nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2006‒05‒13
twenty-one papers chosen by
Steve Ross
University of Connecticut

  1. Efficiency and seasonality in the UK housing market, 1991-2001 By Leslie Rosenthal
  2. The Academic Achievement Gap in Grades 3 to 8 By Charles T. Clotfelter; Helen F. Ladd; Jacob L. Vigdor
  3. Raising Urban Productivity or Attracting People? Different Causes, Different Consequences By Stefano Magrini; Paul Cheshire
  4. Do High School Exit Exams Influence Educational Attainment or Labor Market Performance? By Thomas S. Dee; Brian A. Jacob
  5. Peer Effects in European Primary Schools: Evidence from PIRLS By Andreas Ammermueller; Jörn-Steffen Pishcke
  6. Cities in Canadian Federalism By Enid Slack
  7. A Spatial Model of Growth: Taking Technology Seriously By Zuoquan Zhao
  8. Transit in Washington, D.C.: Current Benefits and Optimal Level of Provision By Nelson, Peter; Bagliano, Andrew; Harrington, Winston; Safirova, Elena; Lipman, Abram
  9. Regional Economic Performance in New Zealand: How Does Auckland Compare? By Geoff Lewis; Steven Stillman
  10. Does Venture Capital Investment Really Require Spatial Proximity? An Empirical Investigation By Michael Fritsch; Dirk Schilder
  11. Will consolidation improve sub-national governments ? By Gurley, Tami; Fox, William F.
  12. The Impact of Homework on Student Achievement By Eren,Ozkan; Henderson,J. Daniel
  13. Evaluating fiscal equalization in Indonesia By Suharnoko Sjahrir, Bambang; Kaiser, Kai; Kadjatmiko; Hofman, Bert
  14. MSA Location and the Impact of State Taxes on Employment and Population: A Comparison of Border and Interior MSA's By William H. Hoyt; J. William Harden
  15. Rural-urban migration in developing countries : a survey of theoretical predictions and empirical findings By Shalizi, Zmarak; Selod, Harris; Lall, Somik V.
  16. Incorporating Transportation Network Structure in Spatial Econometric Models of Commodity Flows By LeSage, James P.; Polasek, Wolfgang
  17. Airport City Limits: A Critical Assessment of the Redevelopment of Berlin's Flughafen Schönefeld By Rawley Vaughan
  18. Innovation, Knowledge and Regional Economic Performances: Regularities and Differences in the EU By Alessandro STERLACCHINI
  19. Home Ownership, Job Duration and Wages By Jakob Roland Munch; Michael Rosholm; Michael Svarer
  20. Does Head Start Improve Children's Life Chances? Evidence from a Regression Discontinuity Design By Jens Ludwig; Douglas L. Miller
  21. Sequencing fiscal decentralization By Martinez-Vazquez, Jorge; Bahl, Roy

  1. By: Leslie Rosenthal (Keele University, Department of Economics)
    Abstract: This paper considers the informational efficiency of the UK owner-occupied housing market over the period 1991-2001. Original small-area, monthly, house price index series are developed from raw housing transactions observations for a number of UK counties and cities. These series are then tested for characteristics indicative of weak market efficiency and seasonality. The major conclusions drawn are that there exists little evidence to support notions of inefficiency in these markets for this period.
    Keywords: Housing Markets; Market efficiency; Seasonality.
    JEL: R31 R20 R10
    Date: 2004–06
  2. By: Charles T. Clotfelter; Helen F. Ladd; Jacob L. Vigdor
    Abstract: Using data for North Carolina public school students in grades 3 to 8, we examine achievement gaps between white students and students from other racial and ethnic groups. We focus on successive cohorts of students who stay in the state's public schools for all six years, and study both differences in means and in quantiles. Our results on achievement gaps between black and white students are consistent with those from other longitudinal studies: the gaps are sizable, are robust to controls for measures of socioeconomic status, and show no monotonic trend between 3rd and 8th grade. In contrast, both Hispanic and Asian students tend to gain on whites as they progress through these grades. Looking beyond simple mean differences, we find that the racial gaps between low-performing students have tended to shrink as students progress through school, while racial gaps between high-performing students have widened. Racial gaps differ widely across geographic areas within the state; very few of the districts or groups of districts that we examined have managed simultaneously to close the black-white gap and raise the relative test scores of black students.
    JEL: I21 J15
    Date: 2006–05
  3. By: Stefano Magrini (Department of Economics, University Of Venice Cà Foscari); Paul Cheshire (Department of Geography and Environment, London School of Economics)
    Abstract: This paper investigates growth differences in the urban system of the EU12 over the last decades of the 20th Century. Models in which growth of real GDP p.c. and rates of population growth are the dependent variables are compared. This suggests that it makes sense to model GDP growth in a European context. The analysis supports the conclusion that systems of urban governance are significantly related to economic growth, as is the distribution of highly skilled human capital and R&D activity. In addition, evidence is found supporting the conclusion that integration shocks in the EU favour core areas but when all else is controlled for peripheral regions experienced a systematic positive growth differential. Careful testing for spatial dependence reveals that national borders are significant barriers to adjustment but we can resolve such problems by including a set of variables designed to reflect spatial economic adjustment mechanisms where cities are densely packed so their economies interact. Models of population growth show some similar results but interesting and revealing differences. Strong evidence is found that there are substantial national border effects impeding the emergence of a full spatial equilibrium across the EU’s urban system. Better climate is the single most significant variable but only when expressed relative to the national (not EU) mean. As with economic growth, there are significant national border effects in patterns of spatial dependence. Concentrations of human capital and R&D, however are if anything negatively associated with attracting population – a finding which parallels the finding that a better climate relative to the national mean is associated with slower rather than faster growth of real GDP per capita.
    Keywords: growth; cities; local public goods; human capital; convergence; territorial competition
    JEL: H41 H73 O18 R11 R50
    Date: 2006
  4. By: Thomas S. Dee; Brian A. Jacob
    Abstract: State requirements that high school graduates pass exit exams were the leading edge of the movement towards standards-based reform and continue to be adopted and refined by states today. In this study, we present new empirical evidence on how exit exams influenced educational attainment and labor market experiences using data from the 2000 Census and the National Center for Education Statistics' Common Core of Data (CCD). Our results suggest that the effects of these reforms have been heterogeneous. For example, our analysis of the Census data suggests that exit exams significantly reduced the probability of completing high school, particularly for black students. Similarly, our analysis of grade-level dropout data from the CCD indicates that Minnesota's recent exit exam increased the dropout rate in urban and high-poverty school districts as well as in those with a relatively large concentration of minority students. This increased risk of dropping out was concentrated among 12th grade students. However, we also found that Minnesota's exit exam lowered the dropout rate in low-poverty and suburban school districts, particularly among students in the 10th and 11th grades. These results suggest that exit exams have the capacity to improve student and school performance but also appear to have exacerbated the inequality in educational attainment.
    JEL: I2 J3
    Date: 2006–05
  5. By: Andreas Ammermueller; Jörn-Steffen Pishcke
    Abstract: We estimate peer effects for fourth graders in six European countries. The identification relies on variation across classes within schools. We argue that classes within primary schools are formed roughly randomly with respect to family background. Similar to previous studies, we find sizeable estimates of peer effects in standard OLS specifications. The size of the estimate is much reduced within schools. This could be explained either by selection into schools or by measurement error in the peer background variable. When we correct for measurement error we find within school estimates close to the original OLS estimates. Our results suggest that the peer effect is modestly large, measurement error is important in our survey data, and selection plays little role in biasing peer effects estimates. We find no significant evidence of non-linear peer effects.
