nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2007‒03‒10
23 papers chosen by
Steve Ross
University of Connecticut

  1. School Assignment, School Choice and Social Mobility By Simon Burgess; Adam Briggs
  2. Neighborhood effects, public housing and unemployment in France By Florence Goffette-Nagot; Claire Dujardin
  3. Using Boundary Changes to Estimate the Impact of School Competition on Test Scores By Simon Burgess; Helen Slater
  4. The interaction between house prices and loans for house purchase. The Spanish case By Ricardo Gimeno; Carmen Martínez-Carrascal
  5. School Choice in England: Background Facts By Simon Burgess; Adam Briggs; Brendon McConnell; Helen Slater
  6. House Prices, Rents, and Interest Rates under Collateral Constraints By Óscar J. Arce; David López-Salido
  7. Modelling the Impact of Pupil Mobility on School Differences in Educational Achievement By Harvey Goldstein; Simon Burgess; Brendon McConnell
  8. House prices and rents in Spain: does the discount factor matter? By Juan Ayuso; Fernando Restoy
  9. Dynamic Models of Segregation in Small-World Networks By Giorgio Fagiolo; Marco Valente; Nicolaas J. Vriend
  10. ‘Sleep-Walking Towards Segregation’? The Changing Ethnic Composition of English Schools, 1997-2003 – an Entry Cohort Analysis By Ron Johnston; Simon Burgess; Richard Harris; Deborah Wilson
  11. Housing tenure and labour mobility: a comparison across European countries By Cristina Barceló
  12. An Efficiency Comparison of City Managers and Elected Mayors By Steven F. Kreft
  13. Time-trend in spatial dependence: Specification strategy in the first-order spatial autoregressive model By López, Fernando; Chasco, Coro
  14. The impact of neighbourhood on the income and mental health of British social renters By Carol Propper; Simon Burgess; Anne Bolster; George Leckie; Kelvyn Jones; Ron Johnston
  15. Clusters, Functional Regions and Cluster Policies By Karlsson, Charlie
  16. Conservation policies, environmental valuation and the optimal size of jurisdictions By Giovanni B. Concu
  18. Cross-sectional Space-time Modeling Using ARNN(p, n) Processes By Kakamu, Kazuhiko; Polasek, Wolfgang
  19. To Segregate or to Integrate: Education Politics and Democracy By David de la Croix; Matthias Doepke
  20. Changes during the 1990's in the location of Swedish Power Couples: Consequences and Explanations By Isacsson, Gunnar; Regnér, Håkan
  21. Why do Black Workers Search Less? A Transport-Mode Based Theory By Zenou, Yves
  22. The Long-Term Consequences of Regional Specialization By Michaels, Guy
  23. House prices and employment reallocation: internacional evidence By Olympia Bover; Juan F. Jimeno

  1. By: Simon Burgess; Adam Briggs
    Abstract: We estimate the chances of poor and non-poor children getting places in good schools, analysing the relationship between poverty, location and school assignment. Our dataset allows us to measure location and distance very precisely. The simple unconditional difference in probabilities of attending a good school is substantial. We run an analysis that controls completely for location, exploiting within-street variation and controlling for other personal characteristics. Children from poor families are significantly less likely to go to good schools. We show that the lower chance of poor children attending a good school is essentially unaffected by the degree of choice.
    Keywords: School assignment, social mobility, school choice
    JEL: I21 I28
    Date: 2006–11
  2. By: Florence Goffette-Nagot (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines]); Claire Dujardin (CORE - Center for Operations Research and Econometrics - [Université catholique de Louvain])
    Abstract: This paper is aimed at examining how individual unemployment is influenced both by location in a deprived neighborhood and public housing. Our identification strategy is twofold. First, we estimate a simultaneous probit model of public housing accommodation, type of neighborhood, and unemployment, thus accounting explicitely for correlation of unobservables between the three behaviors. Second, we take advantage of the situation of the public housing sector in France, which allows us to use public housing accommodation as a powerful<br />determinant of neighborhood choices and to use household's demographic characteristics as exclusion restrictions. Our results show that public housing does not have any direct effect on unemployment. However, living within the 35% more deprived neighborhoods does increase the unemployment probability significantly. As expected, the effect of neighborhood substantially decreases when dealing with the endogeneity of neighborhood and when using public housing as a determinant of neighborhood choice.
