nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2006‒12‒16
seventeen papers chosen by
Steve Ross
University of Connecticut

  1. Urban structure and growth By Esteban Rossi-Hansberg; Mark L. J. Wright
  2. Do Students Care about School Quality? Determinants of Dropout Behavior in Developing Countries By Eric A. Hanushek; Victor Lavy; Kohtaro Hitomi
  3. Segregation in Networks. By Giorgio Fagiolo; Marco Valente; Nicolaas J. Vriend
  4. Stratification and Public Utility Services in Colombia: Subsidies to Households or Distortions on Housing Prices? By Carlos Medina; Leonardo Morales
  5. A quantitative assessment of the role of agglomeration economies in the spatial concentration of U.S. employment By Satyajit Chatterjee
  6. Bridging the Gap between Growth Theory and the New Economic Geography : The Spatial Ramsey Model By Raouf, BOUCEKKINE; Carmen, CAMACHO; Benteng, ZOU
  7. The Long-Term Impacts of Compulsory Schooling: evidence from a natural experiment in school leaving dates By Emilia Del Bono; Fernando Galindo-Rueda
  8. Fairness in Urban Land Use: An Evolutionary Contribution to Law & Economics By Christian Schubert
  9. Owning versus leasing: do courts matter? By Pablo Casas-Arce; Albert Saiz
  10. On the Marshall - Jacobs Controversy: It Takes Two to Tango By Gerben van der Panne; Cees van Beers
  11. Prospective analysis: residential choice and territorial attractiveness By Marie-Martine GERVAIS-AGUER (IERSO-IFReDE-GRES)
  12. Applications of Evolutionary Eceonomic Geography By Ron A. Boschma; Koen Frenken
  13. Measuring fiscal disparities across the U.S. states: a representative revenue system/representative expenditure system approach, fiscal year 2002 By Yesim Yilmaz; Sonya Hoo; Matthew Nagowski; Kim Rueben; Robert Tannenwald
  14. Regional development: contribution of evolutionary biology By Lucie Vaskova
  15. How does leadership support the activity of communities of practice ? By Paul Muller
  16. Decomposing consumer wealth effects: evidence on the role of real estate assets following the wealth cycle of 1990-2002 By Michael R. Donihue; Andriy Avramenko
  17. Is the Regional Perspective Useful? : Rural and Urban Quality of Life ; an Assessment By Annette Spellerberg; Denis Huschka; Roland Habich

  1. By: Esteban Rossi-Hansberg; Mark L. J. Wright
    Abstract: Most economic activity occurs in cities. This creates a tension between local increasing returns, implied by the existence of cities, and aggregate constant returns, implied by balanced growth. To address this tension, we develop a general equilibrium theory of economic growth in an urban environment. In our theory, variation in the urban structure through the growth, birth, and death of cities is the margin that eliminates local increasing returns to yield constant returns to scale in the aggregate. We show that, consistent with the data, the theory produces a city size distribution that is well approximated by Zipf’s Law, but that also displays the observed systematic under-representation of both very small and very large cities. Using our model, we show that the dispersion of city sizes is consistent with the dispersion of productivity shocks found in the data.
    Date: 2006
  2. By: Eric A. Hanushek; Victor Lavy; Kohtaro Hitomi
    Abstract: School quality and grade completion by students are shown to be directly linked, leading to very different perspectives on educational policy in developing countries. Unique panel data on primary school age children in Egypt permit estimation of behavioral models of school leaving. Students perceive differences in school quality, measured as expected achievement improvements in a given school, and act on it. Specifically, holding constant the student's own ability and achievement, a student is much less likely to remain in school if attending a low quality school rather than a high quality school. This individually rationale behavior suggests that common arguments about a trade-off between quality and access to schools may misstate the real issue and lead to public investment in too little quality. Further, because of this behavioral linkage, there is an achievement bias such that common estimates of rates of return to years of school will be overstated. The paper demonstrates the analytical importance of employing output-based measures of school quality.
    JEL: H4 I2 J2 O15
    Date: 2006–12
  3. By: Giorgio Fagiolo; Marco Valente; Nicolaas J. Vriend
    Abstract: Schelling (1969, 1971a,b, 1978) considered a simple model with individual agents who only care about the types of people living in their own local neighborhood. The spatial structure was represented by a one- or two-dimensional lattice. Schelling showed that an integrated society will generally unravel into a rather segregated one even though no individual agent strictly prefers this. We make a first step to generalize the spatial proximity model to a proximity model of segregation. That is, we examine models with individual agents who interact ’locally’ in a range of network structures with topological properties that are different from those of regular lattices. Assuming mild preferences about with whom they interact, we study best-response dynamics in random and regular non-directed graphs as well as in small-world and scale-free networks. Our main result is that the system attains levels of segregation that are in line with those reached in the lattice-based spatial proximity model. In other words, mild proximity preferences can explain segregation not just in regular spatial networks but also in more general social networks. Furthermore, segregation levels do not dramatically vary across different network structures. That is, Schelling’s original results seem to be robust also to the structural properties of the network.
