nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2006‒07‒09
twenty-six papers chosen by
Steve Ross
University of Connecticut

  1. Urban decentralization and income inequality: Is sprawl associated with rising income segregation across neighborhoods? By Christopher H. Wheeler
  2. The price of residential land in large U.S. cities By Morris A. Davis; Michael G. Palumbo
  3. The lack of affordable housing in New England: how big a problem?: why is it growing?: what are we doing about it? By Alicia Sasser; Bo Zhao; Darcy Rollins; Robert Tannenwald
  4. Do Rising Tides Lift All Prices? Income Inequality and Housing Affordability By Janna L. Matlack; Jacob L. Vigdor
  5. Peer Effects, Social Multipliers and Migrants at School: An International Comparison By Horst Entorf; Martina Lauk
  6. Job Search in Thick Markets: Evidence from Italy By Sabrina Di Addario
  7. Neighborhood income inequality By Christopher H. Wheeler; Elizabeth A. La Jeunesse
  8. A productivity model of city crowdedness By Jordan Rappaport
  9. The Effects of Welfare-to-Work Program Activities on Labor Market Outcomes By Peter R. Mueser; Kyung-Seong Jeon; Andrew Dyke; Carolyn J. Heinrich; Kenneth R. Troske
  10. Home Mortgage Disclosure Act (HMDA) home purchase data: summary for New England, 2003 By Julia Reade
  11. Exploring the Link between Housing and the Value Premium (joint with Stijn Van Nieuwerburgh) By Hanno Lustig
  12. The Effect of Internal Migration on Local Labor Markets: American Cities During the Great Depression (March, 2006). Joint with Price Fishback (University of Arizona) and Shawn Kantor (University of California-Merced). By Leah Platt Boustan
  13. Knowlage accessibility and New Firm Formation By Karlsson, Charlie; Nyström, Kristina
  14. Amenities, local conditions and fiscal determinants of factor growth in rural America By Eric Thompson; George Hammond; Stephan Weiler
  15. Price Leadership in the Dutch Mortgage Market By Leo de Haan; Elmer Sterken
  16. Taxation and Debt Financing of Home Acquisition: Evidence from the Finnish 1993 Tax Reform By Tuukka Saarimaa
  17. Rent Control and Tenants' Welfare: The Effects of Deregulating Rental Markets in Finland By Teemu Lyytikäinen
  18. Plus/Minus Grading and Motivation: An Empirical Study of Student Choice and Performance. By James E. McClure; Lee C. Spector
  19. The effect of education on cognitive ability By Torberg Falch; Sofia Sandgren
  20. State growth empirics: the long-run determinants of state income growth By Paul W. Bauer; Mark E. Schweitzer; Scott Shane
  21. Decentralization and Political Institutions By Ruben Enikolopov; Ekaterina Zhuravskaya
  22. Regional Matching Frictions and Aggregate Unemployment By Aki Kangasharju; Sanna-Mari Hynninen; Jaakko Pehkonen
  23. Competition in the Promised Land: Black Migration and the Northern Labor Force, 1940-1970 (May, 2006) By Leah Platt Boustan
  24. Was Postwar Suburbanization ‘White Flight”? Evidence from the Black Migration (April, 2006) By Leah Platt Boustan
  25. Motor Vehicle Use and Travel Behaviour in Germany : Determinants of Car Mileage By Dominika Kalinowska; Hartmut Kuhfeld
  26. Cost Benefit Analysis on Public Transport Investment by Choice Experiment Method: An Example of Osaka Monorail Saito Linefs Extension (in Japanese) By Junyi Shen; Yusuke Sakata; Yoshizo Hashimoto

  1. By: Christopher H. Wheeler
    Abstract: Existing research has found an inverse relationship between urban density and the degree of income inequality within metropolitan areas, suggesting that, as cities spread out, they become increasingly segregated by income. This paper examines this hypothesis using data covering more than 160000 block groups within 359 US metropolitan areas over the years 1980, 1990, and 2000. The findings indicate that income inequality - defined by the variance of the log household income distribution - does indeed rise significantly as urban density declines. This increase, however, is associated with rising inequality within block groups as cities spread out. The extent of income variation exhibited between different block groups, by contrast, shows virtually no association with population density. There is, accordingly, little evidence that sprawl is systematically associated with greater residential segregation of households by income.