    Keywords: Neighborhood effects ; public housing ; unemployment ; simultaneous probit models ; simulated maximum likelihood
    Date: 2007–02–28
  3. By: Simon Burgess; Helen Slater
    Abstract: We study the impact of school choice on test score outcome. It has generally proved difficult to isolate exogenous differences in the degree of competition faced by schools. We run a difference-in-difference analysis, exploiting a local government reorganisation to provide identification. This reorganisation changed the boundaries of education markets. We analyse one cohort of children passing through secondary school before the change, and one afterwards, both for the treated (re-organised) area and for similar control areas. Our point estimates suggest that the fall in competition experienced reduced test scores, but the estimates are not statistically significant.
    Keywords: School choice, school competition, educational outcomes
    JEL: I21 I28
    Date: 2006–10
  4. By: Ricardo Gimeno (Banco de España); Carmen Martínez-Carrascal (Banco de España)
    Abstract: The aim of this paper is to analyse, using a vector error-correction model (VECM), the dynamic interaction between house prices and loans for house purchase in Spain. The results show that both variables are interdependent in the long run: loans for house purchase depend positively on house prices, while house prices adjust when this credit aggregate departs from the level implied by its long-run determinants. In contrast, disequilibria in house prices are corrected only through changes in this variable. As for short-run dynamics, the results show that the two variables have a positive contemporaneous impact on each other, indicating the existence of mutally reinforcing cycles in both variables.
    Keywords: mortgage debt, housing prices, error correction
    JEL: E32 G21 R21
    Date: 2006–02
  5. By: Simon Burgess; Adam Briggs; Brendon McConnell; Helen Slater
    Abstract: There is considerable debate on the merits of extending and strengthening school choice. In England, the controversial Education and Inspections Bill, published on the 28 February 2006, contains a prominent role for ‘school choice’. But the debate lacks some basic information on these issues, and this paper provides some background facts to fill this gap. We first consider the transport issue and ask how many pupils have choice of schools. We report the distance of school commutes for various breakdowns of LEA and school type, and for sub-groups of pupils. We also turn the question around and tabulate the proportion of pupils who have 3 schools within 2km of their home, and within 5km and 8km. The conclusion from all this is that most pupils do have considerable choice of school (as defined here). We also address a specific issue about school access ? which pupils attend their nearest school. We show that only about a half of pupils attend their nearest school, and 30% do not attend one of their nearest three schools. We investigate this to understand which pupils attend their local school, and the role played by the quality of that local school.
    Keywords: school choice; school commute; ethnicity and education
    JEL: I20
    Date: 2006–09
  6. By: Óscar J. Arce (Banco de España); David López-Salido (Banco de España; Centre for Economic Policy Research (CEPR))
    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 home buyers 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: price-to-rent ratio, collateral constraints, buy-to-let investment, multiple equilibria
    JEL: G21 R21 R31
    Date: 2006–04
  7. By: Harvey Goldstein; Simon Burgess; Brendon McConnell
    Abstract: The recently introduced National Pupil Database in England allows the tracking of every child through the compulsory phases of the state education system. The data from Key Stage 2 for three Local Education Authorities are studied, following cohorts of pupils through their schooling. The mobility of pupils among schools is studied in detail using multiple membership multilevel models that include prior achievement and other predictors and the results are compared with traditional ‘value added’ approaches that ignore pupil mobility. The analysis also includes a cross classification of junior and infant schools attended. The results suggest that some existing conclusions about schooling effects may need to be revised.
    Keywords: Multilevel model, multiple membership model, mobility, value added, National Pupil database, educational attainment, cross classified model, random effects, school effectiveness
    JEL: I21
    Date: 2006–09
  8. By: Juan Ayuso (Banco de España); Fernando Restoy (Banco de España)
    Abstract: We estimate alternative price to rent ratios in the Spanish housing market by considering different stochastic discount factors in present value models similar to those used in the financial literature but where the higher rigidity that characterises this market is taken into account. We identify three robust across model regularities: i) the increase in the price to rent ratio since the late nineties helped at first to restore equilibrium, ii) further increases in house prices raised the ratio between 24% and 32% above equilibrium by 2004, although iii) at that time the ratio was only around 2% above its short term adjustment path towards a (new) long run equilibrium.
