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on Urban and Real Estate Economics |
| By: | Maria Arbatskaya (Emory University); Hideo Konishi (Boston College) |
| Abstract: | This paper compares equilibrium outcomes in search markets with and without referrals. Although consumers would benefit from honest referrals, it is not at all clear whether firms would unilaterally provide information about competing offers since such information could encourage a consumer to purchase the product elsewhere. In a model of a horizontally differentiated product and sequential consumer search, we show that valuable referrals can arise as a part of equilibrium: firm will give referrals to consumers whose ideal product is sufficiently far from the firm's offering. The effect of referrals on the equilibrium prices is examined, and it is found that prices are higher in markets with referrals. Although consumers can be made worse off by the existence of referrals, referrals lead to a Pareto improvement as long as search cost is not too low relative to product heterogeneity. The effects of referral fees and third-party referrals are examined, and policy implications are drawn. |
| Keywords: | horizontal referrals, consumer search, information, matching, broker commission. |
| JEL: | C7 D4 D8 L1 |
| Date: | 2005–07–27 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:614&r=ure |
| By: | Torberg Falch; Marte Rønning |
| Abstract: | Evidence on teacher behavior is essential for the understanding of the performance of school systems. In this paper we utilize rich data to study the teachers’ quit decision in Norway. We distinguish between decisions to move between public schools within school districts, to another school district in the same labor market region, across labor market regions, and whether to leave public schools. The results indicate that the quit propensity to all four destinations is negatively related to student performance. The result is qualitatively independent of whether student performance is measured by exam results or teacher graduation. |
| Keywords: | teacher turnover, student achievement, family status, non-pecuniary factors |
| JEL: | H42 I29 J44 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1469&r=ure |
| By: | Charles Ka-Yui Leung; Youngman Chun Fai Leong; Siu Kei Wong |
| Keywords: | price dispersion, search models, macroeconomic factor, time aggregation |
| JEL: | C32 D61 D83 E30 R31 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:chk:cuhked:_167&r=ure |
| By: | Cerny, Ales; Miles, David K; Schmidt, Lubomir |
| Abstract: | Using a calibrated OLG model with several sources of uncertainty we find that the impact of ageing and of reform of social security upon the demand for housing and the level of owner occupation is substantial. The overall structure of household asset holdings – in particular the split between real and financial assets – is sensitive to demographics and to the generosity of state run, pay-as-you-go pensions. The interaction between social security reform and housing market conditions is significant and suggests that any changes in pension rules will have substantial knock on effects on the housing market. |
| Keywords: | housing; OLG model; pension reform; portfolio allocation |
| JEL: | C61 G11 H31 H55 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5143&r=ure |
| By: | Philippe Thalmann |
| Abstract: | Equity and neutrality are distinct concepts in housing taxation and weak and strong tenure neutrality should be distinguished. When a tax system is tested for those criteria, the taxes paid by landlords must be included, as they affect the rents renters pay. This paper defines appropriate tests, applies them to a stylised tax system and simulates tax changes designed to restore equity and/or neutrality. It shows how the homeowner's implicit income should be computed for taxes to be fundamentally tenure neutral or equitable or both. And it shows the key role played by the differential in producing housing services under owner-occupation and renting. |
| Keywords: | Housing taxation; tenure choice; tax equity; tax neutrality |
| JEL: | R21 R31 H21 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:fam:rpseri:rp147&r=ure |
| By: | Martin Hoesli; Elion Jani; André Bender |
| Abstract: | We use the Adjusted Present Value (APV) method with Monte Carlo simulations for real estate valuation purposes. Monte Carlo simulations make it possible to incorporate the uncertainty of valuation parameters, in particular of future cash flows, of discount rates and of terminal values. We use empirical data to extract information about the probability distributions of the various parameters and suggest a simple model to compute the discount rate. We forecast the term structure of interest rates using a Cox et al. (1985) model, and then add a premium that is related to both the real estate market and selected property-specific characteristics. Our empirical results suggest that the central values of our simulations are in most cases slightly less than the hedonic values. The confidence intervals are found to be most sensitive to the long-term equilibrium interest rate being used and to the expected growth rate of the terminal value. |
