nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2006‒10‒28
29 papers chosen by
Steve Ross
University of Connecticut

  1. Life-Cycle Housing and Portfolio Choice with Bond Markets By van Hemert, Otto
  2. Racial Segregation and Public School Expenditure By La Ferrara, Eliana; Mele, Angelo
  3. Housing Market Dynamics and Regional Migration in Britain By Cameron, Gavin; Muellbauer, John; Murphy, Anthony
  4. A Spatio-Temporal Model of House Prices in the US By Sean Holly; M. Hashem Pesaran; Takashi Yamagata
  5. Close Neighbours Matter: Neighbourhood Effects on Early Performance at School By Goux, Dominique; Maurin, Eric
  6. Social Interaction and Urban Sprawl By Jan K. Brueckner; Ann G. Largey
  7. Is there a Causal Effect of High School Math on Labor Market Outcomes? By Juanna Schrøter Joensen; Helena Skyt Nielsen
  8. House Prices, Rents and Interest Rates Under Collateral Constraints By Arce, Oscar; López-Salido, J David
  9. City Size and Financial Development By Becker, Bo
  10. Peer Effects in European Primary Schools: Evidence from PIRLS By Ammermüller, Andreas; Pischke, Jörn-Steffen
  11. Decentralization and the Productive Efficiency of Government: Evidence from Swiss Cantons By Barankay, Iwan; Lockwood, Ben
  12. Spatial Mobility and Returns to Education: Some Evidence from a Sample of French Youth By Philippe Lemistre; Nicolas Moreau
  13. Estimation of Class-Size Effects, Using 'Maimonides' Rule': The Case of French Junior High Schools By Gary-Bobo, Robert J.; Mahjoub, Mohamed Badrane
  14. How Large an Effect Can We Expect from School Reforms? By Spyros Konstantopoulos; Larry Hedges
  15. Social Interactions and Schooling Decisions By Cattaneo, Alejandra; Lalive, Rafael
  16. Assessing the Effects of Local Taxation Using Microgeographic Data By Duranton, Gilles; Gobillon, Laurent; Overman, Henry G.
  17. 'Bend It Like Beckham': Identity, Socialization and Assimilation By Bisin, Alberto; Patacchini, Eleonora; Verdier, Thierry; Zenou, Yves
  18. The Dynamics of the Racial Test Score Gap During the School Years in Britain By Patacchini, Eleonora; Zenou, Yves
  19. Technological Leadership, Human Capital and Economic Growth: A Spatial Econometric Analysis for U.S. Counties, 1969-2003 By Valerien Pede; Raymond Florax; Henri de Groot
  20. A Reflection On The Effects Of Transport Costs Within The New Economic Geography By Olga Alonso-Villar
  21. A model of economic geography with demand pull and congestion costs By Olga Alonso-Villar
  22. Does School Tracking Affect Equality of Opportunity? New International Evidence By Giorgio Brunello; Daniele Checchi
  23. Taxation and Internal Migration: Evidence from the Swiss Census Using Community-Level Variation in Income Tax Rates By Thomas Liebig; Patrick A. Puhani; Alfonso Sousa-Poza
  24. To Segregate or to Integrate: Education Politics and Democracy By de la Croix, David; Doepke, Matthias
  25. Why So Many Local Entrepreneurs? By Michelacci, Claudio; Silva, Olmo
  26. Impact of Early Childhood Care and Education on Children's Preschool Cognitive Development: Canadian Results from a Large Quasi-experiment By Pierre Lefebvre; Philip Merrigan; Matthieu Verstraete
  27. Computing Crime: Information Technology, Police Effectiveness and the Organization of Policing By Garicano, Luis; Heaton, Paul
  28. Merged Municipalities, Higher Debt: On Free-riding and the Common Pool Problem in Politics By Jordahl, Henrik; Liang, Che-Yuan
  29. Airport Noise Regulation, Airline Service Quality, and Social Welfare By Jan K. Brueckner; Raquel Girvin

  1. By: van Hemert, Otto (NYU Stern)
    Abstract: I study optimal housing and portfolio choice under stochastic inflation and real interest rates. Renters allocate financial wealth to stocks and bonds with different maturities. Homeowners also choose the mortgage type. I show that hedge demands and financial constraints vary over an investor's lifetime, giving rise to a pronounced life-cycle pattern in the optimal housing, stock, bond, and mortgage choice. Young homeowners take an adjustable-rate mortgage (ARM) and invest financial wealth predominantly in stocks. Later in the life cycle bonds play an important role, mainly as a hedge against changing real interest rates and house prices. Fairly risk-tolerant homeowners still prefer an ARM, while more risk-averse investors rather choose a combination of an ARM and a fixed-rate mortgage.
