
  15. By: Strauss-Kahn, Vanessa; Vives, Xavier
    Abstract: This paper analyses decisions regarding the location of headquarters in the US for the period 1996-2001. Using a unique firm-level database of about 30,000 US headquarters, we study the firm- and location-specific characteristics of headquarters that relocated over that period. Headquarters are concentrated, increasingly so in medium-sized service-oriented metropolitan areas, and the rate of relocation is significant (5% a year). Larger (in terms of sales) and younger headquarters tend to relocate more often, as well as larger (in terms of the number of headquarters) and foreign firms, and firms that are the outcome of a merger. Headquarters relocate to metropolitan areas with good airport facilities, low corporate taxes, low average wages, high level of business services and agglomeration of headquarters in the same sector of activity.
    Keywords: agglomeration externalities; business services; communication costs; congestion; corporate history; mergers; nested logit; taxes
    JEL: F15 F23 L20 R12
    Date: 2005–05
  16. By: Bénabou, Roland; Kramarz, Francis; Prost, Corinne
    Abstract: We provide an assessment of the French ZEP (Zones d’Education Prioritaire), a programme started in 1982 that channels additional resources to schools in disadvantaged areas and encourages the development of new teaching projects. Focusing on middle-schools, we first evaluate the impact of the ZEP status on resources, their utilization (teacher bonuses versus teaching hours) and key establishments characteristics such as class sizes, school enrolments, teachers’ qualifications and experience, and student composition and mobility. We then estimate the impact of the ZEP programme on four measures of individual student achievement: obtaining at least one diploma by the end of schooling, reaching 8th grade, reaching 10th grade and success at the Baccalauréat. We take into account the endogeneity of the ZEP status by using both differences in differences and instrumental variables based on political variables. The results are the same in all cases: there is no impact on student success of the ZEP programme.
    Keywords: class size; disadvantaged schools; education policy; education production function; School finance
    JEL: H52 I21 I22
    Date: 2005–05
  17. By: Duranton, Gilles; Jayet, Hubert
    Abstract: This paper provides some evidence that the division of labour is limited by the extent of the (local) market. We first propose a theoretical model. Its main prediction is that scarce occupations are over-represented in large cities. Using census data for French cities, we then provide strong empirical support for this prediction.
    Keywords: division of labour; extent of the market; specialization
    JEL: J24 J44 R23
    Date: 2005–05
  18. By: Christopher H. Wheeler
    Abstract: One of the most robust findings emerging from studies of industrial agglomeration is the rise in productivity that tends to accompany it. What most studies have not addressed, however, is the potential role played by human capital externalities in driving this relationship. This paper seeks to do so using data from the 1980, 1990, and 2000 US Census covering a collection of 77 (primarily) 3-digit manufacturing industries across a sample of more than 200 metropolitan areas. The analysis generates two primary results. First, a variety of education- and experience-based measures of average human capital rise significantly as an industry's employment in a metropolitan area increases. Hence, clusters of industry do tend to be characterized by larger stocks of human capital. However, second, even after accounting for the level of human capital in a worker's own industry, the overall size of the industry remains strongly associated with wages. Such results suggest that localization economies are largely not the product of knowledge spillovers.
    Keywords: Regional economics ; Human capital
    Date: 2005
  19. By: Christopher H. Wheeler
    Abstract: Although the association between industrial agglomeration and productivity has been widely examined and documented, little work has explored the possibility that these `external' productivity shifts are the product of more advanced technologies. This paper offers a look at this hypothesis using data on individual-level computer usage across a sample of U.S. metropolitan areas over the years 1984, 1989, 1993, and 1997. The results indicate that, for a wide array of industries at the two-, three-, and four-digit SIC level, an industry's scale within a metropolitan area is positively associated with the frequency of computer use by its workers. However, in spite of these observable differences in workplace technology, I also find that estimated localization effects on wages are largely not explained by computer usage. Even after controlling for computer use, there remain significant own-industry scale effects in labor earnings.
    Keywords: Technology ; Industrial location
    Date: 2005
  20. By: Michelle A. Danis; Anthony Pennington-Cross
    Abstract: This paper focuses on understanding the determinants of the performance of subprime mortgages. A growing body of literature recognizes the substantial lag between the time that a borrower stops making payments on a mortgage and the termination of the loan. The duration of this lag and the method by which the delinquency is ultimately terminated play a critical role in the costs borne by both borrower and lender. Using nested and multinomial logit, we find that delinquency and default are sensitive to current economic conditions and housing markets. Credit scores and loan characteristics also play important roles.
    Keywords: Mortgages
    Date: 2005
  21. By: Lorraine Dearden (Institute for Fiscal Studies); Carl Emmerson (Institute for Fiscal Studies); Chris Frayne (Institute for Fiscal Studies); Costas Meghir (Institute for Fiscal Studies and University College London)
    Abstract: This paper evaluates whether means-tested grants paid to secondary students are an effective way of reducing the proportion of school dropouts. We look at this problem using matching techniques on a pilot study carried out in England during 1999 and 2000 using a specially designed dataset that ensures that valid comparisons between our pilot and control areas are made. The impact of the subsidy is quite substantial with initial participation rates (at age 16/17) being around 4.5 percentage points higher. Full-time participation rates one year later are found to have increased by around 6.4 percentage points which is largely due to the EMA having a significant effect on retention in post compulsory education. These effects vary by eligibility group with those receiving the full payment having the largest initial increase in participation, whilst the effects for those who are partially eligible are only significantly different from the control group in the second year of the program. There is some evidence that the participation rate effect is stronger for boys, especially in the second year, and that the policy goes some way to reducing the gap in dropout rates between boys and girls. It is also clear that the policy has the largest impact on children from the poorest socio-economic background.
