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on Urban and Real Estate Economics |
| By: | Peterson, George E. |
| Abstract: | Municipal land sales provide one option for financing urban infrastructure investment. In countries where land is owned by the public sector, land is by far the most valuable asset on the municipal balance sheet. Selling land or long-term leasing rights to land use while investing the proceeds in infrastructure facilities can be viewed as a type of portfolio asset adjustment. This paper shows that in China many municipalities have financed more than half of their high rates of infrastructure investment from land sales, for periods of 10 to 15 years. Much of the remaining investment has been financed by municipal borrowing against the collateral of land values. Other countries also have turned to land sales and leasing for infrastructure finance. From a local perspective, land sales have the advantage that they typically are free from the intergovernmental restrictions that require higher-level approval for increases in local tax rates or user fees and that restrict local government borrowing. However, financing municipal infrastructure investment through land sales creates special risks that are not recognized in most intergovernmental fiscal frameworks. One danger involves the use of proceeds to finance operating budgets. Risk exposure is exaggerated by the highly volatile nature of urban land markets and evidence that in some countries urban land values in 2006 reflected a real estate bubble. In the past, Hong Kong, a jurisdiction that has relied heavily on land-leasing to finance its infrastructure budget, has seen land sales fall to zero at the bottom of the real estate cycle. The greatest financial sector risk stems from municipal borrowing based on inflated land values offered as collateral to banks. Sound intergovernmental fiscal management will require tighter regulation of municipalities ' financial leveraging of land assets to avoid excessive risk taking by local governments. |
| Keywords: | Public Sector Economics & Finance,Municipal Financial Management,Public Sector Management and Reform,Regional Governance,Urban Governance and Management |
| Date: | 2006–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4043&r=ure |
| By: | van Ryneveld, Philip |
| Abstract: | Since South Africa held its first democratic elections in 1994, it has given significant attention to building an effective system of decentralization including provincial and local government. While provincial governments are responsible mainly for the implementation of social services such as health and education, the provision of much of the urban infrastructure is the responsibility of local government. Although many challenges remain, the country has made significant progress over the past decade in addressing urban service backlogs in poor areas. At the same time, it has greatly improved macroeconomic fundamentals. The system of financing local government seeks to place accountability firmly at the local level, with most revenues in the larger urban centers raised locally through a combination of local taxes and fees for services, while poorer regions are predominantly grant funded. The objective has been to encourage the financing of capital infrastructure through local borrowing based on sustainable, transparent local finances rather than national repayment guarantees, which are outlawed. There is some indirect subsidization of loans through the state-owned Development Bank of Southern Africa. But the emphasis is on achieving redistribution through transparent, formula-based grants paid directly from national to local governments. While further bedding down of the system is needed, the approach is proving largely successful. The paper concludes by recommending that the existing division between provinces as providers of social services and local governments as the key locus of responsibility for services related to the built environment should be strengthened, particularly through the devolution of more urban transport related functions. A number of key risks are also highlighted, including issues related to the reform of local business taxes. |
| Keywords: | Municipal Financial Management,Urban Economics,Public & Municipal Finance,Regional Governance,Urban Governance and Management |
| Date: | 2006–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4042&r=ure |
| By: | Bover, Olympia |
| Abstract: | This paper presents estimates of wealth effects on consumer spending using the first wave of a new survey of household finances (EFF 2002) that contains direct measures of asset holdings and consumption. A distinguishing feature of the EFF is the availability of such information from a representative sample subject to stratification by wealth. Furthermore we believe we are able to measure wealth effects due to precautionary motives only. This is confirmed by the estimated pattern of wealth effects across age groups. To control for the potential endogeneity of housing wealth, we exploit geographical house price variation and inheritance information in the EFF as instrumental variables. We focus on the effects of housing wealth, distinguishing between main and secondary housing, but also report OLS estimates of financial wealth effects. We find large and statistically significant housing wealth effects for prime age households. Overall, the largest wealth effects are for owner occupied housing, followed by secondary housing, with financial wealth effects being smaller and insignificant. |
| Keywords: | house prices; precautionary savings; two-stage least squares matching; wealth effects |
| JEL: | D91 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5874&r=ure |
| By: | Colleen Donovan; David N. Figlio; Mark Rush |