    Keywords: Portfolio choice; mortgage; housing; term structure of interest rates
    JEL: E43 G11
    Date: 2006–09–15
  2. By: La Ferrara, Eliana; Mele, Angelo
    Abstract: This paper explores the effect of racial segregation on public school expenditure in US metropolitan areas and school districts. Our starting point is the literature that relates public good provision to the degree of racial fragmentation in the community. We argue that looking at fragmentation alone may be misleading and that the geographic distribution of different racial groups needs to be taken into account. Greater segregation is associated with more homogeneity in some subareas and more heterogeneity in others, and this matters if decisions on spending are taken at aggregation levels lower than the MSA. For given fragmentation, the extent of segregation conveys information on households’ possibility to sort into relatively more or less homogeneous jurisdictions. We account for the potential endogeneity of racial segregation and find that the latter has a positive impact on average public school expenditure both at the MSA and at the district level. At the same time, increased segregation leads to more inequality in spending across districts of the same MSA, thus worsening the relative position of poorer districts.
    Keywords: public school expenditure; racial fragmentation; segregation
    JEL: H41 H73 J15
    Date: 2006–07
  3. By: Cameron, Gavin; Muellbauer, John; Murphy, Anthony
    Abstract: Economic conditions exert a strong influence on regional migration. On the one hand, strong labour market conditions, as exemplified by low unemployment rates and high earnings, draw migrants into regions. On the other hand, strong housing market conditions can prevent movement since expensive housing can deter migrants and commuting may often be an alternative. This can be thought of as giving rise to a migration equilibrium, where high house prices choke off migration caused by strong labour market conditions. Expected capital gains in housing and expected earnings growth however, can offset high levels of house prices, effects ignored in previous literature. Migration can also be influenced more directly by the availability of housing relative to population without this being mediated through prices. This paper presents evidence from a 28 year panel on net and gross migration for the regions of Britain that is broadly in accord with these expectations.
    Keywords: contiguity; expected capital gains; Great Britain; house prices; regional migration; regional panel
    JEL: C33 J19 R3
    Date: 2006–09
  4. By: Sean Holly (CIMF, University of Cambridge); M. Hashem Pesaran (CIMF, University of Cambridge and IZA Bonn); Takashi Yamagata (CIMF, University of Cambridge)
    Abstract: The purpose of this paper is to apply recent advances in the econometrics of panel data to a problem that has a clear spatial dimension. We model the dynamic adjustment of real house prices using data at the level of US States. In the last decade, in most OECD countries there has been a significant rise in real house prices. This attracted the attention of many international organisations and central banks. In this paper we consider interactions between housing markets by examining the extent to which real house prices at the State level are driven by fundamentals such as real income, as well as by common shocks, and determine the speed of adjustment of house prices to macroeconomic and local disturbances. We take explicit account of both cross sectional dependence and heterogeneity. This allows us to find a cointegrating relationship between house prices and incomes and to identify a small role for real interest rates. Using this model we then examine the role of spatial factors, in particular the effect of contiguous states by use of a weighting matrix. We are able to identify a significant spatial effect, even after controlling for State specific real incomes, and allowing for a number of unobserved common factors.
    Keywords: house price, cross sectional dependence, spatial dependence
    JEL: C21 C23
    Date: 2006–09
  5. By: Goux, Dominique; Maurin, Eric
    Abstract: Children's outcomes are strongly correlated with those of their neighbours. The extent to which this is causal is the subject of an extensive literature. An identification problem exists because people with similar characteristics are observed to live in close proximity. Another major difficulty is that neighbourhoods measured in available data are often considerably larger than those which matter for outcomes (i.e. close neighbours). Several institutional features of France enable us to address these problems. We find that an adolescent's performance at the end of junior high-school are strongly influenced by the performance of other adolescents in the neighbourhood.
