nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2006‒04‒08
twenty-two papers chosen by
Steve Ross
University of Connecticut

  1. Modeling Travel Demand in a Metropolitan City: Case Study of Bangalore, India By Pangotra Prem; Sharma Somesh
  2. A Public Private Partnership Model for Managing Urban Health: A Study of Ahmedabad City By Ramani K V; Mavalankar Dileep; Patel Amit; Mahandiratta Sweta; Bhardwaj Rohini; Joshi Diptesh
  3. Racial Identity and Education By Eleonora Patacchini; Yves Zenou
  4. How Important is Access to Jobs? Old Question - Improved Answer By Aslund, Olof; Östh, John; Zenou, Yves
  5. Public-Private Partnership and Schooling Outcomes across Countries By Ludger Woessmann
  6. Peer Effects, Social Multipliers and Migrants at School: An International Comparison By Horst Entorf; Martina Lauk
  7. R&D and Strategic Industrial Location in International Oligopolies By Garcia Pires, Armando José
  8. A Signaling Theory of Grade Inflation By William Chan; Hao Li; Wing Suen
  9. Affordability of Housing: Concepts, Measurement and Evidence By Mark Robinson; Grant M. Scobie; Brian Hallinan
  10. A Revealed Preference Approach to the Measurement of Congestion in Travel Cost Models By Christopher Timmins; Jennifer Murdock
  11. Cheap Talk in the Classroom By Lydia Mechtenberg
  12. Ethnic Specialization and Earnings Inequality: Why Being a Minority Hurts but Being a Big Minority Hurts More By Martin Kahanec
  13. On the Costs of Policies to Reduce Greenhouse Gases from Passenger Vehicles By Parry, Ian W.H.
  14. First in Village or Second in Rome By Ettore Damiano; Hao Li; Wing Suen
  15. Efficient Revenue Sharing and Upper Level Governments: Theory and Application to Germany By Thiess Büttner; Sebastian Hauptmeier; Robert Schwager
  16. Youth Unemployment and Crime in France By Fougère, Denis; Kramarz, Francis; Pouget, Julien
  17. Prison-Based Education and Re-Entry into the Mainstream Labor Market By John H. Tyler; Jeffrey R. Kling
  18. Can New Orleans Play Its Way Past Katrina? The Role of Professional Sports in the Redevelopment of New Orleans By Victor Matheson; Robert Baade
  19. Regional Effects on Employer Provided Training: Evidence from Apprenticeship Training in Switzerland By Samuel Muehlemann; Stefan C. Wolter
  20. Incentives for separation and incentives for public good provision By Klaas Staal
  21. The Bologna Process: How Student Mobility Affects Multi-Cultural Skills and Educational Quality By Lydia Mechtenberg; Roland Strausz
  22. The distributional incidence of residential water and electricity subsidies By Abdullah, Roohi; Wodon, Quentin; Foster, Vivien; Halpern, Jonathan; Komives, Kristin

  1. By: Pangotra Prem; Sharma Somesh
    Abstract: Increasing urbanization, population growth and rising incomes have led to rapid growth of travel demand in Indian cities. The paper provides a modeling approach for forecasting urban travel demand and assessing public transport options for large metropolitan cities. A travel characteristics model is used to forecast the pattern of travel demand in Bangalore city up to the year 2014. The paper examines the scope of a public bus transport service and a mass rapid transit system for meeting the projected travel demand and thereby curtailing the growth of personal vehicles in the city.
    Date: 2006–03–28
  2. By: Ramani K V; Mavalankar Dileep; Patel Amit; Mahandiratta Sweta; Bhardwaj Rohini; Joshi Diptesh
    Abstract: Urbanization is an important demographic shift worldwide. India’s urban population of 300 million represents 30 % of its total population; with the slum population in urban cities registering a 5 % growth in the last few years. Responding to the healthcare needs of urban poor is therefore very essential. Government of India focus has been mainly on rural health till the late 90s. Recognizing the urgency to manage urban health for the vulnerable sections of our population, the 9th and 10th Five Year Plans of the Government of India have laid special emphasis on developing a well structured network of urban primary care institutions. Ahmedabad city (also known as Ahmedabad Municipal Corporation, AMC) is the sixth largest city in India with a population of 3.5 million spread over 192 square kilometers, across 43 wards. AMC has nearly 2500 slums and chawls housing approximately 1.5 million people. Out of 43 wards in AMC, 9 wards which house more than 20 % of AMC population, have no government health facility at all. With more than 3500 private health facilities in AMC, it is therefore worthwhile to explore Public Private Participation (PPP) to improve the delivery of healthcare services. In this working paper, we outline our approach to developing a PPP model for a decentralized and integrated primary healthcare center for each ward of AMC. Our model is built on a clear understanding of the socio-economic profile, status of public health, and the healthcare seeking habits of Ahmedabad population. Our GIS (Geographic Information System) methodology guides the AMC authorities to identify good locations for urban health center (UHC) so as to ensure availability, affordability, accessibility, and equity to primary healthcare facilities to the slum populations. We illustrate our methodology for Vasna and Naroda wards in AMC.
