nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2005‒11‒05
23 papers chosen by
Steve Ross
University of Connecticut

  1. Assessing high house prices: bubbles, fundamentals, and misperceptions By Charles Himmelberg; Christopher Mayer; Todd Sinai
  2. Residential Segregation in General Equilibrium By Patrick Bayer; Robert McMillan; Kim Rueben
  3. Estimates of home mortgage originations, repayments, and debt on one-to-four-family residences By Alan Greenspan; James Kennedy
  4. Human capital growth in a cross section of U.S. metropolitan areas By Christopher H. Wheeler
  5. Does the Early Bird Catch the Worm? Instrumental Variable Estimates of Educational Effects of Age of School Entry in Germany By Patrick A. Puhani; Andrea M. Weber
  6. Financing Large Canadian Cities in the 21st Century: The Case of the City of Toronto By Harvey Schwartz
  7. Collateral, credit history, and the financial decelerator By Ronel Elul
  8. Local Public Good Provision: Voting, Peer Effects, and Mobility By Stephen Calabrese; Dennis Epple; Thomas Romer; Holger Sieg
  9. House Prices and Inflation in the Euro Area By Boris Cournède
  10. Using Experimental Economics to Measure the Effects of a Natural Educational Experiment on Altruism By Eric Bettinger; Robert Slonim
  11. Young Women's Religious Affiliation and Participation as Determinants of High School Completion By Evelyn L. Lehrer
  12. An Empirical Model of Labor Supply with Social Interactions By Andrew Grodner; Thomas Kniesner
  13. The Abortion-Crime Link: Evidence from England and Wales By Leo H. Kahane; David Paton; Rob Simmons
  14. Evidence of Returns to Schooling in Africa from Household Surveys: Monitoring and Restructuring the Market for Education By T. Paul Schultz
  15. The Economic Impact of the Redevelopment of Georgetown, Connecticut: The Former Gilbert and Bennett Wire Mill, Main Street, and Old Mill Road By Stan McMillen; Brian Baird
  16. "A Dynamic General Equilibrium Analysis of the Political Economy of Public Education." By Jorge Soares
  17. Contracting Out Public Service Provision to Not-for-Profit Firms By John Bennett; Elisabetta Iossa
  18. Does Head Start Improve Children%u2019s Life Chances? Evidence from a Regression Discontinuity Design By Jens Ludwig; Douglas L. Miller
  19. The Effectiveness of Juvenile Correctional Facilities: Public versus Private Management By Patrick Bayer; David E. Pozen
  20. Labor Pooling in R&D Intensive Industries By Heiko Gerlach; Thomas Rønde; Konrad O. Stahl
  21. Is it is or is it ain't my obligation? Regional debt in a fiscal federation By Russell Cooper; Hubert Kempf; Dan Peled
  22. Job Hopping in Silicon Valley: Some Evidence Concerning the Micro-Foundations of a High Technology Cluster By Brice Fallick; Charles A. Fleischmann; James A. Rebitzer
  23. Comments on Aaron Yelowitz, "Santa Fe's Living Wage Ordinance and the Labor Market" By Robert Pollin; Jeannette Wicks-Lim

  1. By: Charles Himmelberg; Christopher Mayer; Todd Sinai
    Abstract: We construct measures of the annual cost of single-family housing for 46 metropolitan areas in the United States over the last 25 years and compare them with local rents and incomes as a way of judging the level of housing prices. Conventional metrics like the growth rate of house prices, the price-to-rent ratio, and the price-to-income ratio can be misleading because they fail to account both for the time series pattern of real long-term interest rates and predictable differences in the long-run growth rates of house prices across local markets. These factors are especially important in recent years because house prices are theoretically more sensitive to interest rates when rates are already low, and more sensitive still in those cities where the long-run rate of house price growth is high. During the 1980s, our measures show that houses looked most overvalued in many of the same cities that subsequently experienced the largest house price declines. We find that from the trough of 1995 to 2004, the cost of owning rose somewhat relative to the cost of renting, but not, in most cities, to levels that made houses look overvalued.
    Keywords: Housing - Prices ; Interest rates ; Metropolitan areas - Statistics ; Rental housing ; Regional economics
    Date: 2005
  2. By: Patrick Bayer (Economic Growth Center, Yale University); Robert McMillan; Kim Rueben
    Abstract: This paper studies the causes and consequences of racial segregation using a new general equilibrium model that treats neighborhood compositions as endogenous. The model is estimated using unusually detailed restricted Census microdata covering the entire San Francisco Bay Area, and in combination with a rich array of econometric estimates, serves as a powerful tool for carrying out counterfactual simulations that shed light on the causes and consequences of segregation. In terms of causes, and contrasting with prior research, our GE simulations indicate that equalizing income and education across race would be unlikely to result in significant reductions in racial segregation, as minority households would sort into newly formed minority neighborhoods. Indeed, among Asian and Hispanic households, segregation increases. In terms of consequences, this paper provides the first evidence that sorting on the basis of race gives rise to significant reductions in the consumption of local public goods by minority households and upper-income minority households in particular. These consumption effects are likely to have important intergenerational implications.
    Keywords: Segregation, General Equilibrium, Endogenous Sorting, Urban Housing Market, Locational Equilibrium, Counterfactual Simulation, Discrete Choice
    JEL: H0 J7 R0 R2
    Date: 2004–05
  3. By: Alan Greenspan; James Kennedy
    Abstract: Since 1997, when the Department of Housing and Urban Development discontinued its quarterly gross mortgage flow system, there has been no systematic attempt to disaggregate the net change in outstanding home mortgage debt into its constituent gross flows. Using a different approach, we have developed a system that reconciles the change in regular home mortgage debt with mortgage flows. The latter includes home purchase and refinance originations, and mortgage purchases, sales, and repayments for five types of mortgage originators and six categories of other mortgagees. In the process, we derive the sources of equity extraction from homes financed by mortgages.
    Date: 2005
  4. By: Christopher H. Wheeler
    Abstract: Human capital is typically viewed as generating a number of desirable outcomes, including economic growth. Yet, in spite of its importance, few empirical studies have explored why some economies accumulate more human capital than others. This paper attempts to do so using a sample of more than 200 metropolitan areas in the United States over the years 1980, 1990, and 2000. The results reveal two consistently significant correlates of human capital growth, defined as the change in a city*s rate of college completion: population and the existing stock of college-educated labor. Given that population growth and human capital accumulation are both positively associated with education, these results suggest that the geographic distributions of population and human capital should have become more concentrated in recent decades. That is, larger, more educated metropolitan areas should have exhibited the fastest rates of increase in both population and education and thus #pulled away* from smaller, less-educated metropolitan areas. The evidence largely supports this conclusion.
    Keywords: Human capital
    Date: 2005
  5. By: Patrick A. Puhani (Darmstadt University of Technology, SIAW, University of St. Gallen, WDI, and IZA Bonn); Andrea M. Weber (Darmstadt University of Technology)
    Abstract: We estimate the effect of age of school entry on educational attainment using three different data sets for Germany, sampling pupils at the end of primary school, in the middle of secondary school and several years after secondary school. Results are obtained based on instrumental variable estimation exploiting the exogenous variation in month of birth. We find robust and significant positive effects on educational attainment for pupils who enter school at seven instead of six years of age: Test scores at the end of primary school increase by about 0.42 standard deviations and years of secondary schooling increase by almost half a year.
    Keywords: education, immigration, policy, identification
    JEL: I21 I28 J24
    Date: 2005–10
  6. By: Harvey Schwartz (Department of Economics, York University)
    Date: 2005–10
  7. By: Ronel Elul
    Abstract: The author develops a simple model in which nancial imperfections can serve to stabilize aggregate uctuations and not merely aggravate them as in much of the previous literature; the author terms this a nancial decelerator. In the model agents borrow to purchase housing and secure their loans with this long-lived asset. There are two nancial imperfections in this model. First, agents are unable to commit to repay their loans — that is, they can strategically default. This limits the amount that lenders are willing to offer. In addition, however, lenders are also imperfectly informed as to a borrower’s propensity to default; that is, there is adverse selection. The latter imperfection implies that default may actually occur in equilibrium, unlike in much of the previous literature. For relatively high house prices the commitment problem ensures that the equilibrium is typically characterized by a standard nancial accelerator; that is, the borrowing constraints which prevent default become tighter as falling prices reduce the wealth with which agents can collateralize future loans, thereby exacerbating aggregate uctuations. However, Elul shows that when prices are very low, agents will default, which serves as a stabilizing force; he terms this a nancial decelerator.
    Date: 2005
  8. By: Stephen Calabrese; Dennis Epple; Thomas Romer; Holger Sieg
    Abstract: Few empirical strategies have been developed that investigate public provision under majority rule while taking explicit account of the constraints implied by mobility of households. The goal of this paper is to improve our understanding of voting in local communities when neighborhood quality depends on peer or neighborhood effects. We develop a new empirical approach which allows us to impose all restrictions that arise from locational equilibrium models with myopic voting simultaneously on the data generating process. We can then analyze how close myopic models come in replicating the main regularities about expenditures, taxes, sorting by income and housing observed in the data. We find that a myopic voting model that incorporates peer effects fits all dimensions of the data reasonably well.
    JEL: H4 H7 H1 R5
    Date: 2005–10
  9. By: Boris Cournède
    Abstract: The inflation measure used by the European Central Bank excludes housing costs that are borne by home owners even though they make up more than a tenth of household final consumption expenditure in the euro area. Has the exclusion of owner-occupied housing costs driven a wedge between the official harmonised index of consumer prices (HICP) and the cost of living? To answer this question, a measure of the user cost of housing capital has been constructed for every euro area country (except Luxembourg). User costs are measured taking into account property taxes but net of tax breaks that home owners enjoy on mortgage repayments. The user cost measure is combined with the HICP to derive a “broad” inflation estimate. For the sake of comparison, an alternative estimate has been put together using imputed rents. The main conclusion is that owner-occupied housing costs have an impact. Another important conclusion is that the effect of owner-occupied housing costs on inflation varies noticeably with the method used to incorporate them into the price index. The paper finally discusses the choice of the method from the point of view of economic policy makers. "This Working Paper relates to the 2005 OECD Economic Survey of Euro Area (" <P>Prix des logements et inflation dans la zone euro Bien qu’ils représentent plus de dix pour cent de la consommation finale des ménages dans la zone euro, les coûts de logement qui sont supportés par les propriétaires occupants ne sont pas inclus dans l’indicateur d’inflation employé par la Banque centrale européenne. L’exclusion de ces coûts a-t-elle enfoncé un coin entre l’indice des prix à la consommation harmonisé (IPCH) et le coût de la vie ? Pour répondre à cette question, une mesure du coût d’usage du capital a été construite pour les logements occupés pour chacun des pays appartenant à la zone euro (à l’exception du Luxembourg). Il s’agit d’une mesure du coût net d’impôts et de taxes, qui tient compte à la fois des taxes foncières et des allégements d’impôt dont bénéficient les propriétaires occupants. Cette mesure est ensuite adjointe à l’IPCH pour obtenir une évaluation de l’inflation « élargie ». Pour les besoins de la comparaison, une autre estimation a été effectuée en utilisant des loyers imputés. La principale conclusion est que les coûts du logement pour les propriétaires occupants font une différence. Une autre conclusion importante est que l’impact de ces coûts dépend sensiblement de la méthode qui est employée pour les intégrer à l’indice de prix. En conclusion, l'étude examine la question du choix de la méthode du point de vue des opérateurs de la politique économique. "Ce Document de travail se rapporte à l'Étude économique de l'OCDE de Euro area, 2005. ("
    Keywords: housing, logement, ECB, BCE, inflation, inflation, HICP, Eurostat, user cost, imputed rents, IPCH, Eurostat, coût d'usage, loyers imputés
    JEL: E30 E31
    Date: 2005–10–12
  10. By: Eric Bettinger; Robert Slonim
    Abstract: Economic research examining how educational intervention programs affect primary and secondary schooling focuses largely on test scores although the interventions can affect many other outcomes. This paper examines how an educational intervention, a voucher program, affected students' altruism. The voucher program used a lottery to allocate scholarships among low-income applicant families with children in K-8th grade. By exploiting the lottery to identify the voucher effects, and using experimental economic methods, we measure the effects of the intervention on children's altruism. We also measure the voucher program's effects on parents' altruism and several academic outcomes including test scores. We find that the educational intervention positively affects students' altruism towards charitable organizations but not towards their peers. We fail to find statistically significant effects of the vouchers on parents' altruism or test scores.
    JEL: I2 C9
    Date: 2005–10
  11. By: Evelyn L. Lehrer (University of Illinois at Chicago and IZA Bonn)
    Abstract: The far-reaching consequences of failing to complete secondary schooling are well known. The central questions addressed in this study are: Does religion make a difference in the likelihood of successfully completing the transition to high-school graduation? If so, how large are the influences? Based on a human capital framework, the paper develops hypotheses about the effects of two dimensions of religion during childhood - affiliation and participation - and tests them with data on non-Hispanic white, African-American, and Hispanic female respondents from the 1995 National Survey of Family Growth. The results are generally consistent with the hypotheses, revealing sizeable differentials in high-school graduation rates by affiliation and participation. The results also uncover pronounced differences by race/ ethnicity.
    Keywords: religion, education
    JEL: J24 J15 J22
    Date: 2005–10
  12. By: Andrew Grodner (Center for Policy Research, Maxwell School, Syracuse University); Thomas Kniesner (Center for Policy Research, Maxwell School, Syracuse University)
    Abstract: Our research econometrically tests the presence of social interactions in the labor supply model. The interdependence is defined as a response of individual's hours worked to the mean hours worked in one's reference group. The reference group includes individuals who share similar age, family structures, and location, all of which jointly determine the economic distance that reflects the cost of interactions. We identify an endogenous social interactions effect by instrumenting for the variable representing the mean hours worked of the people in an individual's reference group with the mean hours worked of the individuals in the adjacent reference groups. Estimates of the linear labor supply model proposed in the literature using Panel Study of Income Dynamics data indicate the presence of positive and non-negligible spillovers in hours worked. The total wage elasticity of labor supply os 0.22, where 0.08 is due to the exogenous wage change, and 0.14 is due to social interactions.
    JEL: J22
    Date: 2005–09
  13. By: Leo H. Kahane (California State University, East Bay); David Paton (Nottingham University Business School); Rob Simmons (Lancaster University Management School)
    Abstract: We use panel data from 1983 to 1997 for the 42 police force areas in England and Wales to test the hypothesis that legalizing abortion contributes to lower crime rates. We provide an advance on previous work by focusing on the impact of possible endogeneity of effective abortion rates with respect to crime. Our use of U.K. data allows us to exploit regional differences in the provision of free abortions to identify abortion rates. When we use a similar model and estimation methodology, we are able to replicate the negative association between abortion rates and reported crime found by Donohue and Levitt for the U.S. However, when we allow for the potential endogeneity of effective abortion rates with respect to crime, we find no clear connection between the two.
    Keywords: abortion, crime, fertility
    JEL: K42 I38 J13
    Date: 2005–10–27
  14. By: T. Paul Schultz (Economic Growth Center, Yale University)
    Abstract: Wage-differentials by education of men and women are examined from African household surveys to suggest private wage returns to schooling. It is commonly asserted that returns are highest at primary school levels and decrease at secondary and postsecondary levels, whereas private returns in six African countries are today highest at the secondary and post secondary levels, and rates are similar for women as for men. The large public subsidies for postsecondary education in Africa, therefore, are not needed to motivate students to enroll, and those who have in the past enrolled in these levels of education are disproportionately from the better-educated families. Higher education in Africa could be more efficient and more equitably distributed if the children of well-educated parents paid the public costs of their schooling, and these tuition revenues facilitated the expansion of higher education and financed fellowships for children of the poor and less educated parents.
