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on Urban and Real Estate Economics |
| By: | Maurice J. Roche (Economics Department, National University of Ireland, Maynooth); David Duffy (Economic and Social Research Institute, Dublin, Ireland.) |
| Abstract: | A model that allows for inter vivos intergenerational transfers in a booming housing market is developed. The model is used to explain how transfers effect the first-time homebuyer's consumption and housing decisions by alleviating borrowing constraints. The general implications of the model are tested using data from the leading Irish mortgage provider. We find that private transfers are targeted towards homebuyers that are liquidity constrained. |
| Keywords: | Transfers, Housing, Borrowing Constraint |
| JEL: | R21 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:may:mayecw:n1740507&r=ure |
| By: | Frederic S. Mishkin |
| Abstract: | The housing market is of central concern to monetary policy makers. To achieve the dual goals of price stability and maximum sustainable employment, monetary policy makers must understand the role that housing plays in the monetary transmission mechanism if they are to set policy instruments appropriately. In this paper, I examine what we know about the role of housing in the monetary transmission mechanism and then explore the implications of this knowledge for the conduct of monetary policy. I begin with a theoretical and empirical review of the main housing-related channels of the transmission mechanism. These channels include the ways interest rates directly influence the user cost of housing capital, expectations of future house-price movements, and housing supply; and indirectly influence the real economy through standard wealth effects from house prices, balance sheet, credit-channel effects on consumer spending, and balance sheet, credit-channel effects on housing demand. I then consider the interaction of financial stability with the monetary transmission mechanism, and discuss the ways in which the housing sector might be a source of financial instability, and whether such instability could affect the ability of a central bank to stabilize the overall macroeconomy. I conclude with a discussion of two key policy issues. First, how can monetary policy makers deal with the uncertainty with regard to housing-related monetary transmission mechanisms? And second, how can monetary policy best respond to fluctuations in asset prices, especially house prices, and to possible asset-price bubbles? |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2007-40&r=ure |
| By: | Stefan Gruber (University of Innsbruck, Austria and University of Bologna and The Rimini Center for Economic Analysis, Italy.); Luigi Marattin (University of Bologna and University of Siena, Italy) |
| Abstract: | This paper presents a New Economic Geography model with distortionary taxation and endogenized transport costs. Tax revenues finance a public good, infrastructure. We show that the introduction of costly public investment in infrastructure leads to more pronounced agglomeration patterns. With respect to the regions sizes, in the periphery, the price-index for manufacturing goods decreases, whereas for the core, the price-index is rather high since the distortionary effect of taxes dominates. Free riding is beneficial for the periphery, which can devote all its tax revenue to local demand support, generating a positive home market effect and driving the catch-up process. |
| Keywords: | New Economic Geography, Taxation, Endogenous Transport Costs, Infrastructure |
| JEL: | F12 H25 H54 R12 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:11-07&r=ure |
| By: | Urquiola, Miguel; Verhoogen, Eric A. |
| Abstract: | This paper examines how schools choose class size and how households sort in response to those choices. Focusing on the highly liberalized Chilean education market, we develop a model in which schools are heterogeneous in an underlying productivity parameter, class size is a component of school quality, households are heterogeneous in income and hence willingness to pay for school quality, and schools are subject to a class-size cap. The model offers an explanation for two distinct empirical patterns observed among private schools that accept government vouchers: (i) There is an inverted-U relationship between class size and household income in equilibrium, which will tend to bias cross-sectional estimates of the effect of class size on student performance. (ii) Some schools at the class size cap adjust prices (or enrollments) to avoid adding another classroom, which produces stacking at enrollments that are multiples of the class size cap. This generates discontinuities in the relationship between enrollment and household characteristics at those points, violating the assumptions underlying regression-discontinuity (RD) research designs. This result suggests that caution is warranted in applying the RD approach in settings in which parents have substantial school choice and schools are free to set prices and influence their enrollments. |
| Keywords: | class size; regression discontinuity; sorting |
| JEL: | C2 I2 L1 O1 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6425&r=ure |
| By: | Giorgio Brunello (Università di Padova); Lorenzo Rocco (Università di Padova) |
| Abstract: | When school quality increases with the educational standard set by schools, education before college needs not be a hierarchy with private schools offering better quality than public schools. An alternative configuration, with public schools offering a higher educational standard than private schools, is also possible, in spite of the fact that tuition levied by private schools is strictly positive. In our model, private schools can offer a lower educational standard at a positive price because they attract students with a relatively high cost of effort, who would find the high standards of public schools excessively demanding. With the key parameters calibrated for the US and Italy, our model predicts that majority voting in the US supports a system with high quality private schools and low quality public schools, as assumed by Epple and Romano, 1998. An equilibrium with low quality private schools is supported instead in Italy. |