    Keywords: Spatial proximity model, Social segregation, Schelling, Proximity preferences, Social networks, Undirected graphs, Best-response dynamics.
    JEL: C72 C73 D62
    Date: 2005
  4. By: Carlos Medina; Leonardo Morales
    Abstract: Domiciliary public utility services in Colombia have a cross subsidy system which charges subsidized rates to the households who live in houses located in strata associated to low wealth levels, and taxed rates to the better off. We assesses the hypothesis that the flow of subsidies that potentially come from a particular house, are discounted by housing market agents so that most of them are transferred to the prices of the houses that generate the subsidies. By estimating a hedonic prices model applying a regression discontinuity approach, we find that the increment in house value estimated because of subsidies is similar in magnitude to the present value of the flow of subsidies. Likely effects are found on the rent amount. We conclude that subsidies to the poor population through public spending in domiciliary public utility services in Colombia is being achieved, if anything, in a very limited way. Most of the financial effort on this subject ends up distorting housing relative prices according to socioeconomic strata, with an annual cost of up to 0.7% of GDP in supposed gross subsidies to domiciliary public utility services.
    Date: 2006–12–01
  5. By: Satyajit Chatterjee
    Abstract: This paper seeks to quantify the contribution of agglomeration economies to the spatial concentration of U.S. employment. A spatial macroeconomic model with heterogeneous localities and agglomeration economies is developed and calibrated to U.S. data on the spatial distribution of employment. The model is used to answer the question: By how much would the spatial concentration of employment decline if agglomeration economies were counterfactually suppressed? For the most plausible calibration, the answer is about 48 percent. More generally, the general equilibrium contribution of agglomeration economies appears to be substantial, with empirically defensible calibrations yielding estimates between 40 and 60 percent.
    Keywords: Employment
    Date: 2006
  6. By: Raouf, BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Carmen, CAMACHO (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics); Benteng, ZOU
    Abstract: We study a Ramsey problem in infinite and continuous time and space. The problem is discounted both temporally and spatially. Capital flows to locations with higher marginal return. We show that the problem amounts to optimal control of parabolic partial differential equations (PDEs). We rely on the existing related mathematical literature toderive the Pontyagin conditions. Using explicit representations of the solutions to the PDEs, we first show that the resulting dynamic gystem gives rise to an ill-posed problem in the sense of Hadamard (1923). We then turn to the spatial Ramsey problem with linear utility. The botained properties are significantly different from those of the non-spatial linear Ramsey model dute to the spatial dynamics induced by capital mobility.
    Keywords: Ramsey model, Economic Geography, parabolic equations, optimal control
    JEL: C61 C62 O41
    Date: 2006–10–30
  7. By: Emilia Del Bono (Institute for Social and Economic Research); Fernando Galindo-Rueda (Department of Trade and Industry)
    Abstract: This paper investigates a unique feature of the English educational system to estimate the causal effect of compulsory schooling on labour market outcomes. We examine school leaving rules that allow for discrete variation in exit dates by date of birth within school cohorts. This natural experiment enables a regression discontinuity design that differences out confounding factors discussed in the literature. Individuals compelled to stay in school for as little as three months longer than their classmates tend to achieve significantly higher qualification levels and experience better labour market outcomes. Our analysis of variation of impacts by age of compulsory schooling allows us to provide valuable new insights on the role of education credentials in the labour market.
    Date: 2006–11
  8. By: Christian Schubert
    Abstract: Markets for complex, multi-faceted goods normally require a complex institutional framework to function properly, i.e., to lead to patterns of outcomes that are deemed acceptable by the individuals involved. This paper examines the institutional underpinnings of the market for urban land use rights, taking both German and U.S. public and private land use law as a case in point. Apart from efficiency considerations that have been discussed in the literature, the individuals' preferences regarding the fairness of (i) the contents of urban land use rights and (ii) the distribution of costs and benefits induced by innovative land uses have been largely neglected. It is argued that investigating the impact of these preferences (and the underlying informal fairness norms) on the legal treatment of land use rights provides a key opportunity to construct an alternative Law & Economics approach that is compatible with an evolutionary perspective on economic land use decisions.
