|
on Urban and Real Estate Economics |
| By: | Matthew Chambers; Carlos Garriga; Don Schlagenhauf |
| Abstract: | After three decades of being relatively constant, the homeownership rate increased over the period 1994 to 2005 to attain record highs. The objective of this paper is to account for the observed boom in ownership by examining the role played changes in demographic factors and innovations in the mortgage market which lessened downpayment requirements. To measure the aggregate and distributional impact of these factors, we construct a quantitative general equilibrium overlapping generation model with housing. We find that the long-run importance of the introduction of new mortgage products for the aggregate homeownership rate ranges from 56 and 70 percent. Demographic factors account for between 16 and 31 percent of the change. Transitional analysis suggests that demographic factors play a more important, but not dominant, role the further away from the long-run equilibrium. From a distributional perspective, mortgage market innovations have a larger impact explaining participation rate changes of younger households, while demographic factors seem to be the key to understanding the participation rate changes of older households. Our analysis suggests that the key to understand the increase in the homeownership rate is the expansion of the set of mortgage contracts. We test the robustness of this result by considering changes in mortgage financing after World War II. We find that the introduction of the conventional fixed rate mortgage, which replaced balloon contacts, accounts for at least fifty percent of the observed increase in homeownership during that period. |
| Keywords: | Home ownership ; Mortgage loans |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2007-034&r=ure |
| By: | Aytek Erdil; Haluk Ergin |
| Abstract: | Very little is known about the student-optimal stable mechanism when school priorities are weak. In current practice, the student proposing deferred acceptance algorithm is applied after indifferences in priority orders are broken with a lottery. Although such a tie-breaking procedure preserves stability, it adversely affects the welfare of the students since it introduces artificial stability constraints. We propose a simple procedure to compute a student-optimal stable matching when priorities are weak. The idea behind our construction relies on a new notion which we call a stable improvement cycle. Abdulkadiroglu, Pathak, and Roth (2006) report that had our algorithm been applied to the preference data of the 2003-2004 New York City High School Match, 6,854 students (10.5% of the 63,795 matched students) would have been matched with schools higher on their preference lists without hurting the others. We run simulations to understand the qualitative effects of correlation in preferences and of locational preference on the size of the efficiency gain. We also investigate the strategic properties of the class of student-optimal stable mechanisms. |
| Keywords: | School Choice, Student-Optimal Stable Mechanism, Weak Priorities, Stable Improvement Cycles |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:349&r=ure |
| By: | Alejandra Mizala; Miguel Urquiola |
| Abstract: | The impact of competition on academic outcomes is likely to depend on whether parents are informed about schools’ effectiveness or valued added (which may or may not be correlated with absolute measures of their quality), and on whether this information influences their school choices. To explore these issues, this paper considers Chile’s SNED program, which seeks to identify effective schools, selecting them from within “homogeneous groups” of arguably comparable institutions. Its results are widely disseminated and the information it generates is quite different from that conveyed by a simple test-based ranking of schools (which in Chile, turns out to largely resemble a ranking based on socioeconomic status). We rely on a sharp regression discontinuity to estimate the effect that being identified as a SNED winner has on schools’ enrollment, tuition levels, and socioeconomic composition. Through five applications of the program, we find no consistent evidence that winning a SNED award affects these outcomes. This suggests that information on school effectiveness—at least as it is calculated and delivered by the SNED—might not much affect school markets. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:edj:ceauch:239&r=ure |
| By: | Katherine Kiel (Department of Economics, College of the Holy Cross; New England Public Policy Center, Federal Reserve Bank of Boston) |
| