nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2005‒12‒09
thirty-six papers chosen by
Steve Ross
University of Connecticut

  1. Gentrification and Neighborhood Housing Cycles: Will America's Future Downtowns be Rich? By Jan K. Brueckner; Stuart S. Rosenthal
  2. Urban Growth and Subcenter Formation: A Trolley Ride from the Staples Center to Disneyland and the Rose Bowl By Marcus Berliant; Ping Wang
  3. Property Tax and Urban Sprawl. Theory and Implications for U.S. Cities By Song, Yan; Zenou, Yves
  4. Racial Sorting and Neighborhood Quality By Patrick Bayer; Robert McMillan
  5. The mechanisms of spatial mismatch By Gobillon, Laurent; Selod, Harris; Zenou, Yves
  6. How Fiscal Decentralization Flattens Progressive Taxes By Roland Hodler; Kurt Schmidheiny
  7. The Price and Quantity of Residential Land in the United States By Davis, Morris; Heathcote, Jonathan
  8. Sustainability of Urban Sprawl: Environmental-Economic Indicators for the Analysis of Mobility Impact in Italy By Chiara M. Travisi; Roberto Camagni
  9. Segregation in Networks By Giorgio Fagiolo; Marco Valente; Nicolaas J. Vriend
  10. Oppositional Identities and the Labour Market By Battu, Harminder; Mwale, MacDonald; Zenou, Yves
  11. Localized Learning Revisited By Anders Malmberg; Peter Maskell
  12. What are the Effects of Contamination Risks on Commercial and Industrial Properties? Evidence from Baltimore, Maryland By Alberto Longo; Anna Alberini
  13. Two Faces of the ICT Revolution: Desegregation and Minority-Majority Earnings Inequality By Martin Kahanec
  14. Property Rights for the Poor: Effects of Land Titling By Sebastian Galiani; Ernesto Schargrodsky
  15. Optimal Control and Spatial Heterogeneity: Pattern Formation in Economic-Ecological Models By Anastasios Xepapadeas; William Brock
  16. Crime and Police Resources: The Street Crime Initiative By Stephen Machin; Olivier Marie
  17. The geographical concentration of unemployment: A male-female comparison in Spain By Olga Alonso-Villar; Coral del Río
  18. Why Is the Timing of School Tracking So Heterogeneous? By Kenn Ariga; Giorgio Brunello; Roki Iwahashi; Lorenzo Rocco
  19. Equilibrium Correlation of Asset Price and Return By Charles Ka Yui Leung
  20. How Much is Too Much? The Influence of Preschool Centers on Children%u2019s Social and Cognitive Development By Susanna Loeb; Margaret Bridges; Bruce Fuller; Russ Rumberger
  21. Policy Innovation in Local Jurisdictions: Testing the Neighborhood Influence Against the Free-Riding Hypothesis By Johannes Rincke
  22. Property Crime and Law Enforcement in Italy. A Regional Panel Analysis 1980-95 By Guido Travaglini
  23. The Todaro Paradox Revisited By Yves Zenou
  24. Crime and Conformism By Patacchini, Eleonora; Zenou, Yves
  25. Demographic Change and Public Education Spending: A Conflict between Young and Old? By Ueli Grob; Stefan C. Wolter
  26. The Law od Demand in Tiebout Economies By Edward Cartwright; Myrna Wooders
  27. Water Consumption and Long-Run Urban Development: The Case of Milan By Mario Nosvelli; Antonio Musolesi
  28. Urban Air Quality and Human Health in Latin America and the Caribbean By Luis A. Cifuentes; Alan J. Krupnick; Raúl O'Ryan; Michael A. Toman
  29. Fiscal Federalism and Economic Growth By Jan K. Brueckner
  30. Job-Hopping in Silicon Valley: Some Evidence Concerning the Micro-Foundations of a High Technology Cluster By Bruce Fallick; Charles A. Fleischman; James B. Rebitzer
  31. Fiscal Competition and the Composition of Public Spending : Theory and Evidence By Rainald Borck; Marco Caliendo; Viktor Steiner
  32. A Bargaining Model of Tax Competition By Han, Seungjin; Leach, John
  33. Fiscal Relations Across Levels of Government in the United States By Thomas Laubach
  34. Individual Protection Against Property Crime: Decomposing the Effects of Protection Observability By Hotte, Louis; van Ypersele, Tanguy
  35. Tax Competition, Capital Mobility, and Innovation in the Public Sector By Prof. Dr. Michael Rauscher
  36. Dynamic Tax Competition and Public-Sector Modernisation By Daniel Becker

  1. By: Jan K. Brueckner; Stuart S. Rosenthal
    Abstract: This paper identifies a new factor, the age of the housing stock, that affects where high- and low-income neighborhoods are located in U.S. cities. High-income households, driven by a high demand for housing services, will tend to locate in areas of the city where the housing stock is relatively young. Because cities develop and redevelop from the center outward over time, the location of these neighborhoods varies over the city’s history. The model predicts a suburban location for the rich in an initial period, when young dwellings are found only in the suburbs, while predicting eventual gentrification once central redevelopment creates a young downtown housing stock. Empirical work indicates that if the influence of spatial variation in dwelling ages were eliminated, longstanding central city/suburban disparities in neighborhood economic status would be reduced by up to 50 percent. Model estimates further predict that between 2000 and 2020, central-city/suburban differences in economic status will widen somewhat in smaller cities but narrow sharply in the largest American cities as they become more gentrified.
    JEL: R00 R14
    Date: 2005
  2. By: Marcus Berliant (Washington University in St. Louis); Ping Wang (Washington University in St. Louis & NBER)
    Abstract: There have been long-term trends of urbanization and sustained growth across developed and developing countries over the past two centuries. Not only have more cities formed, but the leading metropolises have grown larger, with a number of peripheral subcenters developing over time. Conventional models of urban growth are limited, in that commuting cost and congestion eventually result in decreasing returns in a monocentric city as population becomes very large. In our paper, we construct an endogenous growth model with dynamic interactions between spatial agglomeration and urban development. In contrast with the conventional endogenous urban growth framework, our paper models explicitly the underlying growth-driven mechanism, namely location- dependent knowledge spillovers. Our contribution allows endogenous development of subcenters to offset diminishing returns from urban congestion, thus permitting sustained city growth.
    Keywords: Core-Periphery Urban Structure, Agglomerative Production Activity, Endogenous Formation of Cities
    JEL: C78 D51 R12
    Date: 2005–11–23
  3. By: Song, Yan; Zenou, Yves
    Abstract: This article attempts a formal analysis of the connection between property tax and urban sprawl in U.S. cities. We develop a theoretical model that includes households (who are also landlords) and land developers in a regional land market. We then test the model empirically based on a national sample of urbanized areas. The results we obtained from both theoretical and empirical analyses indicate that increasing property tax rates reduces the size of urbanized areas.
    Keywords: fully-closed city; instrumental variables; property tax; urban economics; urban sprawl
    JEL: H3 H71 R14
    Date: 2005–11
  4. By: Patrick Bayer; Robert McMillan
    Abstract: In cities throughout the United States, blacks tend to live in significantly poorer and lower-amenity neighborhoods than whites. An obvious first-order explanation for this is that an individual’’s race is strongly correlated with socioeconomic status (SES), and poorer households can only afford lower quality neighborhoods. This paper conjectures that another explanation may be as important. The limited supply of high-SES black neighborhoods in most U.S. metropolitan areas means that neighborhood race and neighborhood quality are explicitly bundled together. In the presence of any form of segregating preferences, this bundling raises the implicit price of neighborhood amenities for blacks relative to whites, prompting our conjecture -- that racial differences in the consumption of neighborhood amenities are significantly exacerbated by sorting on the basis of race, given the small numbers of blacks and especially high-SES blacks in many cities. To provide evidence on this conjecture, we estimate an equilibrium sorting model with detailed restricted Census microdata and use it to carry out informative counterfactual simulations. Results from these indicate that racial sorting explains a substantial portion of the gap between whites and blacks in the consumption of a wide range of neighborhood amenities -- in fact, as much as underlying socioeconomic differences across race. We also show that the adverse effects of racial sorting for blacks are fundamentally related to the small proportion of blacks in the U.S. metropolitan population. These results emphasize the significant role of racial sorting in the inter-generational persistence of racial differences in education, income, and wealth.
    JEL: H0 J7 R0 R2
    Date: 2005–12
  5. By: Gobillon, Laurent; Selod, Harris; Zenou, Yves
    Abstract: The Spatial Mismatch Hypothesis (SMH) argues that low-skilled minorities residing in U.S. inner cities experience poor labour-market outcomes because they are disconnected from suburban job opportunities. This assumption gave rise to an abundant empirical literature, which confirmed this hypothesis. Surprisingly, however, it is only recently that theoretical models have emerged, which probably explains why the mechanisms of spatial mismatch have long remained unclear and not properly tested. In this survey, we present relevant facts, review the theoretical models of spatial mismatch, confront their predictions with available empirical results, and indicate which mechanisms deserve further empirical tests.