    Keywords: Income distribution ; Income
    Date: 2006
  2. By: Morris A. Davis; Michael G. Palumbo
    Abstract: Combining data from several sources, we build a database of home values, the cost of housing structures, and residential land values for 46 large U.S. metropolitan areas from 1984 to 2004. Our analysis of these new data reveal that since the mid-1980s residential land values have appreciated over a much wider range of cities than is commonly believed. And, since 1998, almost all large U.S. cities have seen significant increases in real residential land prices. Averaging across the cities in our sample, by year-end 2004, the value of residential land accounted for about 50 percent of the total market value of housing, up from 32 percent in 1984. An implication of our results is that the future course of home prices--their average rate of appreciation and their volatility--is likely to be determined even more by the course of land prices than used to be the case.
    Date: 2006
  3. By: Alicia Sasser; Bo Zhao; Darcy Rollins; Robert Tannenwald
    Abstract: Although housing costs in greater Boston and elsewhere around the region have leveled off, affordable housing is still high on the public policy agenda in every New England state. A growing chorus of employers and policymakers are warning that the region's high cost of housing is now undermining its ability to attract and retain workers and businesses. This paper presents a thorough, region-wide analysis of the housing affordability problem in New England. We construct three affordability indicators to examine differences in the cost of housing across socioeconomic, demographic, and occupational groups, for every New England state and for the region's principal metropolitan areas.
    Keywords: Housing - New England ; Housing - Prices ; Housing policy - New England
    Date: 2006
  4. By: Janna L. Matlack; Jacob L. Vigdor
    Abstract: Simple partial-equilibrium models suggest that income increases at the high end of the distribution can raise price paid by those at the low end of the income distribution. This prediction does not universally hold in a general equilibrium model, or in models where the rich and poor consume distinct products. We use Census microdata to evaluate these predictions empirically, using data on housing markets in American metropolitan areas between 1970 and 2000. Evidence clearly and unsurprisingly shows that decreases in one's own income lead to less housing consumption and less income left over after paying for housing. The effect of increases in others' income, holding one's own income constant, is more nuanced. In tight housing markets, the poor do worse when the rich get richer. In slack markets, at least some evidence suggests that increases in others' income, holding own income constant, may be beneficial.
    JEL: D12 D31 I31 R21
    Date: 2006–06
  5. By: Horst Entorf; Martina Lauk
    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-tonative 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. Students with a migration background and a disadvantageous parental status benefit from higher diversity within schools.
    Keywords: Peer effects, migration, education, social multipliers, school systems, parental socioeconomic background
    JEL: I21
    Date: 2006–07–04
  6. By: Sabrina Di Addario (Bank of Italy and University of Oxford)
    Abstract: I analyze empirically the effects of both urban and industrial agglomeration on men’s and women’s search behavior and on the efficiency of matching. The analysis is based on the Italian Labor Force Survey micro-data, which covers 520 randomly drawn Local Labor Market Areas (66 per cent of the total) over the four quarters of 2002. I compute transition probabilities from non-employment to employment by jointly estimating the probability of searching and the probability of finding a job conditional on having searched, and I test whether these are affected by urbanization, industry localization, labor pooling and family network quality. In general, the main results indicate that urbanization and labor pooling raise job seekers’ chances of finding employment (conditional on having searched), while industry localization and family network quality increase only men’s. Moreover, neither urban nor industrial agglomeration affect nonemployed individuals’ search behavior; although men with thicker family networks search more intensively.
    Date: 2005
  7. By: Christopher H. Wheeler; Elizabeth A. La Jeunesse
    Abstract: This paper offers a descriptive empirical analysis of the geographic pattern of income inequality within a sample of 359 US metropolitan areas between 1980 and 2000. Specifically, we decompose the variance of metropolitan area-level household income into two parts: one associated with the degree of variation among household incomes within neighborhoods - defined by block groups and tracts - and the other associated with the extent of variation among households in different neighborhoods. Consistent with previous work, the results reveal that the vast majority of a city*s overall income inequality - at least three quarters - is driven by within-neighborhood variation rather than between-neighborhood variation, although we find that the latter rose significantly during the 1980s, especially between block groups. We then identify a number of metropolitan area-level characteristics that are associated with both levels of and changes in the degree of each type of residential income inequality.
    Keywords: Income distribution ; Income
    Date: 2006
  8. By: Jordan Rappaport
    Abstract: Population density varies widely across U.S. cities. A simple, static general equilibrium model suggests that moderate-sized differences in cities’ total factor productivity can account for such variation. Nevertheless, the productivity required to sustain above-average population densities considerably exceeds estimates of the increase in productivity caused by such high density. In contrast, increasing returns to scale may be able to sustain multiple equilibria at below-average population densities.
