nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2006‒06‒10
fifteen papers chosen by
Steve Ross
University of Connecticut

  1. Measuring Housing Price Growth – Using Stratification to Improve Median-based Measures By Nalini Prasad; Anthony Richards
  2. Australian House Prices: A Comparison of Hedonic and Repeat-sales Measures By James Hansen
  3. There Goes the Neighborhood? Estimates of the Impact of Crime Risk on Property Values From Megan%u2019s Laws By Leigh L. Linden; Jonah E. Rockoff
  4. Parental unemployment and children's school performance By Öster, Anna
  5. Relaxing Tax Competition through Public Good Differentation By Zissimos, Ben; Wooders, Myrna
  6. Cash transfers, conditions, school enrollment, and child work : evidence from a randomized experiment in Ecuador By Araujo, Maria Caridad; Schady, Norbert
  7. Status Equilibrium in Local Public Good Economies By Nouweland, Anne van den; Wooders, Myrna
  8. Megacities vs. Global Cities. The institutional hypothesis. By BOURDEAU-LEPAGE, Lise; HURIOT, Jean-Marie
  9. Do Spatial Agglomeration and Local Labor Market Competition Affect Employer - Provided Training? Evidence from the UK By Giorgio Brunello; Francesca Gambarotto
  10. The Brave New World of Central Banking: The Policy Challenges Posed by Asset Price Booms and Busts By Stephen G. Cecchetti
  11. Tinkering toward accolades: School gaming under a performance accountability system By Randall Reback; Julie Berry Cullen
  12. Education and Labor-Market Discrimination By Kevin Lang; Michael Manove
  13. The Law of Demand in Tiebout Economies By Cartwright, Edward; Conley, John; Wooders, Myrna
  14. Fiscal Decentralization: A Political Economy Perspective By Lockwood, Ben
  15. Crime as a local public bad, neighbourhood observation and reporting By Siddhartha Bandyopadhyay and Kalyan Chatterjee

  1. By: Nalini Prasad (Reserve Bank of Australia); Anthony Richards (Reserve Bank of Australia)
    Abstract: Developments in housing prices are of interest to households, policy-makers and those involved in the housing industry. This has been the case both in Australia and in other countries where house price developments are having significant macroeconomic impacts. However, the construction of measures of city-wide or nationwide average housing prices is not a straightforward exercise. One problem is that the sample of dwellings transacted in any period may be far from random and the characteristics of the sample may change from period to period. As a result, widely used measures of growth in mean or median housing prices will reflect changes in the composition of dwellings sold as well as changes in demand and supply conditions. We demonstrate that median price measures in most major Australian capitals are significantly affected by such compositional change. In this paper, we propose a simple measure of house price growth that addresses the problem of compositional change by stratifying individual transactions into different groups. Our measure differs from those commonly used internationally in that we group small geographic regions (suburbs) according to the long-term average price level of dwellings in those regions, rather than just clustering smaller geographic regions into larger geographic regions. This produces a measure of price growth that substantially improves upon median price measures, and one that is highly correlated with more sophisticated (but more computationally intensive) measures. While we focus on providing a basic framework for measuring house price growth, the stratification techniques contained in this paper have broader applications for dealing with datasets that are affected by compositional change.
    Keywords: housing; house prices
    JEL: G12 R31
    Date: 2006–05
  2. By: James Hansen (Reserve Bank of Australia)
    Abstract: House prices are intrinsically difficult to measure due to changes in the composition of properties sold through time and changes in the quality of housing. I provide an overview of the theoretical nature of these issues and consider how regression-based measures of house prices – hedonic and repeat-sales measures – can control for compositional and quality change. I then explore whether these regression-based alternatives can provide accurate estimates of pure house price changes in the Australian context. Using unit record data for Australia’s three largest cities – Sydney, Melbourne and Brisbane – between 1993 and 2005, the results suggest that the two regression-based approaches provide similar estimates of the pure price change in housing. The measures are comparable in terms of statistical fit, with around half of the variation in prices growth (for those houses sold more than once) explained. The regression-based measures also produce similar estimates of pure price changes to those obtained by a mix-adjusted measure. However, all three measures behave quite differently from a simple median, implying that compositional change matters empirically. These results confirm that regression-based measures are likely to be a useful analytical tool when measuring pure house price changes in Australia.