    Keywords: discrimination; ghettos; segregation; urban unemployment
    JEL: J15 J41 R14
    Date: 2005–11
  6. By: Roland Hodler; Kurt Schmidheiny
    Abstract: We study the tension between fiscal decentralization and progressive taxation. We present a multi-community model in which households differ in incomes and housing preferences and in which the local income tax rate is a function of an exogenous progressive tax schedule and an endogenous local tax shifter. The progressivity of the tax schedule induces a self-sorting process that results in substantial though imperfect income sorting. The actual tax structure is thus less progressive than the exogenous tax schedule. Empirical evidence from the largest Swiss metropolitan area supports the predictions of our model.
    Keywords: progressive taxation, fiscal decentralization, income segregation
    JEL: H73 R23
    Date: 2005
  7. By: Davis, Morris; Heathcote, Jonathan
    Abstract: A house is a bundle comprising a physical structure and the plot of land upon which the house is built. Thus changes in house prices reflect changes in the cost of structures and value of land. In this paper we apply this insight to construct the first constant-quality price and quantity indexes for the aggregate stock of residential land in the United States. We document that the value of residential land exceeds annual GDP, and that the dynamics for the prices of residential land and residential structures are quite different. For example, the real price index for residential land almost tripled between 1975 and 2005, while the real price of structures increased by only 24 percent. Fluctuations in house prices at business cycle frequencies, including the recent boom, are primarily driven by changes in the price of land.
    Keywords: housing; land prices
    JEL: R14 R21 R31
    Date: 2005–11
  8. By: Chiara M. Travisi (DIG, Politecnico di Milano); Roberto Camagni (DIG, Politecnico di Milano)
    Abstract: Sound empirical and quantitative analysis on the relationship between different patterns of urban expansion and environmental or social costs of mobility are still very rare in Europe and the few studies available provide only a qualitative discussion on this. Recently, Camagni et al. (2002) have performed an empirical analysis on the metropolitan area of Milan, aimed at establishing whether different patterns of urban expansion generate different levels of land consumption and heterogeneous impacts of urban mobility. Results confirm the expectation that higher environmental impact of mobility is associated with more extensive and sprawling urban development, more recent urbanisation processes and residential specialisation. The present paper enlarges further the empirical analysis to seven Italian metropolitan areas (namely, Bari, Florence, Naples, Padua, Perugia, Potenza and Turin) to corroborate previous results for the Italian context. The novelty of the present paper is threefold. Firstly, we are interested in exploring the changes occurred to the intensity of the mobility impact across a ten-year period, from 1981 to 1991, corresponding to the Italian economic boom years. Secondly, using an econometric analysis in cross-section, we consider several metropolitan areas at once, being therefore able to explore whether there are significant differences in the way the model explains variations in the mobility impact across various Italian urban areas. Finally, we propose a conceptual interpretation of the causal chain in the explanation of the mobility impact intensity and we test it using Causal Path Analysis.
    Keywords: Urban mobility, Sprawl, Environmental sustainability, Collective costs
    JEL: Q56 R14 R41
    Date: 2005–09
  9. By: Giorgio Fagiolo (University of Verona, and Sant’Anna School of Advanced Studies, Pisa); Marco Valente (University of L’Aquila); Nicolaas J. Vriend (Queen Mary, University of London)
    Abstract: Schelling (1969, 1971, 1971, 1978) considered a simple model with individual agents who only care about the types of people living in their own local neighborhood. The spatial structure was represented by a one- or two-dimensional lattice. Schelling showed that an integrated society will generally unravel into a rather segregated one even though no individual agent strictly prefers this. We make a first step to generalize the spatial proximity model to a proximity model of segregation. That is, we examine models with individual agents who interact 'locally' in a range of network structures with topological properties that are different from those of regular lattices. Assuming mild preferences about with whom they interact, we study best-response dynamics in random and regular non-directed graphs as well as in small-world and scale-free networks. Our main result is that the system attains levels of segregation that are in line with those reached in the lattice-based spatial proximity model. In other words, mild proximity preferences can explain segregation not just in regular spatial networks but also in more general social networks. Furthermore, segregation levels do not dramatically vary across different network structures. That is, Schelling's original results seem to be robust also to the structural properties of the network.
    Keywords: Spatial proximity model, Social segregation, Schelling, Proximity preferences, Social networks, Undirected graphs, Best-response dynamics
    JEL: C72 C73 D62
    Date: 2005–11
  10. By: Battu, Harminder; Mwale, MacDonald; Zenou, Yves
    Abstract: We develop a model in which non-white individuals are defined with respect to their social environment (family, friends, neighbours) and their attachments to their culture of origin (religion, language), and in which jobs are mainly found through social networks. We find that, depending on how strong peer pressures are, nonwhites choose to adopt “oppositional” identities since some individuals may identify with the dominant culture and others may reject that culture, even if it implies adverse labour market outcomes.