    Keywords: Africa, Wage Returns to Schooling, Inequality, HIV/AIDS
    JEL: O15 O55 J31 J24
    Date: 2003–12
  15. By: Stan McMillen; Brian Baird
    Abstract: Redevelopment of old mill creates vibrant new spaces, preserves green space, creates density
    Keywords: development, redevelopment
    JEL: R11 O18
    Date: 2005–10
  16. By: Jorge Soares (Department of Economics,University of Delaware)
    Abstract: The primary objective of this paper is to highlight the distinct roles of altruism and of self-interest in the political determination of a public education policy. I assess the relative importance of three factors in the determination of the equilibrium level of this policy: altruism, the impact of public funding of education on social security benefits and its impact on factor prices. I then focus on the impact of implementing a social security system on the equilibrium levels of education funding and on welfare. I find that although, in the benchmark economy, the presence of social security might generate support for public funding of education, its overall effect on the well-being of individuals is negative for any level of social security taxation. are particularly well-suited for analyzing the dynamics going forward in time even though the dynamics are ill-defined in this direction. In particular, we analyze the inverse limit of the cash-in-advance model of money and illustrate how information about the inverse limit is useful for detecting or ruling out complex dynamics.
    Keywords: Public Education, Voting, General Equilibrium.
    JEL: D78 E62 I22
    Date: 2005
  17. By: John Bennett; Elisabetta Iossa
    Abstract: In an incomplete contract setting, we analyze the contracting out of public service provision, comparing the performance of for-profit and not-for-profit private firms. Two institutional arrangements are considered, control rights lying either with the firm as under the UK's Private Finance Initiative(PFI) or the government (as under traditional procurement). We derive the conditions under which provision by not-for-profit firms leads to greater investment and social benefit than provision by for profit firms. The role played by the non-distribution constraint in not-for profit firms and the nature of the investment are emphasized.
    Date: 2005–06
  18. By: Jens Ludwig; Douglas L. Miller
    Abstract: This paper exploits a new source of variation in Head Start funding to identify the program’s effects on health and schooling. In 1965 the Office of Economic Opportunity (OEO) provided technical assistance to the 300 poorest counties in the U.S. to develop Head Start funding proposals. The result was a large and lasting discontinuity in Head Start funding rates at the OEO cutoff for grant-writing assistance, but no discontinuity in other forms of federal social spending. We find evidence of a large negative discontinuity at the OEO cutoff in mortality rates for children ages 5-9 from causes that could be affected by Head Start, but not for other mortality causes or birth cohorts that should not be affected by the program. We also find suggestive evidence for a positive effect of Head Start on educational attainment in both the 1990 Census, concentrated among those cohorts born late enough to have been exposed to the program, and among respondents in the National Education Longitudinal Study of 1988.
    JEL: I18 I20 I38
    Date: 2005–10
  19. By: Patrick Bayer (Economic Growth Center, Yale University); David E. Pozen
    Abstract: This paper uses data on juvenile offenders released from correctional facilities in Florida to explore the effects of facility management type (private for-profit, private nonprofit, public state-operated, and public county-operated) on recidivism outcomes and costs. The data provide detailed information on individual characteristics, criminal and correctional histories, judge-assigned restrictiveness levels, and home zipcodes—allowing us to control for the non-random assignment of individuals to facilities far better than any previous study. Relative to all other management types, for-profit management leads to a statistically significant increase in recidivism, but, relative to nonprofit and state-operated facilities, for-profit facilities operate at a lower cost to the government per comparable individual released. Costbenefit analysis implies that the short-run savings offered by for-profit over nonprofit management are negated in the long run due to increased recidivism rates, even if one measures the benefits of reducing criminal activity as only the avoided costs of additional confinement.