    Keywords: Urban poor, availability, affordability, access, equity, GIS, PPP
    Date: 2006–03–27
  3. By: Eleonora Patacchini (University of Rome "La Sapienza"); Yves Zenou (IUI, GAINS, CEPR and IZA Bonn)
    Abstract: We investigate the sources of differences in school performance between students of different races by focusing on identity issues. We find that having a higher percentage of same-race friends has a positive effect of white teenagers’ test score while having a negative effect on blacks’ test scores. However, the higher the education level of a black teenager’s parent, the lower this negative effect, while for whites, it is the reverse. It is thus the combination of the choice of friends (which is a measure of own identity) and the parent’s education that are responsible for the difference in education attainment between students of different races but also between students of the same race. One interesting aspects of this paper is to provide a theoretical model that grounds the instrumental variable approach used in the empirical analysis to deal with endogeneity issues.
    Keywords: ethnic minorities, peer effects, education achievement, endogeneity issues
    JEL: A14 I21 J15 J24
    Date: 2006–03
  4. By: Aslund, Olof; Östh, John; Zenou, Yves
    Abstract: We study the impact of job proximity on individual employment and earnings. The analysis exploits a Swedish refugee dispersal policy to get exogenous variation in individual locations. Using very detailed data on the exact location of all residences and workplaces in Sweden, we find that having been placed in a location with poor job access in 1990-91 adversely affected employment in 1999. Doubling the number of jobs in the initial location in 1990-91 is associated with 2.9 percentage points higher employment probability in 1999. The analysis suggests that residential sorting leads to underestimation of the impact of job access.
    Keywords: endogenous location; natural experiment; spatial mismatch
    JEL: J15 J18 R23
    Date: 2006–03
  5. By: Ludger Woessmann
    Abstract: The paper provides a comparative analysis of the association between student achievement and public-private partnerships (PPPs) in schooling across countries. Student-level data from the PISA international achievement test provides information on the public-private character of both operation and funding of each tested school. Across countries, public operation is associated with lower student outcomes, but public funding with better student outcomes. Thus, systems of PPPs that combine private operation with public funding do best among all possible operation-funding combinations, while PPPs that combine public operation with private funding do worst. The advantage of private operation is particularly strong in countries with large shares of public funding.
    JEL: H42 H52 I20 L33
    Date: 2006
  6. By: Horst Entorf (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Martina Lauk (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology))
    Abstract: This article analyses the school performance of migrants dependent on peer groups in different international schooling environments. Using data from the international OECD PISA test, we consider social interaction within and between groups of natives and migrants. Results based on social multipliers (Glaeser et al. 2000, 2003) suggest that both native-to-native and migrant-to-migrant peer effects are higher in ability-differencing school systems than in comprehensive schools. Thus, non-comprehensive school systems seem to magnify the prevailing educational inequality between students with a low parental socioeconomic migration background and children from more privileged families.
    Keywords: Peer effects, migration, education, social multipliers, school systems, parental socioeconomic background
    Date: 2006–03
  7. By: Garcia Pires, Armando José
    Abstract: In a spatial economy where oligopolist firms compete in R&D, it is found that geography affects the innovative behaviour of firms. Notably, international differences in market size conduce to endogenous asymmetries between firms given that firms located in the country with more demand have stronger incentives to invest in R&D. This 'R&D linkage' between demand and competitiveness promotes firms to strategically delocalize to the larger country. As a result, a spatial equilibrium arises with only total or partial agglomeration, but never with symmetric dispersion.