| Keywords: | Real estate valuation; Monte Carlo simulations; Adjusted Present Value (APV) |
| JEL: | R32 G12 G23 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:fam:rpseri:rp148&r=ure |
| By: | Martin Hoesli; Jon Lekander |
| Abstract: | The allocation to real estate by institutional investors has increased in recent years and as a result the gap between suggested and actual allocations has narrowed. The increased inflow of capital to the real estate market is suggested to be a function of two factors: An increased focus on absolute return target investments amongst institutional investors and an increased target allocation to real estate. We argue that the increased target allocation is made possible mainly by the development of new investment vehicles, in particular of private real estate funds, but also of the growing integration of economic regions and of other factors such as the development of investment benchmarks. The flows needed for the actual allocation by European institutional investors to match the suggested allocation constitute at least 31% of the real estate equity universe held by owner occupiers. We estimate that seven years would be needed to reach the target allocation, but it is unlikely that sufficient investment opportunities will arise unless the willingness of owner occupiers to outsource their real estate assets increases. |
| Keywords: | real estate allocation; market transparency; private real estate; flows |
| JEL: | R33 G23 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:fam:rpseri:rp149&r=ure |
| By: | Steven C. Bourassa; Eva Cantoni; Martin Hoesli |
| Abstract: | This paper compares the impacts of alternative models of spatial dependence on the accuracy of house price predictions in a mass appraisal context. Explicit modeling of spatial dependence is characterized as a more fluid approach to defining housing submarkets. This approach allows the relevant “submarket” to vary from house to house and for transactions involving other dwellings in each submarket to have varying impacts depending on distance. We compare the predictive ability of different specifications of both geostatistical and lattice models as well as a simpler model based on submarkets with fixed boundaries. We conclude that – for our data – no spatial statistics method does as well in terms of predictive ability as a simple OLS model that includes a series of dummy variables defining submarkets. However, of the spatial statistics methods, geostatistical models provide more accurate predictions than lattice models. We argue that this is due to the fact that the kriging procedure used to make predictions in a geostatistical framework directly incorporates spatial information about nearby properties. That is not possible in a lattice framework due to the reliance on a matrix of weights that incorporates relationships only for the sample of properties that transact. |
| Keywords: | : spatial dependence; hedonic price models; geostatistical models; lattice models; mass appraisal; housing submarkets |
| JEL: | C21 R31 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:fam:rpseri:rp151&r=ure |
| By: | John Krainer; Mark Spiegel; Nobuyoshi Yamori |
| Abstract: | We develop an overlapping generations model of the real estate market in which search frictions and a debt overhang combine to generate price persistence and illiquidity. Illiquidity stems from heterogeneity in agent real estate valuations. The variance of agent valuations determines how quickly prices adjust following a shock to fundamentals. We examine the predictions of the model by studying price depreciation in Japanese land values subsequent to the 1990 stock market crash. Commercial land values fell much more quickly than residential land values. As we would posit that the variance of buyer valuations would be greater for residential real estate than for commercial real estate, this model matches the Japanese experience. |
| Keywords: | Real property ; Prices ; Japan |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2004-16&r=ure |
| By: | Jürgen Maurer (Institute for Fiscal Studies); André Meier |