    Keywords: externalities, takings, land use law, distributive fairness, procedural fairness
    JEL: K11 R13 R14
    Date: 2006–12
  9. By: Pablo Casas-Arce; Albert Saiz
    Abstract: The authors develop a legal contract enforcement theory of the own versus lease decision. The allocation of ownership rights will minimize enforcement costs when the legal system is inefficient. In particular, when legal enforcement of contracts is costly, there will be a shift from arrangements that rely on such enforcement (such as a rental agreement) toward other forms that do not (such as direct ownership). The authors then test this prediction and show that costly enforcement of rental contracts hampers the development of the rental housing market in a cross-section of countries. They argue that this association is not the result of reverse causation from a developed rental market to more investor-protective enforcement and is not driven by alternative institutional channels. The results provide supportive evidence on the importance of legal contract enforcement for market development and the optimal allocation of property rights.
    Date: 2006
  10. By: Gerben van der Panne; Cees van Beers
    Abstract: The literature is inconclusive as to whether Marshallian specialization or Jacobian diversification externalities favour regional innovativeness. The specialization argument poses that regional specialization towards a particular industry improves innovativeness in that industry. Regional specialization allows for knowledge to spill over among similar firms. By contrast, the diversification thesis asserts that knowledge spills over between firms in different industries, causing diversified production structures to be more innovative. Building on an original database, we address this controversy for the Netherlands. We thereby advance on the literature by providing a two-level approach, at the region’s and the firm’s level. At the regional level, we compare specialized with diversified regions on numbers of accommodated innovators. At the firm level, we establish causalities between externalities and degree of innovativeness. The results suggest Marshallian externalities: specialized regions accommodate increased numbers of innovating firms and, consistently, incumbent firms’ innovativeness increase with regional specialization. Once the product has been launched, innovators in diversified Jacobian regions prove more successful in commercial terms than innovators in specialized Marshallian regions.
    Keywords: Industrial clusters; innovation; knowledge externalities
    JEL: O18 O31 R10
    Date: 2006
    Abstract: A multitude of complex factors may affect the dynamics of where people choose to live yet little analysis has been done on the determinants of residential choice. With the help of a large on-line survey, the present paper will try to unscramble the criteria of choice used by British citizens with plans to establish their main, secondary or “secondary then main” residence in France within three years time. Such choices are all the more revealing due to this population’s preference for certain host regions over others. The study’s aims, purpose and foci will be presented in its first section, followed by a discussion of its theoretical underpinnings and modes of investigation. We will then examine some initial findings, comparing them with future migrants’ residential biography. We follow this with an in-depth analysis, with no pretence of being all-encompassing. The permanent, temporary or “mixed” nature of a move is a very important criterion in analysing migrants’ residential choice and in determining a typology thereof. Then the choices are examined once the various types of migrations and households have been neutralised. Subsequently we focus on territorial attractiveness by selecting five regions, based on future migrants’ expressed preferences for the first three, and the territorial specificities of the other two. One notable challenge will be to identify potential inter-area competition in light of various factors. These include the arbitrage that future migrants might make, the attractiveness that a region may possess (selective or not), the image they have of different areas, and the migratory imagination, whose not insignificant role requires some decoding.
    Keywords: British migration, Hedonic analysis, Residential choice, Territorial attractiveness, Selectivity, Inter-area competition and arbitrage, Migratory imagination
    Date: 2006
  12. By: Ron A. Boschma; Koen Frenken
    Abstract: This paper is written as the first chapter of an edited volume on evolutionary economics and economic geography (Frenken, K., editor, Applied Evolutionary Economics and Economic Geography, Cheltenham: Edward Elgar, expected publication date February 2007). The paper reviews empirical applications of evolutionary economics in the field of economic geography. The review is divided in four parts: the micro-level of the firm, the meso-levels of industry and network, and the macro-level of spatial system. Some remarks on evolutionary policy in regional development are added as well as a short discussion of empirical problems that remain.
    Date: 2006
  13. By: Yesim Yilmaz; Sonya Hoo; Matthew Nagowski; Kim Rueben; Robert Tannenwald
    Abstract: States and their local governments vary both in their needs to provide basic public services and in their abilities to raise revenues to pay for those services. A joint study by the Tax Policy Center and the New England Policy Center at the Federal Reserve Bank of Boston uses the Representative Revenue System (RRS) and the Representative Expenditure System (RES) frameworks to quantify these disparities across states by comparing each state’s revenue capacity, revenue effort, and necessary expenditures to the average capacity, effort, and need in states across the country for fiscal year 2002. ; The fiscal capacity of a state is the state’s revenue capacity relative to its expenditure need. A state with low fiscal capacity has a relatively small revenue base, a relatively high need for expenditures, or—as is often the case—a combination of both. ; The New England and Mid-Atlantic states tend to have high revenue capacity and low expenditure needs compared to the national average. Thus, states in these two regions tend to have high fiscal capacity, or a relatively high capability to cover their expenditure needs using own resources. South Central states, on the other hand, have low fiscal capacity—that is, a low level of revenue-raising capacity given what it would cost to provide a standard set of public services to their citizens. ; Little relation exists between the amount of federal aid received by states and their fiscal capacity; federal money is not primarily distributed to offset differences in the ability to raise revenues or provide services. Given the current level of federal funds allocated to state and local governments, 91 percent of the gap between revenue capacity and expenditure need across the states could be covered if federal funds were reallocated.