    Keywords: agglomeration effects; asymmetric firms; industrial location; oligopoly; R&D investment
    JEL: F12 L13 O31 R3
    Date: 2006–03
  8. By: William Chan; Hao Li; Wing Suen
    Abstract: When employers cannot tell whether a school truly has many good students or just gives easy grades, schools have an incentive to inflate grades to help mediocre students, despite concerns about preserving the value of good grades for good students. We construct a signaling model where grades are inflated in equilibrium. The inability to commit to an honest grading policy reduces the informativeness of grades and hurts schools. Grade inflation by one school makes it easier for another school to fool the market with inflated grades. Easy grades are strategic complements, providing a channel to make grade exaggeration contagious.
  9. By: Mark Robinson; Grant M. Scobie; Brian Hallinan (New Zealand Treasury)
    Abstract: There has recently been widespread public debate and media attention around housing affordability. This paper discusses the concept of affordability as it applies to housing, examines the approaches used to measure affordability, and then documents the aggregate evidence for New Zealand over the last twenty years. We largely use the Household Economic Survey conducted by Statistics New Zealand to obtain our data. We conclude that affordability is difficult to define and that there is no consensus as to the best way to measure it. Using a range of measures, we examine the trends over time. Our data reveals no long-term trend in affordability when considering all measures. Different measures show different movements over time. Affordability has appeared to move in cycles over the last twenty years.
    Keywords: housing; affordability; New Zealand
    JEL: R20
    Date: 2006–03
  10. By: Christopher Timmins; Jennifer Murdock
    Abstract: Travel cost models are regularly used to determine the value of recreational sites or particular site characteristics, yet a key site attribute, congestion, is often excluded from such analyses. One of several reasons is that congestion (unlike many other site attributes) is determined in equilibrium by the process of individuals sorting across sites, and thus presents significant endogeneity problems. This paper illustrates this source of endogeneity, describes how previous research has dealt with it by way of stated preference techniques, and describes an instrumental variables approach to address it in a revealed preference context. We demonstrate that failing to address the endogeneity of congestion will likely lead to the understatement of its costs, and possibly to the mistaken recovery of agglomeration benefits. We apply our technique to the valuation of a large recreational fishing site in Wisconsin (Lake Winnebago) which, if eliminated, would induce significant re-sorting of anglers amongst remaining sites. In our application, ignoring congestion leads to an understatement of the lake’s value by more than 50 percent.
    JEL: Q51
  11. By: Lydia Mechtenberg
    Abstract: In this paper, I o¤er a theoretical explanation of the robust gender differences in educational achievement distributions of school children. I consider a one shot cheap talk game with two different types of senders (biased teachers and fair teachers), two types of receivers ("normal" and "special" pupils) and uncertainty about the sender type on the side of the receiver. I demonstrate that the group of pupils who, in expectation, get either too much or too little encouragement will have less top achievers and a lower average achievement than the group of pupils who get a more accurate feedback message, even if the prior talent distribution is the same for both groups of pupils.
    Keywords: Cheap talk, Education, Discrimination, Gender
    JEL: D82 I21 J16
    Date: 2006–03
  12. By: Martin Kahanec (IZA Bonn)
    Abstract: Social interaction is an important vehicle of human capital acquisition and its efficiency decreases in social distance. In this paper I establish that these two premises, given the socio-cultural differences between ethnic groups, explain the puzzling evidence that (i) minorities typically earn less than majorities and (ii) this earnings gap is increasing in the relative size of a minority in a given region. In particular, I argue that inter-ethnic social distance disadvantages smaller ethnic groups in human capital acquisition and that these efficiency differentials systematically expose minority and majority individuals to different incentives as concerns their choice of skills. As a result, minority and majority individuals tend to acquire different (combinations of) skills and the textbook substitution effect drives an efficiency unit of minority labor to sell at a relatively lower wage in a region with higher percentage of minority people. The conditions under which the efficiency disadvantage of the minority in social interaction and the substitution effect explain the abovementioned empirical findings are established. In addition, this study offers an answer why some minorities earn more than majorities, why minority individuals tend to spend more time socializing in families than in schools, and why integration may harm minorities.
    Keywords: human capital, earnings inequality, labor market, minority, network externalities, social interaction, ethnic specialization
    JEL: J15 J24 J70 O15
    Date: 2006–03
  13. By: Parry, Ian W.H. (Resources for the Future)
    Abstract: Energy models suggest that the cost of reducing carbon emissions from the transportation sector is high relative to other sectors, such as electricity generation. However, this paper shows that taxes to reduce passenger vehicle emissions produce large net benefits, rather than costs, when account is taken of: (a) their impact on reducing non-carbon externalities from passenger vehicle use, and (b) interactions with the broader fiscal system. Both of these considerations also strengthen the case for using a tax-based approach to reduce emissions over fuel economy regulation, while fiscal considerations strengthen the case for taxes over (non-auctioned) emissions permits.