| Abstract: | Recent theoretical contributions have suggested consumption externalities, or peergroup effects, as a potential explanation for some of the puzzles in macroeconomics and finance. However, the empirical relevance of peer effects for intertemporal consumption choice is a completely open question. To shed some light on the issue, we derive an extension of the standard life-cycle model that allows for consumption externalities. The analysis is complicated by the challenge of disentangling actual peer effects from merely correlated effects operating through common features or shocks within peer groups. We show how to conduct reliable inference under these circumstances based on within-group equilibrium conditions that give rise to a social multiplier. This approach can be understood as an adaptation of Manski’s "reflection problem framework" to the case of dynamic models with endogenous regressors. We estimate our model using US panel data from the PSID. While there is strong predictable consumption co-movement within peer groups, the evidence for true consumption externalities vanishes once correlated effects are adequately accounted for. |
| Keywords: | Consumption, Life-Cycle Model, Peer Effects, Reflection Problem |
| JEL: | C23 D12 D91 Z13 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:05/15&r=ure |
| By: | Patrick Bayer; Hanming Fang; Robert McMillan |
| Abstract: | In contrast to conventional wisdom, this paper identifies a powerful mechanism which can lead to persistent and even increasing residential segregation when racial differences in education and other sociodemographics narrow. We document that middle-class black neighborhoods are in short supply in many U.S. metropolitan areas, forcing highly educated blacks either to live in white neighborhoods with high amenity levels or in more black neighborhoods with lower amenity levels. A simple model then shows that increases in the proportion of highly educated blacks in a metropolitan area may lead to the emergence of new middle-class black neighborhoods, relieving the prior neighborhood supply constraint and causing increases in residential segregation. Cross- MSA evidence from the 2000 Census indicates that this mechanism does in fact operate: as the proportion of highly educated blacks in an MSA increases, so the segregation of educated blacks and blacks more generally goes up. Our empirical findings are robust and have important implications for the evolution of residential segregation. |
| JEL: | H0 J7 R0 R2 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11507&r=ure |
| By: | Christophe André; Pietro Catte; Nathalie Girouard; Robert Price |
| Abstract: | <P>The paper examines the linkages between housing markets and the business cycle in OECD countries, focusing on how differences in the degree of resilience to economic shocks can be affected by the structural characteristics of housing and mortgage markets. The paper focuses specifically on: the transmission channel from housing wealth to consumption and on the factors behind house price variability, which help to determine whether the housing sector plays a stabilising role or not. Estimates of the marginal propensity to consume out of housing wealth are presented for ten OECD countries, where it is found that the strongest impact on consumption is in countries that have large, efficient and responsive mortgage markets. Particularly important in this regard is the degree of mortgage market “completeness” -- <I>i.e.</I> the extent to which the market is able to offer a variety of products and to serve a broad range of potential borrowers -- in particular, the extent to which they provide ...</P> <P>Cette étude examine les liens entre les marchés immobiliers et le cycle économique dans les pays de l’OCDE, se concentrant sur le rôle des spécificités nationales des marchés immobiliers et hypothécaires sur l’inégale résilience face aux chocs économiques. Cette étude s’intéresse particulièrement au canal de transmission de la richesse immobilière à la consommation et aux facteurs expliquant la variabilité des prix des logements ; ces deux aspects contribuent à déterminer si le secteur immobilier joue un rôle stabilisateur ou non. Des estimations de la propension marginale à consommer la richesse immobilière sont présentées pour dix pays de l’OCDE. Ces estimations indiquent que les effets les plus important sur la consummation apparaissent dans les pays ayant des marchés hypothécaires de grande taille, efficients et réactifs. Le niveau de « complétude » du marché hypothécaire -- la mesure dans laquelle le marché peut offrir une variété de produits et répondre à un large éventail ...</P> |
| Keywords: | consumption, wealth, house prices, consommation, richesse, prix des logements, Business cycles, cycles économiques, mortgage markets, marchés hypothècaires |
| JEL: | D12 E21 E32 |
| Date: | 2004–06–22 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:394-en&r=ure |
| By: | Paul Van den Noord |