    Keywords: neighbourhood effects on education
    JEL: I21 J24
    Date: 2006–05
  6. By: Jan K. Brueckner (Department of Economics, University of California-Irvine); Ann G. Largey (Dublin City University Business School)
    Abstract: Various authors, most notably Putnam (2000), have argued that low-density living reduces social capital and thus social interaction, and this argument has been used to buttress criticisms of urban sprawl. If low densities in fact reduce social interaction, then an externality arises, validating Putnam's critique. The paper tests this premise using data from the Social Capital Benchmark Survey. In the empirical work, social interaction measures for individual survey respondents are regressed on census-tract density and a host of household characteristics, using an instrumental-variable approach to control for the potential endogeneity of density.
    Keywords: Conflict; Urban sprawl; Social capital
    JEL: R1 J11
    Date: 2006–10
  7. By: Juanna Schrøter Joensen (University of Aarhus); Helena Skyt Nielsen (University of Aarhus and IZA Bonn)
    Abstract: Outsourcing of jobs to low-wage countries has increased the focus on the accumulation of skills – such as Math skills – in high-wage countries. In this paper, we exploit a high school pilot scheme to identify the causal effect of advanced high school Math on labor market outcomes. The pilot scheme reduced the costs of choosing advanced Math because it allowed for at more flexible combination of Math with other courses. We find clear evidence of a causal relationship between Math and earnings for the students who are induced to choose Math after being exposed to the pilot scheme. The effect partly stems from the fact that these students end up with higher education.
    Keywords: Math, high school curriculum, instrumental variable, local average treatment effect
    JEL: I20 J24
    Date: 2006–10
  8. By: Arce, Oscar; López-Salido, J David
    Abstract: We develop an OLG model aimed at explaining the joint determination of housing prices, rents, and interest rates, in an environment featuring a positive home ownership bias and individual borrowing limits that generate a mismatch between desired and available funds to finance housing purchases. Individual heterogeneity on this mismatch gives rise to three different types of households: renters, landlords (i.e. buy-to-let investors, who provide the stock of houses for rent) and homebuyers who do not participate in the rental market. We investigate the conditions under which two alternative stationary equilibria may coexist: (i) a low valuation equilibrium (LVE) in which landlords do not exhaust their borrowing limits; and (ii) a high valuation one (HVE) where every household is financially constrained at the time of purchasing its housing stock. In a HVE (relative to the LVE) the volume of buy- to-let investment, the price-to-rent ratio and the housing price are higher while the interest rate is lower. Due to binding borrowing constraints, in a HVE further reductions in the interest rate only bear a positive networth effect through a reduction of the cost of repaying outstanding mortgaged debt, which fuels future availability of funds, thus sustaining the higher demand for credit. More generally, coexistence of both types of equilibria provides a rationale for the existence of speculative paths from a LVE to a HVE.
    Keywords: buy-to-let investment; collateral constraints; multiple equilibria; price-to-rent ratio
    JEL: G21 R21 R31
    Date: 2006–05
  9. By: Becker, Bo (University of Illinois at Urbana-Champaign)
    Abstract: Stock markets tend to be few in each country, often unique, and located in the largest cities. Typically, much of the economic activity relating to the stock market takes places in this large city. These facts suggest that agglomeration economies are important. In other words, productivity is enhanced for stock market-workers and -firms located in a large city. After discussing this prima facie evidence of agglomeration economies, we consider the cross-country implications. Countries with larger cities will have better developed stock markets because they can benefit from stronger agglomeration economies surrounding the stock market. This provides an economic theory of financial development which is complementary to the standard legal and political theories of financial development. We establish that city size is a robust determinant of stock market size and activity, but not of other types of financial development (banks). We show that this is not driven by reverse causality and that it is not driven by small or new stock markets. Finally, we show that alternative measures of a country's geography, such as urbanization and the population of the second largest city, do not predict stock market development, implying that we do not capture some alternative geographic effect. We conclude that there is a significant positive effect of city size on stock market development, that this reflects agglomeration economies. This explains why countries with large cities have better developed stock markets.
    Keywords: City size; agglomeration economies; financial development
    JEL: G10 G20 O16 R10
    Date: 2006–09–15
  10. By: Ammermüller, Andreas; Pischke, Jörn-Steffen
    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.