    Keywords: carbon policies, passenger vehicles, externalities, welfare costs
    JEL: Q54 R48 H23
    Date: 2006–03–24
  14. By: Ettore Damiano; Hao Li; Wing Suen
    Abstract: Though individuals prefer to join groups with high quality peers, there are also advantages from being high up in the pecking order within the group. We show that sorting of agents in this environment results in an overlapping interval structure in the type space. Segregation and mixing coexist in a stable equilibrium. A greater degree of egalitarianism within organizations leads to greater segregation across organizations. Policies that are effective for lower-quality organizations to attract talent may be counterproductive for higher-quality organizations to retain talent. The degree and the pattern of segregation are shown to depend also on whether higher types are less concerned with relative ranking within the organization, on relative size of organizations, and on the extent of idiosyncratic preferences for other organizational attributes.
  15. By: Thiess Büttner; Sebastian Hauptmeier; Robert Schwager
    Abstract: Recent literature has emphasized that redistributive grant systems may tend to internalize fiscal externalities arising from tax competition. This paper further explores the conditions under which local grant systems enforced by the state government will enhance efficiency. A system of redistributive grants among governments is introduced into a standard model of tax competition. This basic model is then extended in order to allow for variations in the government objectives at the state level. A subsequent empirical analysis of local tax policy exploits the experience with local fiscal revenue sharing in Germany. The results suggest that attempts of state level governments to extract fiscal resources from the local revenue sharing system exert an upward pressure on tax rates.
    Keywords: fiscal equalization, tax competition, fiscal federalism, Germany
    JEL: H71 H77
    Date: 2006
  16. By: Fougère, Denis; Kramarz, Francis; Pouget, Julien
    Abstract: In this paper we examine the influence of unemployment on property crimes and on violent crimes in France for the period 1990 to 2000. This analysis is the first extensive study for this country. We construct a regional-level data set (for the 95 départements of metropolitan France) with measures of crimes as reported to the Ministry of Interior. To assess social conditions prevailing in the département in that year, we construct measures of the unemployment rate as well as other social, economic and demographic variables using multiple waves of the French Labor Survey. We estimate a classic Becker type model in which unemployment is a measure of how potential criminals fare in the legitimate job market. First, our estimates show that in the cross-section dimension, crime and unemployment are positively associated. Second, we find that increases in youth unemployment induce increases in crime. Using the predicted industrial structure to instrument unemployment, we show that this effect is causal for burglaries, thefts, and drug offences. To combat crime, it appears thus that all strategies designed to combat youth unemployment should be examined.
    Keywords: crime; youth unemployment
    JEL: J19 J64 J65 K42
    Date: 2006–04
  17. By: John H. Tyler; Jeffrey R. Kling
    Abstract: We estimate the post-release economic effects of participation in prison-based General Educational Development (GED) programs using a panel of earnings records and a rich set of individual information from administrative data in the state of Florida. Fixed effects estimates of the impact of participating in the GED education program show post-release quarterly earnings gains of about 15 percent for program participants relative to observationally similar non-participants. We also show, however, that these earnings gains accrue only to racial/ethnic minority offenders and any GED-related earnings gains for this group seem to fade in the third year after release from prison. Estimates comparing offenders who obtained a GED to those who participated in GED-related prison education programs but left prison without a GED show no systematic evidence of an independent impact of the credential itself on post-release quarterly earnings.
    JEL: J31 J38
    Date: 2006–03
  18. By: Victor Matheson (Department of Economics, College of the Holy Cross); Robert Baade (Department of Economics and Business, Lake Forest College)
    Abstract: Hurricane Katrina devastated the city of New Orleans in late August 2005, and debates are now underway across the country concerning strategies for reconstructing the City. Both of New Orleans’s professional sports teams, the National Football League Saints and the National Basketball Association Hornets, left the city in the wake of the storm, and the question of what the city should provide in the way of financial accommodation to encourage them to return should be considered in devising a reconstruction plan. New Orleans has hosted a disproportionate share of mega-sports events in the United States given its size and demographics. An important question concerns whether these events have contributed enough to the New Orleans economy to justify reinvestment in infrastructure to restore New Orleans’s place as a leading host of professional sports and mega-events in the United States. This paper examines the economic impact of professional sports on the New Orleans economy and concludes that the redevelopment efforts of New Orleans are better directed at first providing infrastructure that will encourage the return of its middle class citizenry and the restoration of its culture. Playing host to professional sports and mega-events does have symbolic significance, but it is arguable that the city cannot afford to invite guests until it has the means to accommodate them.