| Abstract: | <P>After the launch of the single currency the euro exchange rate fell and interest rates had converged towards the (low) German level. These shocks have worked out differently for the small and large countries. Housing markets have acted as an important vehicle of transmission of these shocks onto economic activity and inflation. Simulations with a stylised econometric model for the euro area economy, making a distinction between the small and large countries in terms of the estimated parameters, illustrate this mechanism ... </P> <P>Modélisation de la divergence conjoncturelle dans la zone euro : le canal de transmission du logement <P>Après le lancement de la monnaie unique, le taux de change de l’euro avait baissé et les taux d’intérêt avaient convergé vers les taux allemands (qui se situaient à un bas niveau). Ces chocs se sont répercutés de manière différente sur les petites et les grandes économies. Les marchés du logement ont joué un rôle important de canal de transmission de ces chocs, en les répercutant sur l’activité économique et l’inflation. Des simulations effectuées à l’aide d’un modèle économétrique de l’économie de la zone euro, établissant une distinction entre les petites et les grandes économies en termes de paramètres estimés, illustrent ce mécanisme ...</P> |
| Keywords: | Business cycles, Economic and Monetary Union, Union Économique et Monétaire, cycles macroéconomiques |
| JEL: | E32 E52 F42 |
| Date: | 2004–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:400-en&r=ure |
| By: | Rocco Huang (University of Amsterdam) |
| Abstract: | This paper documents how social interactions shape industry choices of entrepreneurs. We utilize an administrative data set recording residential addresses of London entrepreneurs. In a large cross-section of community-industry pairs, we show that new entrepreneurs are more likely to enter industries historically over-represented by their residential neighbors. This persistence of industry specializations is stronger in communities where social interactions are more intensive, as proxied by higher ethnic homogeneity, housing structures that are more conducive to social interactions, or higher entrepreneurial density. The effect is also stronger in industries that require more informational interactions, as proxied by higher geographic agglomeration of entrepreneurs. The use of residential addresses helps us identify the presence of social interactions because we can safely argue that residential addresses affect social interactions but do not directly affect industry choices. The median home-business distances in our sample is nearly six kilometers, thus the persistence of industry specializations is unlikely to be driven by unobservable common product market conditions. In every regression, we also control for industry specializations at borough level (the higher level of geographic unit than community, each of which contains around 20 communities), to further remove the effects of unobservable factors. Finally, we also use various sub-groups of entrepreneurs to test for a series of alternative hypotheses, and we do not find support for them. We do not find lower failure rate for entrepreneurs who follow their neighbors’ popular choices. Nevertheless, overall, the results suggest that entry of new entrepreneurs tend to reinforce agglomeration, while exits do not reverse it. This is a weak evidence of agglomeration economies. |
| JEL: | M13 J24 R12 |
| Date: | 2005–07–26 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpla:0507010&r=ure |
| By: | Ferda HALICIOGLU (The University of Greenwich) |
| Abstract: | This study provides empirical estimates for new residential homes demand function in Turkey using the time series data for the period 1964-2004. An aggregate demand function for new private dwellings in Turkey is formed and is estimated using bounds testing cointegration procedure proposed by Pesaran et al. (2001) to compute the short and long-run elasticities of income and price variables. This study also implements CUSUM and CUSUMSQ stability tests on the estimated new housing demand function. The empirical results indicate that income is the most significant variable in explaining the demand for new housing in Turkey and there exists a relatively stable new housing demand function. |
| Keywords: | Demand for new housing, ARDL, stability, Turkey |
| JEL: | R |
| Date: | 2005–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpur:0508002&r=ure |
| By: | Victor Matheson (Department of Economics, College of the Holy Cross); Robert Baade (Department of Economics and Business, Lake Forest College) |