| Abstract: | This paper is the first to explore the effects of school accountability systems on high-achieving students' long-term performance. Using exceptional data from a large highly-selective state university, we relate school accountability pressure in high school to a student's university-level grades and study habits. We exploit a change in the state's accountability system in 1999 that led to some schools becoming newlythreatened by accountability pressure and others becoming newly-unthreatened to identify the effects of accountability pressure. We find that an accountability system based on a low-level test of basic skills apparently led to generally reduced performance by high-achieving students, while an accountability system based on a more challenging criterion-referenced exam apparently led to improved performance in college on mathematics and other technical subjects. Both types of systems are associated with increased "cramming" by students in college. The results indicate that the nature of an accountability system can influence its effectiveness. |
| JEL: | I2 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12628&r=ure |
| By: | Christian Ahlin (Department of Economics, Vanderbilt University); Peter Ahlin (Chatham Financial) |
| Abstract: | We add congestion/snobbery to the Hotelling model of spatial competition. For any firm locations on opposite sides of the midpoint, a pure strategy price equilibrium exists and is unique if congestion costs are strong enough relative to transportation costs. The maximum distance between firms in any pure strategy symmetric location equilibrium declines toward zero as congestion costs increase relative to transportation costs. For any non-zero minimum distance between firms, high enough congestion costs relative to transportation costs guarantee that the unique pure strategy symmetric location equilibrium involves minimum differentiation. In this sense Hotelling was right about differentiation of snob/congestion goods. |
| Keywords: | Hotelling, spatial competition, differentiation, congestion, snobbery |
| JEL: | D21 D43 R12 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:van:wpaper:0621&r=ure |
| By: | Hjalmarsson, Erik (Division of International Finance, Federal Reserve Board); Hjalmarsson, Randi (University of Maryland, School of Public Policy) |
| Abstract: | We test for efficiency in the market for Swedish co-ops by examining the negative relationship between the sales price and the present value of future rents. If the co-op housing market is efficient, the present value of co-op rental payments due to underlying debt obligations of the cooperative should be fully reflected in the sales price. However, we find that, on average, a one hundred kronor increase in the present value of future rents only leads to a 45 to 65 kronor reduction in the sales price; co-ops with higher rents are thus relatively overpriced compared to those with lower rents. Our analysis indicates that pricing tends to be more efficient in areas with higher educated and wealthier buyers. By relying on cross-sectional relationships in the data, our results are less sensitive to transaction costs and other frictions than time-series tests of housing market efficiency. <p> |
| Keywords: | Housing markets; Market efficiency; Cooperative housing |
| JEL: | G14 R21 R31 |
| Date: | 2006–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0232&r=ure |
| By: | Ming Su; Quanhou Zhao |
| Abstract: | China has experienced more than 25 years of extraordinary economic growth. Underlying this growth has been a decentralized fiscal system, in which provinces and large cities are given the freedom to make infrastructure investments to stimulate local development, and are allowed to retain a large part of the fiscal revenues that are generated from economic activity. Although successful as a growth strategy, this policy created two problems for national fiscal management. First, it significantly reduced the central government ' s share of fiscal revenues, which fell from 34.8 percent in 1980 to 22 percent in 1992. Second, it widened economic and fiscal disparities between the rapidly growing urban coastal region and the rest of the country. Rapid growth in subnational debt (which rose 23-fold in a decade) and subnational nonperforming loans (estimated by the authors to range between US$100 billion and US$150 billion) has placed pressure on China ' s financial system. Traditionally, China has favored bank lending as a source of finance because the banking system has provided a vehicle for central political control over local debt. But as China ' s financial system matures, creditworthiness standards must become more important. The authors recommend greater use of the revenue streams from infrastructure assets as a financing source, and gradual relaxation of central political control over subnational debt. One step in this direction would permit leading cities to issue municipal bonds based on objective financial standards. |
| Keywords: | Banks & Banking Reform,Urban Economics,Public & Municipal Finance,Municipal Financial Management,Intergovernmental Fiscal Relations and Local Finance Management |
| Date: | 2006–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4051&r=ure |
| By: | Stefano Breschi (CESPRI-Bocconi University, Milan, Italy); Francesco Lissoni (Brescia University and CESPRI-Bocconi University, Italy) |
| Abstract: | In this paper we exploit new data on US inventors in Organic Chemistry, Pharmaceuticals, and Biotechnology to revisit the JTH test of the localization of knowledge spillovers (Jaffe, Trajtenberg, and Henderson; 1993). We find that inventors who patent across different companies contribute extensively to the observed citation patterns, both directly (through personal self-citations) and indirectly, by linking the various companies via a social network conducive to more citations. To the extent that the geographical mobility of these “cross-firm” inventors is quite limited, the resulting social networks and citations patterns are found to be bounded in space. We conclude that spatial distance, as measured in the JTH experiment, is just a proxy for a much more important variable, such as social distance between inventors. In a similar vein, we show that technological distance, introduced by Thompson and Fox-Kean (2005) to question the soundness of the JTH experiment, is also a proxy of social distance. |