    Keywords: measurement error; peer effects
    JEL: I21 J24
    Date: 2006–05
  11. By: Barankay, Iwan; Lockwood, Ben
    Abstract: Advocates of fiscal decentralization argue that amongst other benefits, it can increase the efficiency of delivery of government services. This paper is one of the first to evaluate this claim empirically by looking at the association between education expenditure decentralization and the productive efficiency of schools using a data-set of Swiss cantons. We first provide careful evidence that expenditure decentralization is a powerful proxy for legal local autonomy. Further panel regressions of Swiss cantons provide robust evidence that more decentralization is associated with higher educational attainment. We also show that these gains lead to no adverse effects across education types but that male students benefited more from educational decentralization closing, for the Swiss case, the gender education gap.
    Keywords: decentralization; local public goods; productive efficiency
    JEL: H40 H52 H70 I20
    Date: 2006–04
  12. By: Philippe Lemistre (Cereq and Lirhe, University of Toulouse 1); Nicolas Moreau (Gremaq, University of Toulouse 1 and IZA Bonn)
    Abstract: The purpose of this article is to reevaluate the returns to geographic mobility and to the level of education, taking into account the interaction between these two variables. We have at our disposal an original French database that permits precise calculation of the distance between the place of education and the location of first employment. We thus capture mobility without a priori regarding the geographical areas selected, and we use kilometric thresholds to estimate the returns to spatial mobility. Our results suggest decreasing returns to spatial mobility as the distance covered rises and increasing returns to mobility with higher levels of education. In addition, for all levels of education, including the lowest, returns to geographic mobility prove to be positive, for one threshold at least and several distances.
    Keywords: spatial mobility, returns to schooling, earnings function
    JEL: J31 J61 I21
    Date: 2006–10
  13. By: Gary-Bobo, Robert J.; Mahjoub, Mohamed Badrane
    Abstract: Using a rich sample of students from French junior high schools with a panel structure, we obtain small but significant and negative effects of class size on probabilities of educational success, in grades 6 and 7. An 8 to 10 student reduction of class size puts the child of a non-educated mother on an equal footing with the child of a college-educated mother. These effects vanish in grades 8 and 9. We use Angrist and Lavy's (1999) theoretical class size (i.e., "Maimonides' rule") as an instrument for observed class size. This is possible, due to availability of total high school and total grade enrollment in each year, in our exceptional data set. We control for father occupation, mother education and other variables. Using a Probit framework to model transitions from one grade to another (and thus grade repetitions), we simultaneously estimate the student's probabilities of success over 4 years in junior high school. This is done while allowing a general covariance structure of the error terms that affect latent student-performance variables and class-size auxiliary equations.
    Keywords: class size; econometrics; education; instrumental variables; junior high school
    JEL: C33 C35 I20
    Date: 2006–07
  14. By: Spyros Konstantopoulos (Northwestern University and IZA Bonn); Larry Hedges (Northwestern University)
    Abstract: Judging the success of school reform requires an interpretative context in which to judge whether effects obtained are large enough to be important or so small as to be a disappointment. The logic of school reform suggests two frameworks with which to judge the importance of effects. One is the size of the existing achievement gaps between important groups in society. The other is the size of gaps in mean achievement among schools (adjusted for student characteristics). NAEP data is used to demonstrate that in national data, gaps which appear large by one standard may appear small by the other. We argue that the most appropriate framework for judging reform effects is the national distribution of school effects.
    Keywords: academic achievement, school effects, multi-level models
    JEL: I20
    Date: 2006–10
  15. By: Cattaneo, Alejandra; Lalive, Rafael
    Abstract: The aim of this paper is to study whether schooling choices are affected by social interactions. Such social interactions may be important because children enjoy spending time with other children or parents learn from other parents about the ability of their children. Identification is based on a randomized intervention that grants a cash subsidy encouraging school attendance among a sub-group of eligible children within small rural villages in Mexico. Results indicate that (i) the eligible children tend to attend school more frequently, (ii) but also the neligible children acquire more schooling when the subsidy is introduced in their local village, (iii) social interactions are economically important, and (iv) they may arise due to changes in parents’ perception of their children’s ability.