    Keywords: Cities and towns ; Productivity ; Population
    Date: 2006
  9. By: Peter R. Mueser (Department of Economics, University of Missouri-Columbia); Kyung-Seong Jeon (Department of Economics, University of Missouri-Columbia); Andrew Dyke; Carolyn J. Heinrich; Kenneth R. Troske
    Abstract: Our study examines the dynamic structure of welfare participation and the labor market involvement of recipients starting in the early 1990s and extending through 1999 in the core counties containing six major urban areas: Atlanta, Baltimore, Chicago, Fort Lauderdale, Houston, and Kansas City. By focusing on six major cities, we can examine the extent to which differences in state and local policy, administrative directives, and local labor market conditions contribute to observed trends.
    Keywords: Welfare Reform
    JEL: I38 I31 H43
    Date: 2006–02–03
  10. By: Julia Reade
    Abstract: This paper provides summary statistics for home purchase data collected under the Home Mortgage Disclosure Act in 2003. In addition to aggregate totals, patterns by income and race / ethnicity are also described. These analyses of HMDA data have been conducted to examine access to home purchase loans, while focusing on traditionally underserved populations – low- and moderate- income (LMI) households and minorities. Overall lending activity has risen in recent years in New England, driven mainly by increasing volumes of applications from LMI and minority households. Although higher income households received more favorable origination and denial rates than lower income households, gaps between groups have narrowed significantly over recent years. In contrast, origination and denial rate gaps between whites and minorities (particularly African Americans and Hispanics) have widened. Gaps between whites and minorities are wider at higher income levels.
    Keywords: Home Mortgage Disclosure Act ; Home ownership - New England ; Mortgage loans - New England
    Date: 2006
  11. By: Hanno Lustig
  12. By: Leah Platt Boustan
  13. By: Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Nyström, Kristina (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper investigates the role of knowledge for successful entrepreneurship. The paper explicitly discusses the role of accessibility to university and company R&D for new firm formation. Company R&D is assumed to contain a higher share of R&D directed towards generating technological knowledge. Hence, the accessibility to such R&D are expected to have a stronger influence on new firm formation than the accessibility to university R&D. Since knowledge can also be assumed to be spatially bounded and diffuses in geographical space, it is argued that local interaction, measured by intra-municipality accessibility to knowledge, have a stronger influence on new firm formation than interregional interaction. In the empirical analysis data on new firm formation in 288 Swedish municipalities and accessibility to university and company R&D for 1997 and 1999 are used. We find that accessibility to company R&D have a stronger impact on new firm formation than accessibility to university R&D. We also find that close knowledge interactions are more important for new firm formation than long distance knowledge interactions. Accessibility to inter-regional company R&D has even a negative impact on new firm formation.
    Keywords: knowledge; accessibility; regional; entrepreneurship; Sweden
    JEL: L10 R11
    Date: 2006–07–07
  14. By: Eric Thompson; George Hammond; Stephan Weiler
    Abstract: This paper examines how amenities, asset indicators, and fiscal factors influence the growth in factors of production from 1972 to 1999 in the 466 non-metropolitan labor market areas in the continental United States. In developing our model of non-metropolitan factor markets, we combine the emphasis of Brown et al. (2003) on the affect of taxes and public expenditure policy on labor and capital formation with the emphasis of Beeson et al. (2001) on the importance of climate and natural features on localized population growth. We develop our own measure of capital stock in non-metropolitan areas using data from the Census of Manufacturing for 1967, 1972, 1977, 1982, 1987, and 1992. Results indicate that local taxes discourage both employment growth and manufacturing capital formation, but that local public infrastructure investment and the level of local entrepreneurship encourages employment growth. Amenities such as a favorable climate and the presence of surface water encourage the growth of employment, and greater local wealth, as measured by dividend, interest, and rent income, encourages the formation of manufacturing capital stock. Results fail to support an “export base” approach for rural economies where greater manufacturing capital stock encourages greater employment in a region.
    Keywords: Rural areas ; Rural development
    Date: 2006
  15. By: Leo de Haan; Elmer Sterken
    Abstract: We study competitive price setting behavior in the Dutch mortgage market, using daily observations on advertised 5- and 10-year mortgage interest rates for a sample of the four largest Dutch banks. We (1) estimate a VECM model, (2) a discrete choice model and (3) a structural conjectural variation model. The results indicate that one of the banks is a price leader, but that waiting for the leader to set the first step does not exclude competitive pricing by the followers.
    Keywords: Mortgage market; Competition; Price leadership; VECM; Probit; Conjectural variation.