    Keywords: housing, price-to-rent ratio, overvaluation
    JEL: G12 R21 R31
    Date: 2006–04
  9. By: Giorgio Fagiolo (Sant’Anna School of Advanced Studies, Pisa); Marco Valente (University of L’Aquila); Nicolaas J. Vriend (Queen Mary, University of London)
    Abstract: Schelling (1969, 1971a,b, 1978) considered a simple proximity model of segregation where individual agents only care about the types of people living in their own local geographical neighborhood, the spatial structure being represented by one- or two-dimensional lattices. In this paper, we argue that segregation might occur not only in the geographical space, but also in social environments. Furthermore, recent empirical studies have documented that social interaction structures are well-described by small-world networks. We generalize Schelling’s model by allowing agents to interact in small-world networks instead of regular lattices. We study two alternative dynamic models where agents can decide to move either arbitrarily far away (global model) or are bound to choose an alternative location in their social neighborhood (local model). 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. Thus, Schelling’s original results seem to be robust to the structural properties of the network.
    Keywords: Spatial proximity model, Social segregation, Schelling, Proximity preferences, Social networks, Small worlds, Scale-free networks, Best-response dynamics
    JEL: C72 C73 D62
    Date: 2007–03
  10. By: Ron Johnston; Simon Burgess; Richard Harris; Deborah Wilson
    Abstract: There has been considerable public debate recently in England regarding levels of segregation (and changes in those levels) not only by neighbourhood but also in schools. Little data are available to evaluate claims that such segregation has been increasing in the country’s schools. This paper uses a data set released by the Department for Education and Skills which indicates the ethnic identity for every student in the entry cohorts for all English primary and secondary schools between 1997-8 (for primary and secondary schools respectively) and 2003. Analysis indicates that there has been some increase in segregation levels in some cities, but only to the expected extent given the changing relative size of the ethnic minority populations there. Segregation is relatively high there, but has only increased if the minority groups’ share of the entry cohorts has been increasing.
    Keywords: ethnic segregation, schools
    JEL: I20
    Date: 2006–09
  11. By: Cristina Barceló (Banco de España)
    Abstract: This paper studies housing tenure and labour mobility using individual data from the ECHP for five European countries. First, the effect of housing tenure on the unemployed workers' labour mobility is studied using a discrete unemployment duration model with two alternative exits to employment, depending on whether they are associated with a residential change or not. Ownership is found to affect geographical mobility negatively. Second, the results are robust to potential endogeneity of the ownership status and institutional differences across countries. Third, post-unemployment wages are studied. We do not find any effects of the unemployment spell duration and the geographical mobility on wages after controlling for the self-selection bias.
    Keywords: labour mobility, housing tenure, duration models, self-selection bias, wage equation
    JEL: J61 R20 J31
    Date: 2006–02
  12. By: Steven F. Kreft (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
    Abstract: Previous research has concluded that there are no efficiency differences between elected mayor-council (EMC) and council-manager (CM) city governments. However, the CM form has recently surpassed the EMC form to become the most popular U.S. city government. This paper provides an alternative method of testing the relative efficiency of the two forms of government. Relying on capitalization theory of local public goods, I develop a hedonic price model for Ohio metropolitan home sales. Results show that houses within a CM city have a pricing premium that can be attributed to the relative efficiency of the CM government.
    Keywords: city manager, government efficiency, local public goods, hedonic, capitalization
    JEL: H7 H4 H1
    Date: 2007–01
  13. By: López, Fernando; Chasco, Coro
    Abstract: The purpose of this article is to analyze if spatial dependence is a synchronic effect in the first-order spatial autoregressive model, SAR(1). Spatial dependence can be not only contemporary but also time-lagged in many socio-economic phenomena. In this paper, we use three Moran-based space-time autocorrelation statistics to evaluate the simultaneity of this spatial effect. A simulation study shed some light upon these issues, demonstrating the capacity of these tests to identify the structure (only instant, only time-lagged or both instant and time-lagged) of spatial dependence in most cases.