| Keywords: | Knowledge diffusion, Localized spillovers, Social networks |
| JEL: | O33 R12 Z13 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:cri:cespri:wp184&r=ure |
| By: | Duranton, Gilles; Overman, Henry G. |
| Abstract: | We use a point-pattern methodology to explore the detailed location patterns of UK manufacturing industries. In particular, we consider the location of entrants and exiters vs. continuing establishments, domestic- vs. foreign-owned, large vs. small, and affiliated vs. independent. We also examine co-localisation between vertically-linked industries. Our analysis provides a set of new stylised facts and confirmation for others. |
| Keywords: | clusters; k-density; localisation; location patterns; spatial statistics |
| JEL: | C19 L70 R12 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5858&r=ure |
| By: | David N. Figlio; Lawrence Kenny |
| Abstract: | This paper is the first to systematically document the relationship between individual teacher performance incentives and student achievement using United States data. We combine data from the National Education Longitudinal Survey on schools, students, and their families with our own survey conducted in 2000 regarding the use of teacher incentives. This survey on teacher incentives has unique data on frequency and magnitude of merit raises and bonuses, teacher evaluation, and teacher termination. We find that test scores are higher in schools that offer individual financial incentives for good performance. Moreover, the estimated relationship between the presence of merit pay in teacher compensation and student test scores is strongest in schools that may have the least parental oversight. The association between teacher incentives and student performance could be due to better schools adopting teacher incentives or to teacher incentives eliciting more effort from teachers; it is impossible to rule out the former explanation with our cross sectional data. |
| JEL: | I2 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12627&r=ure |
| By: | Annez, Patricia Clarke |
| Abstract: | The author examines the role of private participation in infrastructure (PPI) in mobilizing finance for key urban services, that is, urban roads, municipal solid waste management, and water and sanitation since the early 1990s when private participation came to be seen as a key element in infrastructure development. Her review indicates that for financing urban services, PPI has disappointed-playing a far less significant role than was hoped for, and which might be expected given the attention it has received and continues to receive in strategies to mobilize financing for infrastructure. Looking beyond the number, the author examines transactions and finds that there are good reasons-practical, political, economic and institutional-for these disappointments. Recommending that cities in developing countries try harder is not likely to relieve all these constraints. Experience shows that there are a number of features that raise the risk profile of urban infrastructure for private investors, which has meant that the bulk of the transactions that have taken place have been exceptions rather than harbingers of a growing trend. Many of the measures that could reduce the risk profile are outside the control of many cities, others unlikely to change, and yet another group of steps to be taken that would improve prospects for urban service provision, whether in the hands of public or private operators. These findings suggest a more pragmatic and selective approach to the focus on PPI as a source of finance, and more focus on the array of some of the fundamental steps, among them strengthening the public finances of cities to improve both the capacity to deliver services and to reduce the risks that private investors must take when they invest in urban infrastructure. |
| Keywords: | Transport Economics Policy & Planning,Public Sector Economics & Finance,Non Bank Financial Institutions,Urban Slums Upgrading,Urban Services to the Poor |
| Date: | 2006–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4045&r=ure |
| By: | Alexander Muravyev |
| Abstract: | The paper tests for the existence of human capital externalities, more precisely those stemming from higher education, using a micro-level approach: the Mincerian wage regression augmented with the average level of education in a local geographical area (city). To solve identification problems arising due to endogeneity of average education the study exploits a natural experiment provided by the process of economic transition in the former communist economies. We argue that the educational structure of cities under the central planning was determined by the government rather than the market; thus the average educational attainment in cities at the end of communism can be regarded as exogenous with respect to the wages prevailing after the start of transition. The identification strategy based on the use of the pre-transition average education is applied to data from the Russia Longitudinal Monitoring Survey, RLMS. Empirical results are consistent with the presence of significant human capital (educational) externalities in the Russian economy. According to the estimates, one percent increase in the college share in a city results in the increase of city residents' wages by about 1.5 percent. The result proves to be robust to several changes in the empirical specification. |