| Abstract: | Over the past 15 years, new stadiums in the National Football League have been built at an unprecedented rate, and most new facilities have utilized significant public funds. This paper looks at whether the methods used to finance these new facilities honored public finance principles regarding equity, efficiency, and transparency. An examination of the 20 NFL stadiums constructed or refurbished since 1992 reveals a trend towards more voter referendums and an increase reliance on taxation of visitors through hotel and rental car taxes. Although taxation of persons living outside one’s own metropolitan area is appealing, this paper suggests that the benefits of these taxes are not nearly so clear. |
| Keywords: | sports, public finance, stadiums, football, NFL |
| JEL: | H22 H25 H42 H71 L83 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:hcx:wpaper:0511&r=ure |
| By: | Peter Thompson (Department of Economics, Florida International University); Melanie Fox Kean (Department of Economics, University of Houston) |
| Abstract: | Jaffe, Trajtenberg and Henderson (Quarterly Journal of Economics, 108(3):577-98, 1993) developed a matching method to study the geography of knowledge spillovers using patent citations, and found that knowledge spillovers are strongly localized. Their method matches each citing patent to a non-citing patent intended to control for the pre-existing geographic concentration of production. We show how the method of selecting the control group may induce spurious evidence of localized spillovers. This paper reassesses their findings using control patents selected under different criteria. Doing so eliminates evidence of strong intranational localization effects at the state and metropolitan levels, but leaves largely unaffected evidence of international localization effects. |
| Keywords: | patent citations, knowledge spillovers, geography |
| JEL: | O31 O34 |
| Date: | 2004–01 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:0401&r=ure |
| By: | Mihaela Pintea (Department of Economics, Florida International University) |
| Abstract: | This paper focuses on the role of government capital as a critical productive input when the level of services that the agent derives from it is subject to congestion. I develop a two-sector “nonscale” production model in which there are two types of firms, conventional profit-maximizing private firms, and “public firms”, whose objective is to produce a specified quantity of government investment goods – determined by government policy – at minimum cost. Furthermore, the production functions of the two sectors need not in general coincide. Using this two-sector production set-up I assume that the positive externality of the public capital is associated with two types of congestion, proportional and aggregate. A variety of fiscal disturbances are analyzed. Because of the complexity of the model the analysis is carried out using simulations of a calibrated economy. The effects of tax policies are remarkably robust with respect to the relative capital intensities of the two productive sectors. In contrast, the effects of government investment are much more sensitive to this aspect. The introduction of congestion decreases the steady state growth rate of the economy. The relative congestion has stronger effects when the variation in the government investment is analyzed, whereas the absolute congestion is more relevant in the analysis of the change in the tax on capital income. The papers highlight the intertemporal dimensions of fiscal policy and the tradeoffs these involve for economic performance, especially growth and welfare. |
| Keywords: | endogenous growth, fiscal policy, public capital, congestion |
| JEL: | E62 O41 |
| Date: | 2004–01 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:0402&r=ure |
| By: | Peter Thompson (Department of Economics, Florida International University) |
| Abstract: | I report new evidence for localized knowledge spillovers identified by within-patent variations in the geographic matching rates of citations added by inventors and citations added by examiners. Evaluated at the mean citation lag, inventor citations are 20 percent more likely than examiner citations to match the country of origin of their citing patent, while US inventor citations are 25 percent more likely to match the state or metropolitan area of their citing patent. The localization of intranational knowledge spillovers declines with the passage of time, but international borders present a persistent barrier to spillovers. |
| Keywords: | Voting, patent citations, knowledge spillovers, geography |
| JEL: | O31 O34 |
| Date: | 2004–03 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:0405&r=ure |
| By: | Richard A. Chisik (Department of Economics, Florida International University); Robert J. Lemke (Department of Economics and Business, Lake Forest College) |