    JEL: I21 J24
    Date: 2006–05
  6. By: Enid Slack (International Tax Program, Rotman School of Management, University of Toronto)
    Abstract: We consider the place of cities, particularly large cities, in Canadian federalism from several perspectives. Although by most measures the current fiscal condition of Canadian cities seems fairly good, we argue that beneath this happy picture lies a less happy reality. Owing to the limited and relatively inelastic revenue base to which even the largest cities have access, the underlying basis of Canada’s urban prosperity is being eroded, with potentially damaging implications for national well-being over the long run. In an important sense, the roots of this problem lie in the fact that cities do not have any real role or voice in Canada’s federal structure. Since neither role nor voice is likely to be bestowed on them in the near future, however, we conclude by laying out a series of less fundamental actions that all levels of government have to undertake if they wish to maintain not only the present reputation of Canada’s big cities as ‘a nice place to live’ but also, more fundamentally, the urban dynamic that evidence around the world suggests increasingly underpins economic growth.
    Keywords: cities, local fiscal conditions, intergovernmental fiscal relations, Canada
    JEL: H77 H11 R51
    Date: 2006–05
  7. By: Zuoquan Zhao
    Abstract: This paper attempts to develop a spatial model of economic growth in which technology and externalities are assumed to be accountable for production in geographical space. Linking externalities to the extent of intensity of production across locations in continuous space, we introduce spatial range into the production function for technological, human, and physical capitals. Our model argues that the long-run growth rate of an economy is determined not just by the growth rates of the three factors of production but by their rates of change in spatial range over the territory of the economy. In other words, spatial intensity and accumulation matter for growth. Our model is consistent with studies on knowledge spillovers, geographical agglomeration, urban and regional growth, and trade. The primary policy implication of our model is the significance of establishing efficient mechanisms or channels that promote innovation, diffusion, trade, and factor mobility over the territory of an economy. It is not as if we always have it everywhere, but there is a process in which knowledge is being created all the time in different places, and is then being diffused. This evolving distribution should be reflected in a model of production, if it is to describe an entire economy in which different people know different things. As a consequence, the idea of an aggregate production function becomes very dubious, unless a new variable is introduced, representing the distribution and diffusion of new knowledge.
    Date: 2006–05
  8. By: Nelson, Peter (Resources for the Future); Bagliano, Andrew; Harrington, Winston (Resources for the Future); Safirova, Elena (Resources for the Future); Lipman, Abram
    Abstract: The discrepancy between transit’s large share of local transportation resources and its generally low share of local trips has raised questions about the use of scarce transportation funds for this purpose. We use a regional transport model consistent with utility theory and calibrated for the Washington, D.C., metropolitan area to estimate the travel benefits of the local transit system to transit users and the congestion-reduction benefits to motorists. We find that (i) rail transit generates congestion-reduction benefits that exceed rail subsidies; (ii) the combined benefits of rail and bus transit easily exceed local transit subsidies generally; (iii) the lowest-income group receives a disproportionately low share of the transit benefits, both in absolute terms and as a share of total income; and (iv) for practical purposes, the scale of the current transit system is about optimal.
    Keywords: transit, transit subsidies, external transit benefits
    JEL: R40 R41
    Date: 2006–04–10
  9. By: Geoff Lewis; Steven Stillman (The Treasury)
    Abstract: In this study we investigate Auckland’s economic performance relative to other large cities in New Zealand, to medium-sized urban centres and to small towns and rural areas. Measures of regional economic performance are not well developed in New Zealand and there is a relative lack of official data at the regional level. Previous measures developed by two non-governmental organisations have suggested that Auckland is “underperforming” relative to other regions in New Zealand. However, neither of these measures satisfactorily capture productivity performance by areas that are classified according to the density of economic activity that takes place within them. We use data from the annual New Zealand Income Survey to examine hourly earnings and other measures of labour productivity and utilisation for a number of regional areas. Our results tell a fairly consistent story. Auckland and Wellington have the highest levels of productivity performance based on almost all measures of earnings. In particular, both have significantly higher average levels of labour income, and wage rates than the three other comparison areas. Auckland has also experienced stronger growth in wages, in particular for wage/salary workers, than other regions. Our findings cast doubt on the hypothesis that Auckland has been a productivity underperformer within New Zealand. In fact, Auckland appears to be a relatively good performer and this is consistent with agglomeration economies being at work in New Zealand’s largest urban concentration. However, because we limited our investigations to within New Zealand we are not able to say how Auckland’s productivity performance compares to innovative, high-skill cities in other countries. Given New Zealand’s overall poorer performance in labour productivity and the rather modest wage rate growth that we find even for Auckland, it is unlikely to have been as good.