| Keywords: | private schools, public schools, majority voting |
| JEL: | J24 H42 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0043&r=ure |
| By: | Salvary, Stanley |
| Abstract: | Availability of financial capital and location decisions are variables that influence regional manufacturing output. This study maintains that a region’s manufacturing growth depends upon the region’s firm-type dominance. That is, the type of firms that dominate the region’s manufacturing output can be classified as non-local (national or foreign - NF) vs. local and large vs. small. Accordingly, for policy analysis, regions can be classified by firm-type dominance. This distinction is important since, invariably, location decision options and availability of financial capital are more favourable for the larger NF firms than for local firms. In an attempt to assess the impact of firm-type dominance, this study draws upon the dominant industry model which has established that, in any given region, there is a dominant industry (the driving force of the region) to which a region’s manufacturing growth is linked. The information on the impact of firm-type dominance on a region's manufacturing output may enable policy-makers to design workable (or revise existing) manufacturing diversification policies. |
| Keywords: | state-regions and industry-regions; chemical industry region; regional policy analysis; manufacturing growth; firm-type dominance; availability of financial capital; dominant industry model; manufacturing firms' location decisions; regional economic development; foreign-owned manufacturing plants. |
| JEL: | R1 R12 R11 |
| Date: | 2007–08–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:4623&r=ure |
| By: | Desmet, Klaus; Rossi-Hansberg, Esteban |
| Abstract: | U.S. county data for the last 20 or 30 years show that manufacturing employment has been deconcentrating. In contrast, the service sector exhibits concentration in counties with intermediate levels of employment. This paper presents a theory where local sectoral growth is driven by technological diffusion across space. The age of an industry -- measured as the time elapsed since the last major general purpose technology innovation in the sector -- determines the pattern of scale dependence in growth rates. Young industries exhibit non-monotone relationships between employment levels and growth rates, while old industries experience negative scale dependence in growth rates. The model then predicts that the relationship between county employment growth rates and county employment levels in manufacturing at the turn of the 20th century should be similar to the same relationship in services in the last 20 years. We provide evidence consistent with this prediction. |
| Keywords: | industry age; scale dependence; spatial growth; US counties |
| JEL: | R1 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6421&r=ure |
| By: | Edmark, Karin (Department of Economics) |
| Abstract: | This study tests for strategic competition in public spending on childcare and primary education, and care for the elderly, using panel data on Swedish municipalities over 1996-2005. The high degree of decentralization in the organization of the public sector implies that Swedish data is highly suitable for this type of study. The study is not limited to interactions in the same type of expenditure, but also allows for e¤ects across expenditures. The results give no robust support for the hypothesis that municipalities react on the spending policy of neighbouring municipalities in the decision on own spending on care of the elderly, childcare and education. |
| Keywords: | Strategic interactions; Spatial econometrics; Decentralization; Local Public Spending |
| JEL: | C31 H72 H77 |
| Date: | 2007–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uunewp:2007_021&r=ure |
| By: | Ralph S.J Koijen; Otto Van Hemert; Stijn Van Nieuwerburgh |
| Abstract: | The fraction of newly-originated mortgages that are of the adjustable-rate (ARM) versus the fixed-rate (FRM) type exhibits a surprising amount of time variation. A simple utility framework of mortgage choice points to the bond risk premium as theoretical determinant: when the bond risk premium is high, FRM payments are high, making ARMs more attractive. We confirm empirically that the bulk of the time variation in household mortgage choice can be explained by time variation in the bond risk premium. This is true regardless of whether bond risk premia are measured using forecasters' data, a VAR term structure model, or a simple rule-of-thumb based on adaptive expectations. This simple rule-of-thumb moves in lock-step with mortgage choice, thereby lending further credibility to a theory of strategic mortgage timing by households. |
| JEL: | D14 E43 G11 G12 R2 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13361&r=ure |
| By: | Brülhart, Marius; Mathys, Nicole Andréa |
| Abstract: | We estimate agglomeration economies, defined as the effect of density on labour productivity in European regions. The analysis of Ciccone (2002) is extended in two main ways. First, we use dynamic panel estimation techniques (system GMM), thus offering an alternative methodological treatment of the inherent endogeneity problem. Second, the sector dimension in the data allows for disaggregated estimation. Our results confirm the presence of significant agglomeration effects at the aggregate level, with an estimated long-run elasticity of 13 percent. Repeated cross-section regressions suggest that the strength of agglomeration effects has increased over time. At the sector level, the dominant pattern is of cross-sector "urbanisation" economies and own-sector congestion diseconomies. A notable exception is financial services, for which we find strong positive productivity effects from own-sector density. |