    Keywords: Space-time dependence; Spatial autoregressive models; Moran’s I
    JEL: C15 C51 C21
    Date: 2007–03–03
  14. By: Carol Propper; Simon Burgess; Anne Bolster; George Leckie; Kelvyn Jones; Ron Johnston
    Abstract: This paper examines the impact of neighbourhood on the income and mental health of individuals living in social housing in the United Kingdom. We exploit a dataset that is representative and longitudinal to match people to their very local neighbourhoods. Using this, we examine the effect of living in a neighbourhood in which the population is more disadvantaged on the levels and change, over a 10-year window, of income and mental health. We find that social renters who live with the most disadvantaged individuals as neighbours have lower levels of household income and poorer mental health. However, neighbourhood appears to have no impact on changes in either household income or individual mental health.
    Keywords: Neighbourhood effects, income, mental health, social renters
    JEL: I30
    Date: 2006–05
  15. By: Karlsson, Charlie (Jönköping International Business School (JIBS) and CESIS)
    Abstract: This paper gives an overview of research on economic clusters and clustering and is motivated by the growing intellectual and political interest for the subject. Functional regions have the features that agglomeration of economic activities i.e. clusters, benefit from. Functional regions have low intra-regional transaction and transportation cost and has access to the local labour market. The features of spatial economic concentration were for a long time disregarded and it was first in the early 1990s that Krugman brought the subject into the stage light. The scientific interests of cluster and clustering phenomenon have after the “new” introduction rapidly increased in the last decade. Hence, the subject is being thought at various education levels. The importance of cluster and clustering has also been recognized at a national, regional and local level and cluster policies are becoming a major part of political thinking. These policies are however often based on a scarce analysis where no strict criterions are stated.
    Keywords: cluster; location; functional region; knowledge; innovation; entrepreneurship; cluster policy
    JEL: R12 R58
    Date: 2007–02–28
  16. By: Giovanni B. Concu (Risk and Sustainable Management Group, University of Queensland)
    Abstract: The size of a jurisdiction is crucial in determining the efficiency, equity or efficacy of environmental regulations. However, jurisdictions are usually taken to coincide with political boundaries even if environmental externalities may transcend them. This paper illustrates the design and implementation of a Choice Modelling experiment to determine the spatial distribution of environmental benefits of Kings Park (Western Australia). The objective is to understand if federal, state or local resources are the appropriate form of funding a conservation policy. Results indicate that there are interstate spillovers of benefits, hence justifying federal contributions to Kings Park. They also show that some benefits are homogeneously spread within Western Australia, and this is an indication that state funding is also appropriate. Other benefits are distance-dependent; some level of local/council funding is warranted
    Keywords: federal regulation, decentralised policies, benefits spillovers, environmental valuation, choice modelling, distance
    JEL: H77 Q51 Q58
    Date: 2006–11
  17. By: Jean-Paul Faguet; Fabio Sánchez
    Abstract: The effects of decentralization on public sector outputs is much debated but little agreed upon. This paper compares the remarkable case of Bolivia with the more complex case of Colombia to explore decentralization’s effects on public education outcomes. In Colombia, decentralization of education finance improved enrollment rates in public schools. In Bolivia, decentralization made government more responsive by re-directing public investment to areas of greatest need. In both countries, investment shifted from infrastructure to primary social services. In both, it was the behavior of smaller, poorer, more rural municipalities that drove these changes.
    Date: 2006–03–25
  18. By: Kakamu, Kazuhiko (Graduate School of Economics, Osaka University, Osaka, Japan); Polasek, Wolfgang (Department of Economics and Finance, Institute for Advanced Studies, Vienna, Austria)
    Abstract: We suggest a new class of cross-sectional space-time models based on local AR models and nearest neighbors using distances between observations. For the estimation we use a tightness prior for prediction of regional GDP forecasts. We extend the model to the model with exogenous variable model and hierarchical prior models. The approaches are demonstrated for a dynamic panel model for regional data in Central Europe. Finally, we find that an ARNN(1, 3) model with travel time data is best selected by marginal likelihood and there the spatial correlation is usually stronger than the time correlation.