    Keywords: ethnic minorities; identity; multiple equilibria; social networks; white's norm
    JEL: A14 J15
    Date: 2005–11
  11. By: Anders Malmberg; Peter Maskell
    Abstract: The concept of localized learning outlines how local conditions and spatial proximity between actors enable the formation of distinctive cognitive repertoires and influence the generation and selection of skills, processes and products within a field of knowledge or activity. The localized learning argument consists of two distinct yet related elements. One has to do with localized capabilities that enhance learning while the other concerns the possible benefits that firms with similar or related activities may accrue by locating in spatial proximity of one another. In this essay, we disentangle these two inherent elements of the concept, review some of the critique that has been raised against it, and sort out some misunderstandings that we think are attached to its present use.
    Date: 2005
  12. By: Alberto Longo (University of Bath); Anna Alberini (AREC, University of Maryland and Fondazione Eni Enrico Mattei)
    Abstract: Using the hedonic pricing approach, we investigate how the information released on public registries of contaminated and potentially contaminated sites affects nearby commercial and industrial properties in Baltimore, Maryland. We find that commercial and industrial properties are virtually unaffected by proximity to a site with a history of contamination. Knowing that the site is no longer considered contaminated does not have a rebound effect on property prices either. We also find that urban economic development policies, such as Empowerment Zones and Enterprise Zones, have little effect on property values. In sum, brownfield properties in Baltimore are not particularly attractive investments for developers, and there is little potential for self-sustaining cleanup based on appropriate fiscal incentives, such as Tax Increment Financing. It is doubtful that “one size fits all” measures to encourage the cleanup of contaminated sites can be successful in this context.
    Keywords: Contaminated sites registries, Distance to contaminated sites, Hedonic pricing model, Brownfields
    JEL: Q51 Q53 R33
    Date: 2005–09
  13. By: Martin Kahanec (IZA Bonn)
    Abstract: Social interaction is the primary vehicle through which advancement of information and communication technologies (ICT) affects socio-economic outcomes. In the context of minority-majority relations, social distances and segregation determine the benefits individuals gain from social interaction and from improvement of its efficiency. In the general equilibrium framework, this paper argues that ICT advancement disproportionately increases the efficiency of social interaction in ethnically integrated social networks and that of majority individuals, thereby causing desegregation and increasing interethnic earnings inequality at the same time. The argument thus explains the concurrence of two seemingly contradicting developments in the lives of Black and White Americans since the late 1970s - rising interethnic earnings inequality and desegregation of Blacks. Furthermore, I establish that there is a threshold level of ICT below which all minority individuals prefer segregated neighborhoods and above which some minority individuals choose to integrate, thereby reaping the efficiency benefits of social interaction with the larger society. I interpret the reversal of the segregation trend that occurred in the late 1970s as a consequence of advancement of ICT beyond this threshold level. Finally, I suggest an explanation of why typically no desegregation occurred in extraordinarily segregated areas and in the case of recent immigrants.
    Keywords: segregation, earnings inequality, minority, social interaction, ICT revolution, migration
    JEL: J15 J71 O15 O33
    Date: 2005–12
  14. By: Sebastian Galiani; Ernesto Schargrodsky
    Abstract: Secure property rights are considered a key determinant of economic development. The evaluation of the causal effects of land titling, however, is a difficult task as the allocation of property rights is typically endogenous. We exploit a natural experiment in the allocation of land titles to overcome this identification problem. More than twenty years ago, a group of squatters occupied a piece of land in a poor suburban area of Buenos Aires. When the Congress passed a law expropriating the land from the former owners with the purpose of entitling it to the occupants, some of the original owners accepted the government compensation, while others are still disputing the compensation payment in the slow Argentine courts. These different decisions by the former owners generated an allocation of property rights that is exogenous in equations describing the behavior of the squatters. We find that entitled families increased housing investment, reduced household size, and improved the education of their children relative to the control group. However, effects on credit access are modest and there are no effects on labor income.
    Date: 2005
  15. By: Anastasios Xepapadeas (University of Crete); William Brock (University of Wisconsin)
    Abstract: This paper extends Turing analysis to standard recursive optimal control frameworks in economics and applies it to dynamic bioeconomic problems where the interaction of coupled economic and ecological dynamics under optimal control over space creates (or destroys) spatial heterogeneity. We show how our approach reduces the analysis to a tractable extension of linearization methods applied to the spatial analog of the well known costate/state dynamics. We explicitly show the existence of a non-empty Turing space of diffusive instability by developing a linear-quadratic approximation of the original non-linear problem. We apply our method to a bioeconomic problem, but the method has more general economic applications where spatial considerations and pattern formation are important. We believe that the extension of Turing analysis and the theory associated with the dispersion relationship to recursive infinite horizon optimal control settings is new.