    Keywords: field experiment; peer effects; PROGRESA; schooling
    JEL: C93 I21 I28
    Date: 2006–09
  16. By: Duranton, Gilles; Gobillon, Laurent; Overman, Henry G.
    Abstract: We study the impact of local taxation on the location and growth of firms. Our empirical methodology pairs establishments across jurisdictional boundaries to estimate the impact of taxation. Our approach improves on existing work as it corrects for unobserved establishment heterogeneity, for unobserved time-varying site specific effects, and for the endogeneity of local taxation. Applied to data for English manufacturing establishments we find that local taxation has a negative impact on employment growth, but no effect on entry.
    Keywords: borders; local taxation; regression discontinuity; spatial differencing
    JEL: H22 H71 R38
    Date: 2006–09
  17. By: Bisin, Alberto; Patacchini, Eleonora; Verdier, Thierry; Zenou, Yves
    Abstract: We first develop a model of identity formation resulting from the interaction of cultural transmission and socialization inside the family, peer effects and social interactions, and identity choice. We then put the model to data using the UK Fourth National Survey of Ethnic Minorities. We show that the main determinants of ethnic identity include past racial harassment experiences, language spoken at home and with friends, quality of housing, and structure of the family. Most importantly, we find that, consistently with our theoretical analysis, identity and socialization to an ethnic minority are, other things equal, more intense in mixed neighbourhood than in segregated neighbourhoods. We argue that this last result has important and up-to-now unnoticed implications for integration and assimilation policies.
    Keywords: cultural transmission; ethnicity; identity; intermarriage
    JEL: A14 J15
    Date: 2006–05
  18. By: Patacchini, Eleonora; Zenou, Yves
    Abstract: We investigate the racial gap in test scores between white and non-white students in Britain both in levels and differences across the school years. We find that there is a substantial racial gap in test scores, especially between ages 7 and 11, and a less severe one between ages 11 and 16. It thus seems that nonwhites are losing ground at school, especially during the first five years. We then investigate the reasons behind this racial gap and its evolution. We focus on racial differences in parents' involvement in education. We find that a non-negligible part of the test score racial gap can be explained by these cultural differences. In particular, we show that if non-white parents would invest in education of their 11 year-old children as much as white parents do, then the racial test score gap in reading and mathematics would be reduced by 18.1 and 7.2 percent, respectively.
    Keywords: cultural differences; education; ethnic minorities; parental involvement
    JEL: I21 J15 J24
    Date: 2006–05
  19. By: Valerien Pede; Raymond Florax (Department of Agricultural Economics, College of Agriculture, Purdue University); Henri de Groot (Department of Spatial Economnics, Frije Universiteit, The Netherlands)
    Abstract: The traditional view of cities as monocentric conglomerates of people clustered around an employment center, driving economic growth in cities that subsequently trickles down to the hinterland, is increasingly being challenged. In particular, the role of space, technological leadership, human capital, increasing returns to scale and industrial clustering as well as hierarchical organization principles have been emphasized in the more recent literature. This paper utilizes exploratory and spatial econometric data analysis techniques to investigate these issues for U.S. counties using data from 1969 through 2003. Ultimately, contiguous and hierarchical organization and interaction patterns are captured using an endogenous growth model allowing for spatial effects, inspired by earlier work on human capital and technology gaps. We investigate a neoclassical growth model and compare it to a spatial version of an endogenous growth model allowing for “domestic” investment in human capital and catch-up to the technology leader, and find that human capital strongly contributes to growth in a neoclassical setting, but much less so in an endogenous setting. In the endogenous model the catch-up term dominates in comparison to “domestic” human capital effects.
    Keywords: economic growth, human capital, technological leadership
    JEL: C21 I23 O33 R12
    Date: 2006
  20. By: Olga Alonso-Villar (Universidade de Vigo)
    Abstract: The purpose of this paper is to analyze, in the light of recent contributions of New Economic Geography models, the spatial consequences of transport cost reductions. So far, the role of transport costs have been only partially unveiled, since papers focused either on the Dixit-Stiglitz-Iceberg framework or on the alternative framework put forth by Ottaviano et al. (2002)—which departs from the former in preferences and transport modelling. This paper goes a step further, offering a comprehensive view that includes the two approaches, in contexts both of two and of more than two locations. As opposed to other revisions of the literature, which have focused mainly on the centripetal forces included in these models, we emphasize the role of dispersion forces. The study suggests that in a two-location setting the results seem quite robust against changes in transportation modelling, so that considering either multiplicative transport costs or additive the predictions are identical. However, when allowing for a multilocation setup, the analysis becomes more complex.