| Keywords: | Human Capital Externalities, Cities, Russia |
| JEL: | I2 J31 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp629&r=ure |
| By: | Florian Hoffmann; Philip Oreopoulos |
| Abstract: | This paper uses a new administrative dataset of students at a large university matched to courses and instructors to analyze the importance of teacher quality at the postsecondary level. Instructors are matched to both objective and subjective characteristics of teacher quality to estimate the impact of rank, salary, and perceived effectiveness on grade, dropout and subject interest outcomes. Student fixed effects, time of day and week controls, and the fact that first year students have little information about instructors when choosing courses helps minimize selection biases. We also estimate each instructor's value added and the variance of these effects to determine the extent to which any teacher difference matters to short-term academic outcomes. The findings suggest that subjective teacher evaluations perform well in reflecting an instructor's influence on students while objective characteristics such as rank and salary do not. Whether an instructor teaches full-time or part-time, does research, has tenure, or is highly paid has no influence on a college student's grade, likelihood of dropping a course or taking more subsequent courses in the same subject. However, replacing one instructor with another ranked one standard deviation higher in perceived effectiveness increases average grades by 0.5 percentage points, decreases the likelihood of dropping a class by 1.3 percentage points and increases in the number of same-subject courses taken in second and third year by about 4 percent. The overall importance of instructor differences at the university level is smaller than that implied in earlier research at the elementary and secondary school level, but important outliers exist. |
| JEL: | H52 I2 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12596&r=ure |
| By: | Edward L. Glaeser; Bryce A. Ward |
| Abstract: | Over the past 30 years, eastern Massachusetts has seen a remarkable combination of rising home prices and declining supply of new homes. The reductions in new supply don't appear to reflect a real lack of land, but instead reflect a response to man-made restrictions on development. In this paper, we examine the land-use regulations in greater Boston. There has been a large increase in the number of new regulations, which differ widely over space. Few variables, other than historical density and abundant recreational water, reliably predict these regulations. High lot sizes and other regulations are associated with less construction. The regulations boost prices by decreasing density, but density levels seem far too low to maximize total land value. |
| JEL: | R14 R21 R31 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12601&r=ure |
| By: | D'Haultfoeuille, Xavier; Davezies, Laurent; Fougère, Denis |
| Abstract: | This paper considers the semiparametric identification of endogenous and exogenous peer effects based on group size variation. We show that Lee (2006)’s linear-in-means model is generically identified, even when all members of the group are not observed. While unnecessary in general, homoskedasticity may be required in special cases to recover all parameters. Extensions to asymmetric responses to peers and binary outcomes are also considered. Once more, most parameters are semiparametrically identified under weak conditions. However, recovering all of them requires more stringent assumptions. Eventually, we bring theoretical evidence that the model is more adapted to small groups. |
| Keywords: | linear-in-means model; semiparametric identification; social interactions |
| JEL: | C14 C21 C25 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5865&r=ure |
| By: | Mas, Alexandre; Moretti, Enrico |
| Abstract: | We investigate how and why the productivity of a worker varies as a function of the productivity of her co-workers in a group production process. In theory, the introduction of a high productivity worker could lower the effort of incumbent workers because of free riding; or it could increase the effort of incumbent workers because of peer effects induced by social norms, social pressure, or learning. Using scanner level data, we measure high frequency, worker-level productivity of checkers for a large grocery chain. Because of the firm's scheduling policy, the timing of within-day changes in personnel is unsystematic, a feature for which we find consistent support in the data. We find strong evidence of positive productivity spillovers from the introduction of highly productive personnel into a shift. A 10% increase in average co-worker permanent productivity is associated with 1.7% increase in a worker's effort. Most of this peer effect arises from low productivity workers benefiting from the presence of high productivity workers. Therefore, the optimal mix of workers in a given shift is the one that maximizes skill diversity. In order to explain the mechanism that generates the peer effect, we examine whether effort depends on workers' ability to monitor one another due to their spatial arrangement, and whether effort is affected by the time workers have previously spent working together. We find that a given worker's effort is positively related to the presence and speed of workers who face him, but not the presence and speed of workers whom he faces (and do not face him). In addition, workers respond more to the presence of co-workers with whom they frequently overlap. These patterns indicate that these individuals are motivated by social pressure and mutual monitoring, and suggest that social preferences can play an important role in inducing effort, even when economic incentives are limited. |
| Keywords: | spillovers |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5870&r=ure |