    Keywords: Spatial analysis, Pattern formation, Turing mechanism, Turing space, Pontryagin’s principle, Bioeconomics
    JEL: Q2 C6
    Date: 2005–07
  16. By: Stephen Machin (University College London, CEP, London School of Economics and IZA Bonn); Olivier Marie (CEP, London School of Economics)
    Abstract: In this paper we look at links between police resources and crime in a different way to the existing economics of crime work. To do so we focus on a large-scale policy intervention - the Street Crime Initiative - that was introduced in England and Wales in 2002. This allocated additional resources to some police force areas to combat street crime, whereas other forces did not receive any additional funding. Estimates derived from several empirical strategies show that robberies fell significantly in SCI police forces relative to non-SCI forces after the initiative was introduced. Moreover, the policy seems to have been a cost effective one, even after allowing for possible displacement or diffusion effects onto other crimes and adjacent areas. There is some heterogeneity in this positive net social benefit across different SCI police forces, suggesting that some police forces may have made better use of the extra resources than others. Overall, we reach the conclusion that increased police resources do in fact lead to lower crime, at least in the context of the SCI programme we study.
    Keywords: street crime, police resources, cost effectiveness
    JEL: H00 H5 K42
    Date: 2005–11
  17. By: Olga Alonso-Villar (Universidade de Vigo); Coral del Río (Universidade de Vigo)
    Abstract: This paper aims at complementing the approach presented by Johnston et al. (2003) with tools from the literature on economic geography and income distribution in order to perform a thorough analysis of the spatial concentration of unemployment. Apart from using such empirical procedures in the field of labour economy, the paper shows the complementarities that both approaches have when trying to look into distributive issues from a spatial perspective. For that purpose, the paper analyses the spatial distribution of unemployment in Spain, with a thorough analysis of the differences between male and female patterns.
    Keywords: unemployment; spatial concentration; municipalities.
    Date: 2005–11
  18. By: Kenn Ariga (Kyoto Institute of Economic Research); Giorgio Brunello (Padova University, CESifo and IZA Bonn); Roki Iwahashi (University of the Ryukyus, Okinawa); Lorenzo Rocco (Padova University)
    Abstract: Secondary schools in the developed world differ in the degree of differentiation and in the first age of selection of pupils into different tracks. In this paper, we account for the heterogeneity of tracking time with a simple stochastic model which conjugates the returns from specialization with the costs of early selection. We calibrate the model for 20 countries - including most of Europe, the US and Japan - and show that the model performs rather well in replicating the observed heterogeneity, with the remarkable exception of Germany.
    Keywords: tracking, secondary schools
    JEL: H52 H73
    Date: 2005–11
  19. By: Charles Ka Yui Leung
    Abstract: Two empirical questions concerning the equity and housing have been studied extensively: (1) Are the price and return serially correlated, and (2) What is the optimal weight of housing in the portfolio? The answer to the second question crucially depends on the cross-correlation of assets. This paper complements the literature by building a simple dynamic general equilibrium with fully rational agents, and obtain closed form solutions for the implied auto- and cross-correlations. The length of time horizon, as well as the persistence of economic shock matter. Implications and future research directions are then discussed.
    Keywords: rational expectation, price and return, serial and cross correlation, market efficiency, predictability
    JEL: E30 G10 R20
    Date: 2005–11
  20. By: Susanna Loeb; Margaret Bridges; Bruce Fuller; Russ Rumberger
    Abstract: Previous research has demonstrated that attending center care is associated with cognitive benefits for young children. However, little is known about the ideal age for children to enter such care or the "right" amount of time, both weekly and yearly, for children to attend center programs. Using national data from the Early Childhood Longitudinal Study (ECLS-K), this paper asks whether there are optimal levels of center care duration and intensity and whether these levels vary by race or income. We consider pre-reading and math skills as measured by assessments administered at the beginning of kindergarten, as well as teacher-reported social-behavioral measures. We find that on average attending center care is associated with positive gains in pre-reading and math skills, but negative social behavior. Across economic levels, children who start center care between ages two and three see greater gains than those who start centers earlier or later. Further, starting earlier than age 2 is related to more pronounced negative social effects. Results for center intensity vary by income levels and race. For instance, poor and middle-income children see academic gains from attending center intensively (more than 30 hours a week), but wealthier children do not; and while intense center negatively impacts Black and White's social development, it does not have any negative impact for Hispanic children.