    Keywords: agglomeration, dispersion, monopolistic competition, transport costs.
    JEL: F12 R12
    Date: 2006
  21. By: Olga Alonso-Villar (Universidade de Vigo)
    Abstract: This paper proposes a simple model of economic geography in which to derive analytical results when jointly considering two centrifugal forces —congestion costs together with the pull demand effect— within the Dixit-Stiglitz-Iceberg framework. In this vein, we develop a unified model with labor mobility that combines some of the features of Tabuchi (1998) with those of Forslid and Ottaviano (2003). We analytically show that when considering the effects of congestion costs, dispersion of economic activity is possible not only at high but also at low transport costs. This result corroborates previous numerical simulations conducted by Tabuchi (1998).
    Keywords: Congestion costs, demand pull, urban concentration, transport costs.
    JEL: R12 F12 F15 O18
    Date: 2006
  22. By: Giorgio Brunello (University of Padova, Collegio Carlo lberto Torino, CESifo and IZA Bonn); Daniele Checchi (University of Milano and IZA Bonn)
    Abstract: This paper investigates whether at the interaction between family background and school tracking affects human capital accumulation. Our a priori view is that more tracking should reinforce the role of parental privilege, and thereby reduce equality of opportunity. Compared to the current literature, which focuses on early outcomes, such as test scores at 13 and 15, we look at later outcomes, including literacy, dropout rates, college enrolment, employability and earnings. While we do not confirm previous results that tracking reinforces family background effects on literacy, we do confirm our view when looking at educational attainment and labour market outcomes. When looking at early wages, we find that parental background effects are stronger when tracking starts earlier. We reconcile the apparently contrasting results on literacy, educational attainment and earnings by arguing that the signalling role of formal education – captured by attainment – matters more than actual skills – measured by literacy – in the early stages of labour market experience.
    Keywords: education, tracking, literacy, wages
    JEL: J24
    Date: 2006–09
  23. By: Thomas Liebig (OECD); Patrick A. Puhani (Leibniz University of Hannover, SIAW, University of St. Gallen and IZA Bonn); Alfonso Sousa-Poza (University of St. Gallen)
    Abstract: We investigate the relationship between income tax rate variation and internal migration for the unique case of Switzerland, whose system of determining tax rates primarily at the community level results in enough variation to permit analysis of their influence on migration. Specifically, using Swiss census data, we analyze migratory responses to tax rate variations for various groups defined by age, education, and nationality/residence permit. The results suggest that young Swiss college graduates are most sensitive to tax rate differences, but the estimated effects are not large enough to offset the revenue-increasing effect of a rise in tax rate. The migratory responses of foreigners and other age-education groups are even smaller, and reverse causation seems negligible.
    Keywords: mobility, immigration, foreigners, visa status, residence permit, taxation, Switzerland
    JEL: J61 H73
    Date: 2006–10
  24. By: de la Croix, David; Doepke, Matthias
    Abstract: The governments of nearly all countries are major providers of primary and secondary education to its citizens. In some countries, however, public schools coexist with private schools, while in others the government is the sole provider of education. In this study, we ask why different societies make different choices regarding the mix of private and public schooling. We develop a theory which integrates private education and fertility decisions with voting on public schooling expenditures. In a given political environment, high income inequality leads to more private education, as rich people opt out of the public system. Comparing across political systems, we find that concentration of political power can lead to multiple equilibria in the determination of public education spending.
    Keywords: democracy; private education; probabilistic voting; public education
    JEL: D72 H42 I21 O10
    Date: 2006–08
  25. By: Michelacci, Claudio; Silva, Olmo
    Abstract: We document that the fraction of entrepreneurs who work in the region where they were born is significantly higher than the corresponding fraction for dependent workers. This difference is more pronounced in more developed regions and positively related to the degree of local financial development. Firms created by locals are more valuable and bigger (in terms of capital and employment), operate with more capital intensive technologies, and are able to obtain greater financing per unit of capital invested, than firms created by non-locals. This evidence suggests that there are so many local entrepreneurs because locals can better exploit the financial opportunities available in the region where they were born. This can help in explaining how local financial development causes persistent disparities in entrepreneurial activity, technology, and income.