| Abstract: | It is well-known that there are no pure strategy Nash equilibria (PSNE) in the standard three-candidate spatial voting model when candidates maximize their share of the vote. When all that matters to the candidates is winning the election, however, we show that PSNE do exist. We provide a complete characterization of such equilibria and then extend our results to elections with an arbitrary number of candidates. Finally, when two candidates face the potential entrant of a third, we show that PSNE no longer exist, however, they do exist when the number of existing candidates is at least three. |
| Keywords: | Voting, spatial equilibrium, location models, entry |
| JEL: | C7 D0 H8 R1 |
| Date: | 2004–04 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:0407&r=ure |
| By: | Cem Karayalcin (Department of Economics, Florida International University) |
| Abstract: | Many developing economies are characterized by the dominance of a super metropolis. The coexistence of a primate city with a low level of economic development is not an accident, the former being symptomatic of the causes of the latter. Taking historical Rome as the archetype of a city that centralizes political power to extract resources from the rest of the country, we develop two models of rent-seeking and expropriation which illustrate different mechanisms that relate political competition to economic outcomes. The "voice" model shows that rent-seeking by di?erent interest groups (localized in different specialized cities/regions) will lead to low investment and growth when the number of these groups is low. Increased political competition in the form of more organized groups engaged in countervailing activity leads to more secure property rights and higher growth. The "exit" model allows political competition among those with political power (to tax or expropriate from citizens) over a footloose tax base. It shows that when this power is centralized, tax rates would be higher and growth rates lower. When political power is decentralized across different self-interested rulers in diverse jurisdictions, the competition over the mobile resources leads to lower tax/expropriation rates, raising the long-run rate of growth of the economy. |
| Keywords: | public goods, inequality, redistribution, political economy |
| JEL: | O4 P5 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:0510&r=ure |
| By: | Paul MAKDISSI (Département d’´economique and CEREF, Universit´e de Sherbrooke, 2550 boulevard de l’Universit´e, Sherbrooke, Qu´ebec, Canada, J1K 2R1); Quentin WODON (LCSPR, World Bank, 1818 H Street, NW, Washington, DC 20433, USA) |
| Abstract: | Under rent ceilings and quality doors for low income housing units, imperfect information on the ability of tenants to pay their rent may lead the decentralized production of housing units by risk averse private entrepreneurs to be inefficient. A coordinating agency and/or subsidies for new tenants would help to produce more housing, thereby increasing the profits for landlords while also enabling more low income households to find housing. |
| Keywords: | Low Income Housing, Risk Aversion, Rent Control, Public Good |
| JEL: | H41 R31 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:shr:wpaper:04-06&r=ure |
| By: | E. Anthon Eff |
| Abstract: | Positive autocorrelation implies that proximate observations take on similar values. “Proximate” can be defined in many different dimensions. In a cross-section of nations, it can be defined using physical distance, cultural similarity, ecological similarity, or using frequency and intensity of interaction, such as trade relationships or enemy and ally relationships. Autocorrelation of regression residuals presents well-known problems in least-squares estimation, but autocorrelation also provides useful information for exploratory data analysis and model specification. The paper shows that autocorrelation is widespread in international datasets. The paper demonstrates the usefulness of autocorrelation in uncovering stylized facts about international relations, and in specifying a least-squares model. |
| Keywords: | Spatial Autocorrelation; Culture; Religion |
| JEL: | F00 C49 Z10 Z12 |
| Date: | 2004–02 |
| URL: | http://d.repec.org/n?u=RePEc:mts:wpaper:200401&r=ure |
| By: | E. Anthon Eff |
| Abstract: | Positive autocorrelation implies that proximate observations take on similar values. “Proximate” can be defined in many different dimensions. In a cross-section of U.S. regions, it can be defined using physical distance, cultural similarity, ecological similarity, or using frequency and intensity of interaction, such as migration or commuting relationships. Autocorrelation of regression residuals presents well-known problems in least-squares estimation, but autocorrelation also provides useful information for exploratory data analysis and model specification. The paper shows that autocorrelation is widespread in U.S. regional data. |
| Keywords: | Spatial Autocorrelation; Culture; Religion |
| JEL: | R15 C49 Z10 Z12 |
| Date: | 2004–09 |
| URL: | http://d.repec.org/n?u=RePEc:mts:wpaper:200406&r=ure |