    Keywords: Dynamic panel data, hierarchical models, marginal likelihoods, nearest neighbors, tightness prio, spatial econometrics
    JEL: C11 C15 C21 R11
    Date: 2007–02
  19. By: David de la Croix (Department of Economics and CORE, Université Catholique de Louvain); Matthias Doepke (University of California, Los Angeles, CEPR, and NBER)
    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 askwhy different societiesmake different choices regarding the mix of private and public schooling. We develop a theory which integrates private education and fertility decisionswith 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.
    JEL: D72 I21 H42 O10
    Date: 2007
  20. By: Isacsson, Gunnar (National Road and Transportation Research Institute); Regnér, Håkan (The Swedish Confederation of Professional Associations)
    Abstract: Between 1990 and 1998 there was an increase by 4 percentage points of couples where both individuals were college educated, so-called power couples, in Swedish cities. During the same period, the shares of non-college educated couples and college educated singles increased by only 1 percentage point, respectively. The study argues that the observed trends are explained neither by the co-location hypothesis nor the marriage market hypothesis. Instead it seems that the differential household trends in city location coincide with differential trends in the city earnings premium. The city earnings premium has increased during the 1990´s particularly for college educated men and women in couples.
    Keywords: City earnings premiums; power couples; location
    JEL: J11 J31 R23
    Date: 2007–02–12
  21. By: Zenou, Yves
    Abstract: We develop a search matching model in which blacks and whites are totally identical, except for the fact that they use different transport modes. We find that whites, who use faster transport modes (i.e. cars) than blacks (who use public transport), do search more intensively and extensively, and experience lower unemployment rate. Indeed, when deciding their optimal search intensities, all workers trade off short-run losses with long-run gains. However, because they use a faster transport mode, white job-seekers anticipate that they can reach jobs located further away so they can increase their maximal distance of search. This, in turn, induces firms to create more jobs, which finally motivate white workers to search more because of better opportunities. We also show that whites obtain higher wages. Indeed, in our model, each worker negotiates his/her wage with the firm using the Nash-bargaining rule. Because white workers have better outside options than blacks since their labour market tightness as well as the maximal distance of search are higher, they obtain a higher wage.
    Keywords: ethnic minorities; job search; multiple job centres; spatial labour markets
    JEL: D83 J15 J64 R1
    Date: 2007–03
  22. By: Michaels, Guy
    Abstract: What are the consequences of resource-based regional specialization, when it persists over a long period of time? While much of the literature argues that specialization is beneficial, recent work suggests it may be costly in the long run, due to economic or political reasons. I examine this question empirically, using exogenous geological variation in the location of subsurface oil in the Southern United States. I find that oil abundant counties are highly specialized: for many decades their mining sector was almost as large as their entire manufacturing sector. During the 1940s and 1950s, oil abundant counties enjoyed per capita income that was 20-30 percent higher than other nearby counties, and their workforce was better educated. But whereas in 1940 oil production crowded out agriculture, over the next 50 years it caused the oil abundant counties to develop a smaller manufacturing sector. This led to slower accumulation of human capital in the oil abundant counties, and to a narrowing of per capita income differentials to about 5 percentage points. Despite this caveat, the gains from specialization were large, and specialization had little impact on the fraction of total income spent by local government or on income inequality.
    Keywords: growth; human capital; petroleum; specialization
    JEL: J24 O18 O33 Q33 R11
    Date: 2006–12
  23. By: Olympia Bover (Banco de España; Institute for Fiscal Studies (IFS); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)); Juan F. Jimeno (Banco de España; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA))
    Abstract: Over the last decade house prices increased remarkably in many countries. However, while in several countries there was an employment boom in the construction sector, in others the share of employment in this sector did not significantly change. In this paper we estimate a model of labor demand in the construction sector, featuring building constraints, which explains many of the international differences in the response of sectoral reallocation of employment to house prices. Countries with more building possibilities (Spain, Sweden and the US) have a high sectoral reallocation of employment, and display larger elasticities of labor demand in the construction sector with respect to house prices than countries that seem to have fewer building possibilities (Belgium, the Netherlands, and the UK). Nevertheless, our estimates imply that, for the whole economy, the elasticity of labor demand with respect to house prices is broadly similar across countries.
    Keywords: house prices, labor demand, sectoral reallocation of labor
    JEL: R32 J23
    Date: 2007–03

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