    JEL: I2 I3
    Date: 2005–12
  21. By: Johannes Rincke (Zentrum für Europäische Wirtschaftsforschung)
    Abstract: Before making di±cult decisions, individuals tend to collect information on decision makers in reference groups. With respect to policy innovations in a decentralized public sector, this may give rise to positive neighborhood influence on adoption decisions. On the other hand, due to learning externalities, an incentive exists to free-ride on policy experiments of others. In this paper, U.S. data on school district policies are used to show that with respect to policy experiments, decision makers indeed are heavily affected by decision makers in reference groups. The results suggest that if a given district's neighbors' expected benefits from adopting a new policy increase, this substantially increases the original district's probability of adoption. The paper thus rejects the free-riding hypothesis and supports the view that in federal systems the discusion of policy innovations is stimulated by horizontal interactions between jurisdictions.
    JEL: D6 D7 H
    Date: 2005–11–23
  22. By: Guido Travaglini (Università 'La Sapienza' Roma)
    Abstract: In this paper a Cobb-Douglas utility function is introduced and solved for a dynamic equation of property crime supply and its determinants, namely deterrents and income. Thereafter, all variables are empirically tested, by means of a simultaneous equations model, for the sign and magnitude of their mutual relationships in a panel of Italy and its two economically and culturally different areas, the North and the South. The period scrutinized is 1980-95 and the results obtained widely differ among the two. When appropriately modeled and instrumented, in fact, property crime is found to react to police and criminal justice deterrence, and also to incomes, with different parameter magnitudes and significance. The same diversity applies to the parameters related to deterrence, flawed in quite a few cases by scarce law enforcement and productivity, and to those related to local incomes, which still reflect for the South a tendency of crime to substitute for legal activities.
    Keywords: Models with Panel Data, Illegal Behavior and the Enforcement of Law
    JEL: C33 K42
    Date: 2005–12–01
  23. By: Yves Zenou (IUI, GAINS and IZA Bonn)
    Abstract: The Todaro Paradox states that policies aimed at reducing urban unemployment are bound to backfire: they will raise rather than reduce urban unemployment. The aim of this paper is to reexamine this paradox in the context of efficiency wage and search-matching models. For that, we study a policy that consists in decreasing the urban unemployment benefit. In an efficiency wage model, we find that there is no Todaro paradox while this is not always true in a search-matching model since a decrease in the urban unemployment benefit can increase both urban employment and unemployment.
    Keywords: efficiency wages, search-matching, rural-urban migration, policy
    JEL: D83 J41 J64 O15
    Date: 2005–11
  24. By: Patacchini, Eleonora; Zenou, Yves
    Abstract: We propose a simple conformism model that explains how parental education and peer pressure impact on criminal activities. We then test the model using the U.S. National Longitudinal Survey of Adolescent Health (AddHealth), which contains unique information on friendship relationships among delinquent teenagers. We find that conformity is very strong within groups of delinquents and that the higher the taste for conformity of an individual, the lower the deviation from the norm's group. These results suggest that, for teenagers, the decision to commit crimes is not a simple choice based primarily on individual considerations but is strongly affected by their environment and peers.
    Keywords: conformism; juvenile crime; norms; parents' education
    JEL: A14 I21 K42
    Date: 2005–11
  25. By: Ueli Grob; Stefan C. Wolter
    Abstract: Demographic change in industrial countries will influence educational spending in potentially two ways. On the one hand, the decline in the number of school-age children should alleviate the financial pressure. On the other hand, the theoretical/empirical literature has established that the concomitantly increasing proportion of elderly in the population can influence the propensity of politicians to spend on education. Using a panel of the Swiss Cantons for the period from 1990 to 2002, we find that the education system has exhibited little elasticity in adjusting to changes in the school-age population, and that the share of the elderly population has a significantly negative influence on the willingness to spend on public education.
    Keywords: public finance, education finance, demographics, panel estimates, Switzerland
    JEL: H72 I22 J18
    Date: 2005
  26. By: Edward Cartwright (Department of Economics, Keynes College, University of Kent); Myrna Wooders (Department of Economics, Vanderbilt University)
    Abstract: We consider a general equilibrium local public goods economy in which agents have two distinguishing characteristics. The first is 'crowding type,' which is publicly observable and provides direct costs or benefits to the jurisdiction (coalition or firm) the agent joins. The second is taste type, which is not publicly observable, has no direct effects on others and is defined over private good, public goods and the crowding profile of the jurisdiction the agent joins. The law of demand suggests that as the quantity of a given crowding type (plumbers, lawyers, smart people, tall people, nonsmokers, for example) increases, the compensation that agents of that type receive should go down. We provide counterexamples, however, that show that some agents of a given crowding type might actually benefit when the proportion of agents with the same crowding type increases. This reversal of the law of demand seems to have to do with an interaction effect between tastes and skills, something difficult to study without making these classes of characteristics distinct. We argue that this reversal seems to relate to the degree of difference between various patterns of tastes. In particular, if tastes are homogeneous, the law of demand holds. This paper is to appear in a volume on Tiebout economies, to be published by the Lincoln Institute.
    JEL: H41 D46 D71
    Date: 2005–11
  27. By: Mario Nosvelli (CERIS – DSE, CNR (National Research Council)); Antonio Musolesi (CERIS – DSE, CNR (National Research Council))
    Abstract: Analyses of long run consumption series are rare in literature. We study the evolution of water consumption in Milan in the twentieth century. The objective is twofold: on one side, the univariate analysis tries both to assess the impact of relevant socio-economic and environmental changes on water consumption in Milan and verify if consumers have deeply rooted consumption habits. On the other side, the multivariate analysis is used to identify the socio-economic factors that are relevant in explaining consumption evolution. Results indicate both that water users have well entrenched consumption habits and that population, climate and economic structure behave more similarly, in Euclidean terms, to water consumption than to other economic and social variables.
    Keywords: Urban consumption, Long-run, Development, Environmental changes
    JEL: Q25 R1 C22 C19
    Date: 2005–09
  28. By: Luis A. Cifuentes; Alan J. Krupnick; Raúl O'Ryan; Michael A. Toman
    Abstract: This working paper is being published with the objective of contributing to the debate on a topic of importance to the region, and to elicit comments and suggestions from interested parties. This paper has not undergone consideration by the SDS Management Team. As such, it does not reflect the official position of the Inter-American Development Bank.
    Date: 2005
  29. By: Jan K. Brueckner
    Abstract: This paper uses an endogenous-growth model with overlapping generations to explore the connection between fiscal federalism and economic growth. The analysis shows that federalism, which allows public-good levels to be tailored to suit the differing demands of young and old consumers, who live in different jurisdictions, increases the incentive to save. This stronger incentive in turn leads to an increase in investment in human capital, and a byproduct of this higher investment is faster economic growth.
    JEL: H10 H70
    Date: 2005
  30. By: Bruce Fallick (Federal Reserve System); Charles A. Fleischman (Federal Reserve System); James B. Rebitzer (Case Western Reserve University, The Levy Economics Institute, & The National Bureau of Economic Research)
    Abstract: Observers of Silicon Valley’s computer cluster report that employees move rapidly between competing firms, but evidence supporting this claim is scarce. Job-hopping is important in computer clusters because it facilitates the reallocation of talent and resources toward firms with superior innovations. 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 features of California law that make non-compete agreements unenforceable. Consistent with our model of innovation, mobility rates outside of computer industries are no higher in California than elsewhere.
    Keywords: agglomerations, clusters, non-compete agreements, human capital, innovation, Silicon Valley, modular production.
    JEL: R12 L63 O3 J63
    Date: 2005–12–02
  31. By: Rainald Borck; Marco Caliendo; Viktor Steiner
  32. By: Han, Seungjin; Leach, John
    Abstract: This paper develops a model in which competing governments offer financial incentives to individual firms to induce the firms to locate within their jurisdictions. Equilibrium is described under three specifications of the supplementary taxes. There is no misallocation of capital under two of these specifications, and there might or might not be capital misallocation under the third. This result contrasts strongly with that of the standard tax competition model, which does not allow governments to treat firms individually. That model almost always finds that competition among governments leads to the misallocation of capital.