    Keywords: sports, public finance, economic impact, New Orleans, Hurricane Katrina
    JEL: H25 H71 H40 L83 Q54
    Date: 2006–03
  19. By: Samuel Muehlemann; Stefan C. Wolter
    Abstract: This paper uses regional variation in labor markets, the industry structure and the educational system to explain the training decisions of firms. Using a representative firm-level data set, the results show that firms are less likely to offer training if the number of competing firms situated in the same geographical area is high. Furthermore, the supply of potential apprentices affects the training decision positively through an improved matching process. In addition, the expected ability of apprentices also has a positive impact, whereas a more developed system of full-time schooling options for school leavers reduces the likelihood of a firm to offer training.
    Keywords: apprenticeship training, regional labor markets
    JEL: I28 J24 J42
    Date: 2006
  20. By: Klaas Staal (Zentrum für Europäische Integrationsforschung ZEI(b), Walter-Flex-Straße 3, 53113 Bonn, Germany and Econometric Institute, Erasmus University Rotterdam, the Netherlands.
    Abstract: In this paper I examine the incentives of regions to unite, to separate and to provide public goods. Separation allows for greater influence over the nature of political decision making while unification allows regions to exploit economies of scale in the provision of public goods. When public good provision is relatively inexpensive, separation occurs since individuals want to assert greater influence, while for intermediate costs of public good provision, separation can be explained by the desires for greater influence as well as for more public goods. Compared with the social optimum, there are excessive incentives for public good provision as well as excessive incentives for separation.
    Keywords: unification, separation, public good provision, voting
    JEL: D7 H2 H7
    Date: 2006–03
  21. By: Lydia Mechtenberg; Roland Strausz
    Abstract: We analyze the two goals behind the European Bologna Process of increasing student mobility: enabling graduates to develop multi– cultural skills and increasing the quality of universities. We isolate three effects: 1) a competition effect that raises quality; 2) a free rider effect that lowers quality; 3) a composition effect that influences the relative strengths of the two previous effects. The effects lead to a trade–off between the two goals. Full mobility may be optimal, only when externalities are high. In this case, student mobility yields inef- ficiently high educational quality. For moderate externalities partial mobility is optimal and yields an inefficiently low quality of education.
    Keywords: Student mobility, Quality of higher education, Multi–cultural skills, Bologna Process
    JEL: D61 H77 I28
    Date: 2006–03
  22. By: Abdullah, Roohi; Wodon, Quentin; Foster, Vivien; Halpern, Jonathan; Komives, Kristin
    Abstract: Subsidies to residential utility customers are popular among policymakers, utility managers, and utility customers alike, but they are nonetheless the subject of much controversy. Utility subsidies are seen as a way to help make utility service affordable for poor households and as an alternative mechanism for income redistribution. These arguments in favor of subsidies are countered by serious concerns about their adverse effects on consumer behavior, utility operations, and the financial health of utilities. Both the affordability and redistributive arguments for subsidies are based on the presumption that poor households benefit disproportionately from water and electricity subsidies, that they are well-targeted to the poor. The authors test this assumption by examining the extent to which the poor benefit from con sumption and connection subsidies for water and electricity services. Their analysis of a wide range of subsidy models from around the developing world shows that the most common form of utility subsidy-quantity-based subsidies delivered through the tariff structure-are highly regressive. Geographically targeted or means-tested subsidies do better, and in many cases have a progressive incidence, but large numbers of poor households remain excluded. Low levels of coverage and metering severely limit the effectiveness of consumption subsidy schemes to reach the poor. Simulations suggest that connection subsidies are an attractive alternative for low coverage areas, but only if utilities have the means and motivation to extend network access to poor households and only if those households choose to connect.
    Keywords: Economic Theory & Research,Town Water Supply and Sanitation,Tax Law,Urban Water Supply and Sanitation,Energy Production and Transportation
    Date: 2006–04–01

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