    Date: 2006
  14. By: Lucie Vaskova (LET - Laboratoire d'économie des transports - [CNRS : UMR5593] - [Université Lumière - Lyon II] - [Ecole Nationale des Travaux Publics de l'Etat])
    Abstract: This paper tries to set out a potential of application of some evolutionary biology concepts to the issue of regional development. The objective is to show that employment of these concepts or at least inspiration by them may enrich some theories of regional development and enhance the explanatory framework of regional evolution.<br />First, the views of institutional economics and geography on evolutionary biology contribution are summarised, then some evolutionary concepts are applied to the path dependence concept e. g., in effort to find a possible way of classification of this phenomenon. However, we discuss some other evolutionary concepts, as coevolution, adaptation, preadaption, general approach to comprehension of evolution, etc. in connexion with some chosen theories and problems of regional development.
    Keywords: Regional development ; evolutionary biology ; path dependence ; theories of regional development
    Date: 2006–12–05
  15. By: Paul Muller
    Abstract: the purpose of this paper is to present leadership as an important mechanism underlying the coordination and the cohesion of communities of practice. More precisely, it will be shown that an important factor conditioning the coordination and the cohesion of a community rests on the leaders’ capacity to influence individual behaviors. This capacity of influence is grounded on the high degrees of reputation and trust they enjoy within the community. However, coordination of individual behaviors is not ensured by the mere existence of leadership. A simulation model points out the conditions under which leadership forms an efficient coordinating device.
    Keywords: communities of practice, leadership, reputation, exit, loyalty, coordination, social simulation.
    JEL: L23 D23
    Date: 2006
  16. By: Michael R. Donihue; Andriy Avramenko
    Abstract: During the period from 1990 to 2002, U.S. households experienced a dramatic wealth cycle, induced by a 369-percent appreciation in the value of real per capita liquid stock-market assets, followed by a 55-percent decline. However, despite predictions at the time by some analysts relying on life-cycle models of consumption, consumer spending in real terms continued to rise throughout this period. Using data from 1990 to 2005, traditional approaches to estimating macroeconomic wealth effects on consumption confront two puzzles: (i) econometric evidence of a stable cointegrating relationship among consumption, income, and wealth is weak at best; and (ii) life-cycle models that rely on aggregate measures of wealth cannot explain why consumption did not collapse when the value of stock-market assets declined so dramatically. We address both puzzles by decomposing wealth according to the liquidity of household assets. In particular, we find that significant appreciation in the value of real estate assets that occurred after the peak of the wealth cycle helped to sustain consumer spending from 2001 to 2005.
    Keywords: Wealth
    Date: 2006
  17. By: Annette Spellerberg; Denis Huschka; Roland Habich
    Abstract: In Germany, processes can be observed that have long been out of keeping with the principle of equality of opportunity. Unemployment is concentrated in the structurally weak peripheral areas, in Eastern Germany in particular; emigration of young and better-educated people to the West is not diminishing, but contrary to expectation is again on the increase; aging pro-cesses have set in already, and when it comes to the provision of infrastructure, e.g. in the field of professional training, some regions are already suffering from considerable problems. These difficulties are frequently interpreted as differences between East and West and are explained away as problems resulting from reunification, such as the deindustrialization and restructuring of the economy and the enormous decline in the birth rate in Eastern Germany. Although these problems cannot just be attributed to social transformation and the birth rate crisis alone, being subject to more general processes of intensified globalization and the aging of society, the increasing regional disparities are rarely considered in the overall context of regional development patterns throughout Germany. Moreover, the difficulty of even obtaining data for purposes of comparison generally means that an international yardstick is lacking when regional developments are analyzed. The present study investigates regional disparities over a period of time in the light of subjective and objective indicators of the quality of life for individuals. To this end, we make use of data from the Wohlfahrtssurvey [Welfare Survey] from 1978 to 2001, among other sources. On the basis of the Euromodule that has been established at the WZB, we compare current regional patterns in Germany with those in other European countries. This approach makes it possible to provide information on the scale of regional disparities in various different countries, and to identify privileged and handicapped regions with reference to standards of living and the sense of wellbeing. The study's findings show that, in the past twenty-five years, welfare in Western Germany has evened out at a higher level, but currently a trend towards increasing economic disparity is discernible. In comparison with other European countries, on the other hand, the differences (regional differences) within Germany are comparatively slight.
    Date: 2006

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