    Keywords: regional economic performance, Auckland, productivity, New Zealand
    JEL: R12 R20 J24
    Date: 2005–11
  10. By: Michael Fritsch; Dirk Schilder
    Abstract: We examine the role of spatial proximity for Venture Capital (VC) investments in Germany. The main database is a survey of 85 personal interviews with representatives of different types of financial institutions. The analysis shows that spatial proximity is far less important for VC investments than is often believed. For example, the results indicate that syndication is partly used as an alternative to spatial proximity. Telecommunication does not work as a substitute for face-to-face contact. On the whole, regional proximity is not a dominant factor in VC partnerships. Therefore, the absence of VC firms in a region does not appear to cause a severe regional equity gap.
    Keywords: Venture Capital, spatial proximity, start-up financing
    JEL: G24 O16 D21 M13 R12
    Date: 2006–05
  11. By: Gurley, Tami; Fox, William F.
    Abstract: Local government size varies dramatically around the world. In Sudan, Cote d ' Ivoire, and the United Kingdom, municipalities average more than 125,000 people. Those in many European countries have less than 10,000 people. Countries often consider consolidation of local governments as a means to lower service delivery costs, improve service quality, enhance accountability, improve equity, or expand participation in government. The authors review a number of theoretical arguments and empirical findings concerning the size of sub-national governments. Countries should not presume that amalgamation will solve problems because benefits and costs are situation specific. Success depends on many factors, including getting incentives right for the various players and managing the transition properly. The effects on costs must be examined in terms of all changes occurring with consolidation, including geographic size. Size economies appear service specific and are most likely to result for infrastructure intensive services such as water and sewerage. Size economies are less likely for services such as education that are provided in numerous small production units near the population. Also, the potential for savings depends on other factors, such as willingness to eliminate redundant workers. Consolidation reduces the potential for local government competition, which appears to enhance service quality but not necessarily overall government size. There is some evidence that citizens are more willing to be involved in larger governments, but trust may fall with government size. Larger governments can improve regional planning by handling problems with a broader geographic perspective and giving the government more influence with national policymakers.
    Keywords: Urban Slums Upgrading,Municipal Financial Management,Public & Municipal Finance,Urban Economics,Education for the Knowledge Economy
    Date: 2006–05–01
  12. By: Eren,Ozkan (Southern Methodist University); Henderson,J. Daniel (State University of New York at Binghamton)
    Abstract: Utilizing parametric and nonparametric techniques, we asses the role of a heretofore relatively unexplored “input” in the educational process, homework, on academic achievement. Our results indicate that homework is an important determinant of student test scores. Relative to more standard spending related measures, extra homework has a larger and more significant impact on test scores. However, the effects are not uniform across different subpopulations; we find additional homework to be most effective for high and low achievers. Moreover, the parametric estimates of the educational production function overstate the impact of schooling related inputs. In all estimates, the homework coefficient from the parametric model maps to the upper deciles of the nonparametric distribution and as a by-product the parametric model understates the percentage of students with negative responses to additional homework.
    Keywords: Generalized Kernel Estimation,Nonparametric,School Inputs,Stochastic Dominance,Student Achievement
    JEL: C21 I21 I28
    Date: 2006–04–27
  13. By: Suharnoko Sjahrir, Bambang; Kaiser, Kai; Kadjatmiko; Hofman, Bert
    Abstract: This paper presents a methodology to evaluate fiscal decentralization focusing on the potential mis-targeting of intergovernmental fiscal equalization transfers. The approach builds on an explicit comparison and the summary measurement of different (horizontal) allocation distributions across states or localities. Whereas formula-based fiscal transfers have the merit of being transparent and promoting revenue predictability in fiscal decentralization, in practice, two challenges emerge: (1) What are the appropriate formula designs given the sub-national data constraints evident in most decentralizing developing countries? and (2) How costly in terms of mis-targeting to the presumed expenditure needs and fiscal capacity are deviations from these types of benchmark formulas (for example, due to historical factors or the need to meet establishment costs such as civil service wages)? The authors illustrate this approach by assessing Indonesia ' s evolving intergovernmental fiscal system instituted in the 2001 Big Bang decentralization. The discussion comes against Indonesia ' s recent policy decision to fully fund sub-national civil servant wages as part of the base general allocation grant (DAU) transfers, raising questions about both incentive effects for local governments and potential mis-targeting. The authors identify potential efficiency losses from the DAU ' s horizontal misallocation from half a dozen alternative scenarios found in the policy dialogue, ranging from 9 to 30 percent-on the order of US$ 3.9 billion-of the overall annual size of this large intergovernmental transfer. The scale of these tradeoffs highlights the importance of intergovernmental transfers in more general debates in public finance for decentralized countries.