| Keywords: | Dynamic panel GMM; Employment density; European regions; Productivity |
| JEL: | R10 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6410&r=ure |
| By: | Guido Buenstorf (Max Planck Institute of Economics, Evolutionary Economics Group); Christina Guenther (Max Planck Institute of Economics, Evolutionary Economics Group) |
| Abstract: | We study location choices and firm performance in the German machine tool industry, focusing on the forced migration of East German firms after World War II. Our analysis of location choices supports earlier findings that industry agglomerations attract further entrants. Relocating firms outperformed entrants that possessed no prior industry experience; apparently were able to build on their prewar capabilities. We find no evidence suggesting that firm performance benefited from agglomeration effects. |
| Keywords: | Capabilities, agglomeration economies, location choice, firm survival, machine tool industry |
| JEL: | L20 R12 R30 |
| Date: | 2007–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2007-053&r=ure |
| By: | Hindriks, Jean J.G.; Peralta, Susana; Weber, Shlomo |
| Abstract: | The paper considers a model of federation with two heterogeneous regions that try to attract the capital by competing in capital income taxes and public investment that enhance the productivity of capital. Regions' choices determine allocation of capital across the regions and their revenues under a tax sharing scheme. This framework allows for the examination of different approaches to fiscal equalization schemes (Boadway and Flatters, 1982, and Weingast, 2006). We show that tax competition distorts (downwards) public investments and that the equalization grants discourage public investments with a little effect on equilibrium taxes. However, the equalization schemes remain beneficial not only for the federation and, under a low degree of regional asymmetry, also for each region. |
| Keywords: | equalization; fiscal; fiscal federalism; heterogeneous regions; public investments |
| JEL: | C72 H23 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6431&r=ure |
| By: | Jörnsten, Kurt (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Thorsen, Inge (Stord/Haugesund University College); Ubøe, Jan (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration) |
| Abstract: | In this paper we will see how commuter preferences can be revealed from observations of trip distributions. We will explain how to find unique representations of preference structures leading to an observed trip distribution, and will also present a numerical method that can be used to infer preferences from systems of considerable size. The theory is applied to a real world network, and we show how our framework can be used to reveal detailed information about the spatial structure of this network. We also use this new framework to suggest a new approach to evaluate the impact of road pricing. |
| Keywords: | Travel demand; revealed preferences; efficient distance; road pricing |
| JEL: | C31 R41 R48 |
| Date: | 2007–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2007_018&r=ure |
| By: | Tatom, John |
| Abstract: | The state of Indiana has had a major foreclosure problem, especially since the 2001 recession. As the nation confronts an emerging surge in foreclosures associated with an explosion of subprime loans in 2004-06, the Indiana foreclosure rate is likely to surge to record territory. Two neighboring states, Michigan and Ohio, join Indiana in having the nation’s highest foreclosure rates. In fact, Ohio has led the nation since 2003, knocking Indiana into second place since then. Meanwhile, Michigan climbed to third place since mid-2006. This report provides a perspective on the crisis in Indiana and its sources. The principal source of the high foreclosure rate in Indiana is the predominance of high risk loans, originally from FHA and later from subprime lenders. Slow house price appreciation and slow employment growth are statistically significant factors accounting for state foreclosure rates, but these factors have not been especially weak since 2001 and they are highly correlated with the share of risky loans. Other factors that are frequently mentioned do not fit the pattern of emerging foreclosure from 1995-2006, or they are not large enough to have had much substantive effect on the overall foreclosure picture. These include auto sector and manufacturing production and employment or predatory lending and mortgage fraud. Education of borrowers, especially first-time buyers, and the education of lenders in traditional prudent lending practices are more likely to foster lower foreclosure rates than other remedies and to do so without reducing homeownership rates. |
| Keywords: | Foreclosure rate; mortgage finance; mortgage risk |
| JEL: | G1 |
| Date: | 2007–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:4674&r=ure |
| By: | V. Thiruppugazh |
| Abstract: | This article examines the causes of urban earthquake vulnerability in Gujarat, based on the case study of Ahmedabad city which was affected in the 2001, Gujarat earthquake. This paper argues that the non-compliance of regulations which causes urban vulnerability cannot be corrected merely by additional regulations or increased enforcement. An enabling environment of compliance of regulations can be achieved only though good enforcement mechanism, integration of development with vulnerability reduction, good governance practices, awareness creation, partnerships and capacity building. |
| Keywords: | urban vulnerability, risk reduction, vulnerability reduction,earthquake vulnerability, regulations, mitigation |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:pas:asarcc:2007-08&r=ure |
| By: | A. de Palma (ENPC and THEMA, Université de Cergy-Pontoise, 33 bd. du Port, F-95011 CERGY-PONTOISE, France); F. Marchal (Laboratory of Transportation Economics (LET), CNRS, Ave. Berthelot 14, F-69363 LYON, France) |