    JEL: G21 L13
    Date: 2006–06
  16. By: Tuukka Saarimaa
    Abstract: The 1993 Finnish tax reform reduced the incentives to use debt financing in home acquisition for high-income households. Before the reform mortgage interest was deductible according to a progressive schedule creating a so-called upside-down effect, which means that the benefit from the deduction was the greater the higher was taxpayer?s income. After the reform, the deduction is made according to a flat schedule, and thus, the size of the benefit no longer depends on taxpayer?s income. We use household level data from the Income Distribution Survey of Statistics Finland to study whether high-income households have responded to the reform. Using tobit, Heckman and two-part model on repeated cross-sectional data from 1990?2000 we find that the probability of having a mortgage debt is clearly less dependent on the income of household?s head after the tax reform. This income variable measures the tax deduction effect and we conclude that the 1993 tax reform was behind the observed behavioural change. The results for the amount of mortgage debt conditional on a positive amount are more ambiguous. It seems that the tax reform had no or very little effect on the demand for the amount of mortgage debt.
    Keywords: mortgage interest deduction, tax reform, mortgage demand
    JEL: C30 R30 D10 H20
    Date: 2005–04–06
  17. By: Teemu Lyytikäinen
    Abstract: Private rental markets in Finland were subject to rent control from 1967 until the beginning of the 1990s when the rent control system was gradually abolished. This study estimates the costs and benefits of rent control to tenants in private rental dwellings in 1990 using the years 1998 and 2001 as benchmarks. Special emphasis is placed on the welfare costs of increased discrepancies between actual and desired housing consumption due to the overdemand situation caused by rent control. Earlier studies on the welfare effects of rent control usually assume that the household would consume on the estimated demand curve in the absence of rent control. Here it is shown that this assumption biases estimates of the net benefit of rent control to tenants downwards and welfare measures are derived that also allow for suboptimal housing consumption in the absence of rent control. The empirical implementation of these measures utilizes micro-simulation to differentiate between ?natural? free market disequilibrium costs and additional disequilibrium costs caused by rent control. According to the results, the additional disequilibrium costs offset roughly 30 per cent of the benefits of lower rents to tenants and amounted to over 2 per cent of consumption expenditure of tenant households. The estimated net benefit of rent control to tenants, taking both low rents and disequilibrium costs into account, was 4.5 or 6.5 per cent of consumption expenditure, depending on the reference year. The ratio of the net benefit to tenants to the costs of lower rents to landlords was 64 or 72 per cent.
    Keywords: Rent control, consumer?s surplus, disequilibrium costs
    JEL: R21 D12 D61
    Date: 2006–03–21
  18. By: James E. McClure (Department of Economics, Ball State University); Lee C. Spector (Department of Economics, Ball State University)
    Abstract: This paper considers whether student motivation might be impacted by the replacement of a straight (A, B, C, D, F) grading system with a plus/minus system (A, A-, B+ . . . D-, F). The data that are examined are from several undergraduate economics classes at a mid-sized Midwestern university in the United States. The data includes student characteristics, student performance, and students' choices of either a plus/minus or a straight grading system. In this admittedly small scale study students, who chose plus/minus grading, were not significantly more motivated than students who opted for straight grading.
    Keywords: Student Motivation, Plus/Minus grading, undergraduate education
    Date: 2004–01
  19. By: Torberg Falch (Department of Economics, Norwegian University of Science and Technology); Sofia Sandgren (Department of Economics, Norwegian University of Science and Technology)
    Abstract: We analyze whether the amount of schooling influences intelligence as measured by IQ tests. By use of a novel longitudinal dataset we are able to condition on early cognitive ability to account for selection into non-compulsory schooling when estimating the effect on cognitive ability at age 20. OLS estimates indicate that one year of schooling increases IQ by 2.8-3.5 points (about 0.2 standard deviations). When family income per family member and teacher evaluations of the individuals at age 10 are used as instruments for schooling and early cognitive ability, the return to schooling is estimated to 3.5-3.8 IQ points.
    Keywords: Cognitive ability; Education production; Return to schooling
    JEL: I21 J24
    Date: 2006–06–10
  20. By: Paul W. Bauer; Mark E. Schweitzer; Scott Shane
    Abstract: Real average U.S. per capita personal income growth over the last 65 years exceeded a remarkable 400 percent. Also notable over this period is that the stark income differences across states have narrowed considerably: In 1939 the highest income state’s per capita personal income was 4.5 times the lowest, but by 1976 this ratio had fallen to less than 2 times. Since 1976, the standard deviation of per capita incomes at the state level has actually risen, as some higher-income states have seen their income levels rise relative to the median of the states. A better understanding of the sources of these relative growth performances should help to characterize more effective economic development strategies, if income growth differences are predictable. In this paper, we look for statistically and economically significant growth factors by estimating an augmented growth model using a panel of the 48 contiguous states from 1939 to 2004. Specifically, we control for factors that previous researchers have argued were important: tax burdens, public infrastructure, size of private financial markets, rates of business failure, industry structure, climate, and knowledge stocks. Our results, which are robust to a wide variety of perturbations to the model, are easily summarized: A state’s knowledge stocks (as measured by its stock of patents and its high school and college attainment rates) are the main factors explaining a state’s relative per capita personal income.