    Keywords: house prices; hedonic; repeat-sales
    JEL: G12 R21 R31
    Date: 2006–05
  3. By: Leigh L. Linden; Jonah E. Rockoff
    Abstract: We combine data from the housing market with data from the North Carolina Sex Offender Registry to estimate how individuals value living in close proximity to a convicted criminal. We use the exact location of these offenders to exploit variation in the threat of crime within small homogenous groupings of homes, and we use the timing of sex offenders’ arrivals to control for baseline property values in the area. We find statistically and economically significant negative effects of sex offenders’ locations that are extremely localized. Houses within a one-tenth mile area around the home of a sex offender fall by four percent on average (about $5,500) while those further away show no decline. These results suggest that individuals have a significant distaste for living in close proximity to a known sex offender. Using data on crimes committed by sexual offenders against neighbors, we estimate costs to victims of sexual offenses under the assumptions that all of the decline in property value is due to increased crime risk and that neighbors’ perceptions of risk are in line with objective data. We estimate victimization costs of over $1 million—far in excess of estimates taken from the criminal justice literature. However, we cannot reject the alternative hypotheses that individuals overestimate the risk posed by offenders or view living near an offender as having costs exclusive of crime risk.
    JEL: R2 K4
    Date: 2006–05
  4. By: Öster, Anna (Konjunkturinstitutet)
    Abstract: This study investigates the effect of parental unemployment on children’s school performance. We use individual level data for all children completing lower secondary school in Sweden in 1990 directly moving on to three years of upper secondary school. We control for family and individual heterogeneity by means of lower secondary school GPA. The huge variation in Swedish unemployment during the beginning of the 1990s provides an ideal setting for testing the hypothesis that parental unemployment affects children’s school performance. Our results indicate that having an unemployed father has a negative effect on children’s school performance while having an unemployed mother has a positive effect.
    Keywords: School performance; unemployment
    JEL: E24 I21 J12
    Date: 2006–05–22
  5. By: Zissimos, Ben (Dept of Economics, Vanderbilt University); Wooders, Myrna (Dept of Economics, Vanderbilt University)
    Abstract: This paper argues that, because governments are able to relax tax competition through public good differentiation, traditionally high-tax countries have continued to set taxes at a relatively high rate even as markets have become more integrated. The key assumption is that firms vary in the extent to which public good provision reduces costs. We show that Leviathan governments are able to use this fact to relax the forces of tax competition, reducing efficiency. When firms can ‘vote with their feet’ tax competition leads firms to locate in ‘too many’ jurisdictions. A ‘minimum tax’ further relaxes tax competition, further reducing efficiency.
    Keywords: asymmetric equilibrium ; core-periphery ; non-renegotiable minimum tax ; tax competition ; tax harmonization
    JEL: C72 H21 H42 H73 R50
    Date: 2003
  6. By: Araujo, Maria Caridad; Schady, Norbert
    Abstract: The impact of cash transfer programs on the accumulation of human capital is a topic of great policy importance. An attendant question is whether program effects are larger when transfers are " conditioned " on certain behaviors, such as a requirement that households enroll their children in school. This paper uses a randomized study design to analyze the impact of the Bono de Desarrollo Humano (BDH), a cash transfer program, on enrollment and child work among poor children in Ecuador. There are two main results. First, the BDH program had a large, positive impact on school enrollment, about 10 percentage points, and a large, negative impact on child work, about 17 percentage points. Second, the fact that some households believed that there was a school enrollment requirement attached to the transfers, even though such a requirement was never enforced or monitored in Ecuador, helps explain the magnitude of program effects.
    Keywords: Small Area Estimation Poverty Mapping,Primary Education,Land and Real Estate Development,Municipal Housing and Land,Real Estate Development
    Date: 2006–06–01
  7. By: Nouweland, Anne van den (Department of Economics, Vanderbilt University,); Wooders, Myrna (Department of Economics, Vanderbilt University and Department of Economics, University of Warwick)
    Abstract: We define a concept of status equilibrium for local public good economies. A status equilibrium specifies one status index for each agent in an economy. These indices determine agents' cost shares in any possible jurisdiction. We provide an axiomatic characterization of status equilibrium using consistency properties.
    Date: 2005
  8. By: BOURDEAU-LEPAGE, Lise (LEG - CNRS UMR 5118 - Université de Bourgogne); HURIOT, Jean-Marie (LEG - CNRS UMR 5118 - Université de Bourgogne)
    Keywords: cities
    Date: 2006
  9. By: Giorgio Brunello (University of Padua); Francesca Gambarotto (University of Padua)
    Abstract: In this paper we use British data to ask whether local employment density - which we take as a proxy of labor market competition - affects employer - provided training. We find that training is less frequent in economically denser areas. We interpret this result as evidence that the balance of poaching and local agglomeration effects on training is negative. The effect of density on training is not negligible: when evaluated at the average firm size in the local area, a 1 percent increase in density reduces the probability of employer - provided training by 0.014, close to 4 percent of the average incidence of this type of training in the UK.