    Keywords: Economic Theory & Research,Public Sector Management and Reform,Fiscal Adjustment,Regional Governance,Urban Governance and Management
    Date: 2006–05–01
  14. By: William H. Hoyt (Department of Economics, Gatton School of Business and Economics, and Martin School of Public Policy and Administration, University of Kentucky); J. William Harden
    Abstract: We examine the impact of state taxation on employment by focusing on county employment in metropolitan statistical areas (MSA). However, we make a distinction between the impacts of state taxation on employment in metropolitan areas that are wholly contained within a single state and metropolitan areas that consist of counties in more than a single state. We make this distinction because, as we argue in the paper, the impacts of state taxes on both employment and population may be very different in metropolitan areas that border states and those that do not. We expect there to be differences both because the cost of avoiding state taxes, that is, mobility costs, might be lower along borders and also because along borders employees need not reside in the same state in which they are employed. Thus, while in general we believe that employment should be more responsive to taxes in border MSA’s, for some taxes, specifically taxes imposed on households, employment might be less responsive as households rather than firms can move to avoid these taxes. Because both the location of employment and residence are affected, and possibly differentially so, by state taxes, we jointly estimate the impacts that taxation may have on employment and population. Our results indicate that there are differences in the responsiveness of both employment and population to both tax and spending variables between border and interior jurisdictions. We also find that the impact of neighboring state taxes have differential effects on employment and population. That there are significant differences in the response to taxation and different type of taxes in border and interior counties suggests state-level estimates of the impacts of taxation may suffer from significant aggregation bias.
    Date: 2005–05
  15. By: Shalizi, Zmarak; Selod, Harris; Lall, Somik V.
    Abstract: The migration of labor from rural to urban areas is an important part of the urbanization process in developing countries. Even though it has been the focus of abundant research over the past five decades, some key policy questions have not found clear answers yet. To what extent is internal migration a desirable phenomenon and under what circumstances? Should governments intervene and, if so, with what types of interventions? What should be their policy objectives? To shed light on these important issues, the authors survey the existing theoretical models and their conflicting policy implications and discuss the policies that may be justified based on recent relevant empirical studies. A key limitation is that much of the empirical literature does not provide structural tests of the theoretical models, but only provides partial findings that can support or invalidate intuitions and in that sense, support or invalidate the policy implications of the models. The authors ' broad assessment of the literature is that migration can be beneficial or at least be turned into a beneficial phenomenon so that in general migration restrictions are not desirable. They also identify some data issues and research topics which merit further investigation.
    Keywords: Labor Markets,Urban Housing and Land Settlements,National Urban Development Policies & Strategies,Voluntary and Involuntary Resettlement,Economic Theory & Research
    Date: 2006–05–01
  16. By: LeSage, James P. (Department of Economics, University of Toledo); Polasek, Wolfgang (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)
    Abstract: We introduce a regression-based gravity model for commodity flows between 35 regions in Austria. We incorporate information regarding the highway network into the spatial connectivity structure of the spatial autoregressive econometric model. We find that our approach produces improved model fit and higher likelihood values. The model accounts for spatial dependence in the origin-destination flows by introducing a spatial connectivity matrix that allows for three types of spatial dependence in the origins to destinations flows. We modify this origin-destination connectivity structure that was introduced by LeSage and Pace (2005) to include information regarding the presence or absence of a major highway/train corridor that passes through the regions. Empirical estimates indicate that the strongest spatial autoregressive effects arise when both origin and destination regions have neighboring regions located on the highway network. Our approach provides a formal spatial econometric methodology that can easily incorporate network connectivity information in spatial autoregressive models.