| Abstract: | Non-recurrent congestion in transportation networks occurs as a consequence of stochastic factors affecting demand and supply. Intelligent Transportation Systems such as Advanced Traveler Information Systems (ATIS) and Advanced Traffic Management Systems (ATMS) are designed in order to reduce the impacts of non-recurrent congestion by providing information to a fraction of users or by controlling the variability of traffic flows. For these reasons, the design of ATIS and ATMS requires reliable forecast of non-recurrent congestion. This paper proposes a new method to measure the impacts of non-recurrent congestion on travel costs by taking risk aversion into account. The traffic model is based on the dynamic traffic simulations model METROPOLIS. Incidents are generated randomly by reducing the capacity of the network. Users can instantaneously adapt to the unexpected travel conditions or can also change their behavior via a day-to-day adjustment process. Comparisons with incident-free simulations provide a benchmark for potential travel time savings that can be brought in by a state-of-the-art information system. We measure the impact of variable travel conditions by describing the willingness to pay to avoid risky or unreliable journeys. Indeed, for risk averse drivers, any uncertainty corresponds to a utility loss. This utility loss is computed for several levels of network disruption. The main results of the paper is that the utility loss due to uncertainty is of the same order of magnitude as the total travel costs. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:ema:worpap:2007-18&r=ure |
| By: | Haraldsson, Mattias (VTI) |
| Abstract: | This paper estimates the long run effects of distance work on various aspects of the activity-travel pattern. Estimations are made using econometric matching on a data material from the Swedish travel survey, RES, a travel diary collected in the period 1999-2001. The activity-travel pattern of men seems to be irresponsive to distance work, while some aspects of the activity-travel pattern of women change due to distance work. For instance, it is found that distance-working women adopt a more “local” lifestyle where purchases and child care are moved closer to home. |
| Keywords: | Distance work; matching |
| JEL: | R40 |
| Date: | 2007–09–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2007_006&r=ure |
| By: | Wolfgang Polasek (Institute for Advanced Studies,Vienna, Austria and The Rimini Centre for Economic Analysis, Rimini, Italy); Richard Sellner (Institute for Advanced Studies,Vienna, Austria); Wolfgang Schwarzbauer (Institute for Advanced Studies,Vienna, Austria) |
| Abstract: | Long-term predictions with a system of dynamic panel models can have tricky properties since the time dimension in regional (cross) sectional models is usually short. This paper describes the possible approaches to make long-term-ahead forecast based on a dynamic panel set, where the dependent variable is a cross-sectional vector of growth rates. Since the variance of the forecasts will depend on number of updating steps, we compare the forecasts behavior of a aggregated and a disaggregated updating procedure. The cross section of the panel data can be modeled by a spatial AR (SAR) or Durbin model, including heteroscedasticity. Since the forecasts are non-linear functions of the model parameters we show what MCMC based approach will produce the best results. We demonstrate the approach by a example where we have to predict 20 years ahead of regional growth in 99 Austrian regions in a space-time dependent system of equations.Creation-Date: 200707 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:10-07&r=ure |
| By: | Rajeev Dehejia; Thomas DeLeire; Erzo F.P. Luttmer; Joshua Mitchell |
| Abstract: | This paper examines whether participation in religious or other social organizations can help offset the negative effects of growing up in a disadvantaged environment. Using the National Survey of Families and Households, we collect measures of disadvantage as well as parental involvement with religious and other social organizations when the youth were ages 3 to 19 and we observe their outcomes 13 to 15 years later. We consider a range of definitions of disadvantage in childhood (family income and poverty measures, family characteristics including parental education, and child characteristics including parental assessments of the child) and a range of outcome measures in adulthood (including education, income, and measures of health and psychological wellbeing). Overall, we find strong evidence that youth with religiously active parents are less affected later in life by childhood disadvantage than youth whose parents did not frequently attend religious services. These buffering effects of religious organizations are most pronounced when outcomes are measured by high school graduation or non-smoking and when disadvantage is measured by family resources or maternal education, but we also find buffering effects for a number of other outcome-disadvantage pairs. We generally find much weaker buffering effects for other social organizations. |
| JEL: | D10 I30 J62 Z12 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13369&r=ure |
| By: | Igal Hendel; Aviv Nevo; François Ortalo-Magné |
| Abstract: | We compare outcomes obtained by sellers who listed their home on a newly developed For-Sale-By-Owner (FSBO) web site versus those who used an agent and the Multiple Listing Service (MLS). We do not find support for the hypothesis that listing on the MLS helps sellers obtain a significantly higher sale price. Listing on the MLS shortens the time it takes to sell a house. The diffusion of the new FSBO platform was quick, with the market share stabilizing after 2 years, suggesting it managed to gain a critical mass necessary to compete with the MLS. However, the lower effectiveness of FSBO (in terms of time to sell and probability of a sale) suggests that the increasing returns to network size are not fully exploited at its current size. We discuss the welfare implications of our findings. |
| JEL: | L14 L85 R31 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13360&r=ure |