    Keywords: Economic development ; Income ; Education - Economic aspects
    Date: 2006
  21. By: Ruben Enikolopov (Harvard University and CEFIR); Ekaterina Zhuravskaya (New Economic School/CEFIR and CEPR)
    Abstract: Does fiscal decentralization lead to more efficient governance, better public goods, and higher economic growth? This paper tests Riker’s theory (1964) that the results of fiscal decentralization depend on the level of countries’ political centralization. We analyze crosssection and panel data from up to 75 developing and transition countries for 25 years. Two of Riker’s predictions about the role of political institutions in disciplining fiscally-autonomous local politicians are confirmed by the data. 1) Strength of national political parties significantly improves outcomes of fiscal decentralization such as economic growth, quality of government, and public goods provision. 2) In contrast, administrative subordination (i.e., appointing local politicians rather than electing them) does not improve the results of fiscal decentralization.
    Date: 2006–05
  22. By: Aki Kangasharju; Sanna-Mari Hynninen; Jaakko Pehkonen
    Abstract: This study demonstrates that a stochastic frontier approach applied to regional level data offers a convenient and interesting method to examine how regional differences in matching efficiency and structural factors contribute to aggregate unemployment. The study reveals notable and temporally stable differences in matching efficiency across travel-to-work areas in Finland. If all areas were as efficient as the most efficient one, the number of hirings would increase by about 40 per cent. This would reduce the aggregate unemployment rate from the current 8.5 per cent level to 6.0 per cent. If all the areas shared the same structural characteristics as the most favourable area, the aggregate unemployment rate would drop to 7.1 per cent.
    Keywords: Efficiency, matching, aggregate unemployment, regional labour markets
    Date: 2006–03–03
  23. By: Leah Platt Boustan
  24. By: Leah Platt Boustan
  25. By: Dominika Kalinowska; Hartmut Kuhfeld
    Abstract: In contrast to other countries where official odometer readings are collected when cars are being inspected or whenever there is a change in the registration data, no such information is available in Germany. The published annual figures on mileage of German vehicles result from model calculations, based on different data sources. The last two large surveys on car use were carried out in 1993 and 2002. These data are analyzed to find determinants of car mileage traveled and to check if there was a significant change of average mileage within 10 years. The method used to find determinants of car mileage is a log-linear analysis of variance. In general, average annual mileage for a German passenger car was 13,500 km in 2002, about 5 % less than in 1993 (14,200 km per car). When both privately and business owned cars are included in the models, only car-specific characteristics can be used as explanatory variables. In these models there is a high effect of the survey year on the car mileage even if other variables - as car size, car age, and type of engine - are controlled for. However, if we consider private cars only, additional variables of individual users can be included in the models. In addition to engine type, age of car, horsepower, the age and gender of the driver are central variables explaining car mileage. The dummy variable for the year is significant as well, but its effect on average mileage is lower, although, e.g., fuel prices did rise by 50 % between 1993 and 2002. Obviously the demographic changes in motorization are dominant, while an effect of fuel price increase is not evident - apart from the trend towards diesel cars. These observations confirm research results, stating that individual preference for car use is a high-level inelastic demand.
    Keywords: Travel behavior, car mileage, car use
    Date: 2006
  26. By: Junyi Shen (Institute of Social and Economic Research, Osaka University); Yusuke Sakata (School of Economics, Kinki University); Yoshizo Hashimoto (Osaka Prefectural Institute for Advanced Industry Development)
    Abstract: The necessity of applying Cost Benefit Analysis (CBA) in evaluating the validity of a public transport investment is well recognized by policy makers in recent days. Originating in a sense of this fact, we implement CBA in a new project called Osaka Monorail Saito Linefs extension by applying a Choice Experiment (CE) method. It is estimated that the benefit cost (B/C) ratio is 1.87 under a basic scenario. In addition, with a consideration on different kinds of uncertainty in the future, a number of sensitivity analyses are implemented. The results of sensitivity analysis indicate that the possibility of generating net benefit is extremely high for the project studied here.
    Keywords: Cost Benefit Analysis, Choice Experiment (CE) method, Monorail, Sensitive Analysis
    JEL: C25 D61 R42
    Date: 2006–07

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