    JEL: H52 I28 J24
    Date: 2005–06
  22. By: Edward L. Glaeser
    Abstract: New York has been remarkably successful relative to any other large city outside of the sunbelt and it remains the nation's premier metropolis. What accounts for New York's rise and continuing success? The rise of New York in the early nineteenth century is the result of technological changes that moved ocean shipping from a point-to-point system to a hub and spoke system; New York's geography made it the natural hub of this system. Manufacturing then centered in New York because the hub of a transport system is, in many cases, the ideal place to transform raw materials into finished goods. This initial dominance was entrenched by New York's role as the hub for immigration. In the late 20th century, New York's survival is based almost entirely on finance and business services, which are also legacies of the port. In this period, New York's role as a hub still matters, but it is far less important than the edge that density and agglomeration give to the acquisition of knowledge.
    JEL: N0
    Date: 2005–06
  23. By: Pedro S. Martins
    Abstract: Do workers benefit from the education of their co-workers? We investigate this question drawing on a panel of large Portuguese firms and their workers, using fixed effects and instrumenting average schooling in each firm-year with its lagged value and the lagged share of retirement-age workers. We find evidence of substantial firm-level social returns (at about 19%), much larger than standard estimates of private returns to education, and of sizeable returns accruing to less educated workers but not to their more educated colleagues
    Keywords: Social Returns to Education, Education Spillovers, Matched Employer-Employee Data, Wages, Portugal.
    JEL: J24 J31 I20
  24. By: Fredrik Carlsen, Bjørg Langset and Jørn Rattsø (Statistics Norway)
    Abstract: The mobility of the tax base may influence fiscal outcomes. The many theoretical contributions about the role of mobility are not matched by empirical evidence. Existing studies address strategic interaction between governments, but have little to say about mobility. We introduce a new measure of mobility conditions based on the geographic profit variability of industrial sectors. The econometric analysis shows a systematic negative relationship between mobility conditions and tax level among municipalities in Norway. The analysis takes into account neighborhood effects in a spatial model, and the endogeneity of mobility conditions is handled with instrumental variables.
    Keywords: Fiscal competition; mobility; local taxation
    JEL: H71 H72 H73 C21
    Date: 2005–06
  25. By: Paul Cheshire (London School of Economics, Department of Geography & Environment); Stefano Magrini (Università degli Studi di Venezia 'Ca' Foscari', Dipartimento di Scienze Economiche)
    Abstract: This paper investigates differences in the rate of growth of population across the large city-regions of the EU12 between 1980 and 2000. The US model which assumes perfect factor mobility does not seem well adapted to European conditions. There is evidence strongly suggesting that equilibrating migration flows between cities in different countries are highly constrained in the EU. However, quality of life motives do seem to be a significant and important feature of differential population growth rates if measured relative to national rather than EU12 values. Once other factors are allowed for, a systematic and highly significant factor determining rates of urban population growth is climatic variation. Cities with better weather than that of their countries have systematically tended to gain population over the past 20 years once other factors – including natural rates of increase in the areas of each country outside the major cities - are allowed for: there is no such effect for climate variables if expressed relative to the value of the EU12 as a whole. On the other hand, there is evidence that the systematic spatial gains from European integration are reflected in a city’s population growth. The results are tested for spatial dependence and remain robust.
    Keywords: growth; cities; quality of life differences; mobility; migration
    JEL: R
    Date: 2005–06–07
  26. By: W. Robert Reed (University of Oklahoma); Cynthia L. Rogers (University of Oklahoma)
    Abstract: The Whitman Administration’s 30 percent reduction in New Jersey’s personal income taxes from 1994-96 is prominently cited as a role model for state fiscal policy. We investigate whether the growth benefits attributed to the Whitman tax cuts are warranted. Panel data methods are applied to annual observations of county-level employment growth from New Jersey and the surrounding economic region. Our analysis does not support the hypothesis that tax cuts stimulated employment growth in New Jersey. While New Jersey did experience substantial employment growth subsequent to the tax cuts, most of this growth was shared by the nearby Economic Areas.
    Keywords: Tax cuts, economics growth
    JEL: R58 H71 H24
    Date: 2005–06–08
  27. By: M. Hashem Pesaran; Til Schuermann; Björn-Jakob Treutler
    Abstract: In theory the potential for credit risk diversifcation for banks could be substantial. Portfolios are large enough that idiosyncratic risk is diversifed away leaving exposure to systematic risk. The potential for portfolio diversifcation is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the different types of risk factors. We propose a model for exploring these dimensions of credit risk diversifcation: across industry sectors and across di¤erent countries or regions. We find that full firm-level parameter heterogeneity matters a great deal for capturing differences in simulated credit loss distributions. Imposing homogeneity results in overly skewed and fat-tailed loss distributions. These differences become more pronounced in the presence of systematic risk factor shocks: increased parameter heterogeneity greatly reduces shock sensitivity. Allowing for regional parameter heterogeneity seems to better approximate the loss distributions generated by the fully heterogeneous model than allowing just for industry heterogeneity. The regional model also exhibits less shock sensitivity.
    Keywords: Risk management, default dependence, economic interlinkages, portfolio choice
    JEL: C32 E17 G20
    Date: 2005–05

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