    JEL: J24 R12
    Date: 2006–05
  10. By: Stephen G. Cecchetti
    Abstract: At the dawn of the 21st century, property and equity ownership are spread more broadly across the population than they once were. One consequence of this is that asset price booms and crashes now have a direct impact on general welfare. The fact that bubbles distort nearly all economic decisions gives policymakers a stronger interest in asset price stability. In this essay I examine the theoretical and empirical case for the existence of equity and property bubbles, and then summarize the economic distortions that they create. The evidence suggests increasing our attention on property prices. I go on to discuss the possible policy responses, including examining the consequences of changing the way in which housing is included in standard aggregate price measures.
    Keywords: . Central bank policy, equity price bubbles, housing price bubbles.
    JEL: E5 G0
    Date: 2005–12
  11. By: Randall Reback (Barnard College, Columbia University); Julie Berry Cullen (UC-San Diego and NBER)
    Abstract: We explore the extent to which schools manipulate the composition of students in the test-taking pool in order to maximize ratings under Texas' accountability system in the 1990s. We first derive predictions from a static model of administrators' incentives given the structure of the ratings criteria, and then test these predictions by comparing differential changes in exemption rates across student subgroups within campuses and across campuses and regimes. Our analyses uncover evidence of a moderate degree of strategic behavior, so that there is some tension between designing systems that account for heterogeneity in student populations and that are manipulation-free.
    Keywords: school accountability; performance standard; caseload manipulation
    JEL: D82 H39 I28
    Date: 2006–05
  12. By: Kevin Lang; Michael Manove
    Abstract: We propose a model that combines statistical discrimination and educational sorting that explains why blacks get more education than do whites of similar cognitive ability. Our model explains the difference between blacks and whites in the relations between education and AFQT and between wages and education. It cannot easily explain why, conditional only on AFQT, blacks earn no more than do whites. It does, however, suggest, that when comparing the earnings of blacks and whites, one should control for both AFQT and education in which case a substantial black-white wage differential reemerges. We explore and reject the hypothesis that differences in school quality between blacks and whites explain the wage and education differentials. Our findings support the view that some of the black-white wage differential reflects the operation of the labor market.
    JEL: J7
    Date: 2006–05
  13. By: Cartwright, Edward (Department of Economics, University of Kent); Conley, John (Department of Economics, Vanderbilt University); Wooders, Myrna (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 firms) 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 (plummers, lawers, 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 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.
    Date: 2005
  14. By: Lockwood, Ben (University of Warwick and CEPR)
    Abstract: This paper surveys recent contributions to the study of fiscal decentralization which adopt a political economy approach. It is argued that this approach can capture, in a variety of formal models, the plausible and influential ideas (increasingly, supported by empirical evidence) that fiscal decentralization can lead to improved preference-matching and accountability of government. In particular, recent work on centralized provision of public good provision via bargaining in a legislature shows how centralization reduces preference-matching, and recent work using "electoral agency" models formalizes the accountability argument. These models also provide insights into when decentralization may fail to deliver these benefits.
    Keywords: Fiscal decentralization ; political economy ; local public goods
    JEL: H41 H70 H72
    Date: 2004
  15. By: Siddhartha Bandyopadhyay and Kalyan Chatterjee
    Abstract: We examine the effects of giving incentives for people to report crime on crime rates. In particular, we look at what happens when the costs of reporting are negligible and the cost of being interrogated by the police are high in a rational choice model of crime and crime reporting. Perverse equilibria where everyone reports or no one reports (and thus reports have no informational value) emerge. This happens both in a model where police make rational inferences about crime based on reports as well as in a model where police investigate according to fixed rules, operating under a fixed budget. Importantly, generating more reports about crime could actually increase equilibrium crime rates. This occurs via a resource thinning effect caused by "too many" reports. Hence, from a policy perspective increasing incentives for neighbours to report suspicious activities may prove to be counterproductive. We also show how different ways of profiling certain groups of people can either increase or decrease crime rates in the profiled group.
    Keywords: Neighbourhood, crime reporting and multiple equilibria
    JEL: C72 D82
    Date: 2006–05

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