    Keywords: Juvenile Crime; Juvenile Correctional Facilities; Recidivism; Prison Privatization; Provision of Public Goods: Nonprofit, For-profit, Public
    JEL: H0 H1 H4 K0 K4
    Date: 2003–07
  20. By: Heiko Gerlach (University of Auckland,; Thomas Rønde (University of Copenhagen, CEBR, and CEPR,; Konrad O. Stahl (University of Mannheim, CEPR, CESifo, and ZEW,
    Abstract: We investigate firms’ incentives to locate in the same region to gain access to a large pool of skilled labor. Firms engage in risky R&D activities and thus create stochastic product and implied labor demand. Agglomeration in a cluster is more likely in situations where the innovation step is large and the probability for a firm to be the only innovator is high. When firms cluster, they tend to invest more and take more risk in R&D compared to spatially dispersed firms. Agglomeration is welfare maximizing, because expected labor productivity is higher and firms choose a more effcient, technically diversified portfolio of R&D projects at the industry level.
    JEL: L13 O32 R12
    Date: 2005–09
  21. By: Russell Cooper; Hubert Kempf; Dan Peled
    Abstract: This paper studies the repayment of regional debt in a multiregion economy with a central authority: Who pays the obligation issued by a region? With commitment, a central government will use its taxation power to smooth distortionary taxes across regions. Absent commitment, the central government may be induced to bail out the regional government in order to smooth consumption and distortionary taxes across the regions. We characterize the conditions under which bailouts occur and their welfare implications. The gains to creating a federation are higher when the (government spending) shocks across regions are negatively correlated and volatile. We use these insights to comment on actual fiscal relations in three quite different federations: the U.S., the European Union and Argentina.
    Keywords: Taxation
    Date: 2005
  22. By: Brice Fallick; Charles A. Fleischmann; James A. Rebitzer
    Abstract: In Silicon Valley's computer cluster, skilled employees are reported to move rapidly between competing firms. This job-hopping facilitates the reallocation of resources towards firms with superior innovations, but it also creates human capital externalities that reduce incentives to invest in new knowledge. Using a formal model of innovation we identify conditions where the innovation benefits of job-hopping exceed the costs from reduced incentives to invest in human capital. These conditions likely hold for computers, but not in most other settings. Features of state law also favor high rates of inter-firm mobility in California. Outside of California, employers can use non-compete agreements to inhibit mobility, but these agreements are unenforceable in California. Using new data on labor mobility we find higher rates of job-hopping for college-educated men in Silicon Valley's computer industry than in computer clusters located out of the state. Mobility rates in other California computer clusters are similar to Silicon Valley's, suggesting some role for state laws restricting non-compete agreements. Consistent with our model of innovation, we also find that outside of the computer industry, California's mobility rates are no higher than elsewhere.
    JEL: R12 L63 O3 J63 J48
    Date: 2005–10
  23. By: Robert Pollin; Jeannette Wicks-Lim
    Abstract: In a new study by Yelowitz “Santa Fe’s Wage Ordinance and the Labor Market,” dated September 23, 2005 (published by the Employment Policies Institute) Yelowitz claims to have demonstrated that the Santa Fe living wage ordinance is responsible for significant, negative consequences for Santa Fe’s least educated residents, including a 9.0 percentage point increase in the city’s unemployment rate among such workers. However, he derives these findings through a presentation of evidence that is misleading and incomplete, misusing the available data. We replicate and extend Yelowitz’s model to look at job growth specifically, and, using the same data as Yelowitz, we find that the Santa Fe ordinance did not produce any decline at all in the availability of jobs. Moreover, our estimates suggest that the living wage ordinance did increase earned income for the average worker affected by the ordinance, even if we accept Yelowitz’s estimates on reduced hours of work. In short, even while relying on Yelowitz’s own model and estimates, we find that, to date, the Santa Fe ordinance has succeeded in achieving its main aims: to improve the quality of jobs for low-wage workers in Santa Fe without reducing their employment opportunities.
    Date: 2005

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