    Date: 2005–12–02
  33. By: Thomas Laubach
    Abstract: This paper discusses the current state of fiscal relations between the federal, state and local governments in the United States and suggests directions for improvement. The significant degree of fiscal autonomy of the states and, to a lesser extent, of local governments has had several beneficial effects, including the responsiveness of public expenditure to local preferences and the comparatively high degree of accountability through the close link between revenue-raising powers and expenditure assignments. This link reflects traditionally weak support for redistribution across jurisdictions. Grants from the federal to sub-national governments are focused on achieving aims of an efficiency or paternalistic nature and are therefore all earmarked. Programme devolution to the states, notably in the welfare area, has been remarkably successful in fostering innovation in programme design, but the cost pressures in health care for the indigent are such that greater federal involvement might become necessary. The efficiency with which states raise revenues has been compromised by the erosion of their tax bases, notably for corporate income and sales taxes. Replacing these taxes with a less distorting form of indirect taxation could reverse this trend. Finally, state balanced budget requirements appear to have had salutary effects, but more extreme forms of fiscal rules have reduced state and local governments' ability to provide the desired level of public goods. This Working Paper relates to the 2005 OECD Economic Survey of the United States ( <P>Les relations budgétaires entre les différents niveaux d'administration aux États-Unis On fera le point dans cet article sur les relations budgétaires entre l’État fédéral, les États fédérés et les collectivités locales tout en examinant les mesures qui pourraient être prises pour améliorer ces relations. La large autonomie budgétaire des États et, dans une moindre mesure, des collectivités locales, a eu plusieurs effets bénéfiques, en particulier la réactivité des dépenses publiques aux préférences locales et une responsabilité relativement étendue du fait du lien étroit entre les prérogatives fiscales et les obligations de dépenses. Ce lien reflète traditionnellement le faible rôle de la redistribution entre les collectivités territoriales. Les subventions fédérales aux administrations infranationales sont accordées en fonction d’objectifs d’efficience ou de préoccupations à caractère paternaliste et sont donc toujours préaffectées. La décentralisation des programmes au niveau des États, en particulier pour la protection sociale, s’est révélée très fructueuse en favorisant l’innovation dans la conception des mesures, mais les coûts sont tels pour les soins de santé en faveur des catégories défavorisées qu’une plus forte participation fédérale pourrait être nécessaire. L’érosion des bases d’imposition, notamment pour l’impôt sur les sociétés et pour la taxe sur les ventes, compromet une collecte efficiente des recettes des États. On pourrait inverser cette tendance en substituant à ces impôts une forme de taxation indirecte qui créerait moins de distorsions. Enfin, l’obligation d’équilibre budgétaire au niveau des États paraît avoir été salutaire, mais les règles de discipline budgétaire sous leurs formes les plus extrêmes ont entravé la fourniture, par les États et les collectivités locales Ce document de travail se rapporte à l'Étude économique de l'OCDE des États-Unis 2005 (
    Keywords: fiscal federalism, fiscal rules, fédéralisme budgétaire, subvention, grants, welfare reform, Medicaid, state and local taxes, balanced budget requirements, tax and expenditure limitations, réforme de la protection sociale, Medicaid, impôts des Etats et des collectivités locales, règles de discipline budgétaire, obligation d'équilibre budgétaire, plafonds d'impôts et de dépenses
    JEL: H23 H51 H52 H53 H71 H72 H74 H77
    Date: 2005–11–29
  34. By: Hotte, Louis; van Ypersele, Tanguy
    Abstract: We revisit the question of the efficiency of individual decisions to be protected against crime for the cases of both observable and unobservable protection. We obtain that observable protection is unambiguously associated with a negative externality and that at the individual level, it has a deterrence effect but no payoff reduction effect. Unobservable protection has a global deterrence effect and is associated with a private payoff reduction effect but no private deterrence effect. A decrease in the global crime payoff is detrimental to a victim if protection is observable, while it is beneficial with unobservable protection. While protection has a positive diversion effect when observable, it has the equivalent of a negative diversion effect when unobservable.
    Keywords: crime; efficiency; private protection
    JEL: D62 D82 K42
    Date: 2005–10
  35. By: Prof. Dr. Michael Rauscher (University of Rostock)
    Abstract: The paper analyses the impact of tax competition on innovation in the public sector. It is shown that the effects of increased mobility of the tax base on innovation and growth are ambiguous. The negative relationship is more likely, however. Moreover, it is shown that a Leviathan government may be induced to spend a larger share of its budget on unproductive activities.
    Keywords: tax competition, economic growth, innovation, Leviathan competition, North-South model.
    JEL: H21 H7 O31 O41
    Date: 2005
  36. By: Daniel Becker (University of Rostock)
    Abstract: This paper addresses the question whether increased mobility of capital en- hances public-sector modernisation. Public-sector modernisation is modelled as the accumulation of knowledge that serves as an input in the government’s production of a consumption good that is redistributed to households. The tax competition model in the background is a dynamic model in which capital flight induced by taxation is a process that takes time. The speed with which firms can relocate capital to other jurisdictions is taken as a measure of the degree of capital mobility. The main result of the paper is a contradiction of the idea that the competitive pressure caused by increased capital mobility enhances public sector modernisation.
    Keywords: public-sector modernisation, redistribution, dynamic tax competition, imperfect capital mobility
    JEL: H11 H77 H54 O40
    Date: 2005

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