    Keywords: economic and financial development; entrepreneurship; social capital
    JEL: J23 O12 O16 Z13
    Date: 2006–09
  26. By: Pierre Lefebvre; Philip Merrigan; Matthieu Verstraete
    Abstract: On September 1st 1997, a new early childhood care and education policy was initiated by the provincial government of Québec, the second most populous province in Canada. Providers of childcare services licensed by the Department of the Family began offering daycare spaces at the reduced parental contribution of $5 per day per child for children aged 4. In successive years, the government reduced the age requirement and engaged in a plan to create new childcare facilities and pay for the cost of additional $5 per day childcare spaces. By September 2000, the low-fee policy applied to all children aged 0 to 59 months and the number of partly subsidized spaces increased from 77,000 in 1998 to 170,000 spaces, totally subsidized, by midyear 2003. In addition, on September 1st 1997, all public schools offered full-day rather than part-day kindergarten for 5-year-old children. No such important policy changes for preschool (including kindergarten) children were enacted in the other Canadian provinces over the years 1994 to 2003. Using biennial data drawn from Statistics Canada’s National Longitudinal Survey of Children and Youth (NLSCY), conducted since 1994-1995, this study attempts to estimate the effect of the policy on Québec’s preschool children cognitive test scores. A non-experimental evaluation framework based on multiple pre- and post-treatment periods is used to estimate the effect of the early childhood care and education regime on school readiness. The econometric results support the hypothesis that the policy had no effects on the cognitive development of 4-year-olds (the PPVT-R raw scores and the PPVT-R standardized scores). However, we provide evidence that the policy had a substantial negative impact on the scores of 5-year-olds.
    Keywords: preschool children, school readiness, childcare, kindergarten, treatment effects, natural experiment
    JEL: H42 J21 J22
    Date: 2006
  27. By: Garicano, Luis; Heaton, Paul
    Abstract: How does information technology (IT) affect the organization of police work? How does it in turn affect police crime-fighting effectiveness? To answer these questions, we construct a new panel data set of police departments covering 1987-2003. We find that while IT adoption had substantial effects on a wide range of police organizational practices, it had, by itself, a negligible impact on crime-fighting effectiveness. These results are robust to various methods for controlling for agency-level characteristics and the endogeneity of IT use. We then suggest and test two explanations for this puzzle. First, we demonstrate that use of a particular technology, computerized record-keeping, increased recorded crime rates. Second, we provide evidence that IT investments only had a substantial impact on crime clearance rates and crime rates when undertaken as part of a broad set of complementary organizational practices such as those in the Compstat program.
    Keywords: hierarchy; information technology; organization; police; skills
    JEL: K42 L23 M5 O33
    Date: 2006–09
  28. By: Jordahl, Henrik (Research Institute of Industrial Economics); Liang, Che-Yuan (Uppsala University)
    Abstract: We use the 1952 Swedish municipal amalgamation reform to study free-riding and the common pool problem in politics. We expect municipalities that were affected by the reform to increase their debt in anticipation of a merger, and this effect to be larger if they were merged with many other populous municipalities (i.e. facing a large common pool). We use ordinary least squares and matching on the complete cross section of rural municipalities for the period 1947-1951, fixed effects when exploiting the panel features, as well as a geographical instrumental variables strategy. We find an average treatment effect close to the amount that the average merged municipality increased its debt with during this period, which corresponds to 2.8 percent of average income or 63 percent of the average increase in income. However, we do not find larger increases in municipalities that were part of a larger common pool.
    Keywords: Common pool; municipal amalgamation; local governments
    JEL: D72 H73 H74 H77 R53
    Date: 2006–10–19
  29. By: Jan K. Brueckner (Department of Economics, University of California-Irvine); Raquel Girvin (Transporation Sciences, University of California-Irvine)
    Abstract: This paper explores the impact of airport noise regulation on airline service quality and airfares. It also characterizes the socially optimal stringency of noise limits, taking both noise damage and the various costs borne by airlines and their passengers into account. The analysis also investigates the effect of noise taxes, as well as the optimal level level of such taxes. Along with the companion paper by Girvin (2006a), this work represents the first complete theoretical investigation into the economics of airport noise regulation using a model where the interests of the key relevant stakeholders are captured.
    Keywords: Conflict; Airport noise; Flight frequency: Airfares
    JEL: L0 L9 Q2
    Date: 2006–09

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