    Keywords: Commodity flows, Spatial autoregression, Bayesian, Maximum likelihood, Spatial connectivity of origin-destination flows
    JEL: R1 R41 L92 C21
    Date: 2006–05
  17. By: Rawley Vaughan
    Date: 2006–05–03
  18. By: Alessandro STERLACCHINI (Universita' Politecnica delle Marche, Dipartimento di Management ed Organizzazione Aziendale)
    Abstract: This paper examines how the recent economic performance - jointly measured by the level and growth rate of per capita GDP - of 151 developed European regions has been affected by their innovation and knowledge base. A regression analysis is carried out by using as a main explanatory variable a composite indicator extracted from a comprehensive set of innovation and education variables. The above relationship is controlled for structural characteristics and allowed to vary across EU countries. The results point to a highly significant economic impact of innovation and knowledge which, however, is not homogeneous among countries and regions.
    Keywords: innovation and knowledge, regional economic performance
    JEL: O18 O33 R11
    Date: 2006–05
  19. By: Jakob Roland Munch (University of Copenhagen, CEBR and EPRU); Michael Rosholm (University of Aarhus and IZA Bonn); Michael Svarer (University of Aarhus)
    Abstract: We investigate the impact of home ownership on individual job mobility and wages in Denmark. We find that home ownership has a negative impact on job-to-job mobility both in terms of transition into new local jobs and new jobs outside the local labour market. In addition, there is a clear negative effect of home ownership on the unemployment risk and a positive impact on wages. These results are robust to different strategies for correcting for the possible endogeneity of the home owner variable.
    Keywords: home ownership, job mobility, duration model
    JEL: J6 R2
    Date: 2006–05
  20. By: Jens Ludwig (Georgetown University, NBER and IZA Bonn); Douglas L. Miller (University of California, Davis and NBER)
    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 to develop Head Start proposals. The result was a large and lasting discontinuity in Head Start funding rates at the OEO cutoff for grantwriting assistance. We find evidence of a large drop at the OEO cutoff in mortality rates for children from causes that could be affected by Head Start, as well as suggestive evidence for a positive effect on educational attainment.
    Keywords: early childhood education, poverty, schooling, health, Head Start
    JEL: I18 I20 I38
    Date: 2006–05
  21. By: Martinez-Vazquez, Jorge; Bahl, Roy
    Abstract: While there is extensive knowledge about how to design fiscal decentralization policies, considerably less is understood about how a decentralization program should be sequenced and implemented. Countries embarking on decentralization often struggle with decisions about the essential components of decentralization, including the order of an introduction of decentralization policies, the number of years necessary to bring a full program on line, and the components of the transition strategy. The authors argue that the sequencing of decentralization policies is an important determinant of its success. The consequences of a poorly sequenced decentralization program can range from minor delays and complications to ineffectiveness and subsequent failing support of decentralization efforts, macroeconomic instability, and fundamental failure in public sector delivery. At a minimum, the strategy of " making it up as we go " will not lead to the same structure of decentralization as will a planned strategy. The paper raises two questions: First, is there an optimal sequencing for decentralization policies and implementation? The answer is that there is, and that following these sequencing rules can reduce the costs and risks of implementing fiscal decentralization. Second, to what extent do countries follow these optimal sequencing rules? The answer is, in general, they do not. The gap between theory and practice is a result of the complexity of sequencing design, which discourages fiscal planners from implementing the full process. In addition, sequencing requires a sustained discipline and vision for its implementation, as well as overcoming pressures from political actors, especially in developing countries.
    Keywords: Decentralization,Subnational Regional Economics,Economic Theory & Research,Teaching and Learning,Regional Rural Development
    Date: 2006–05–01

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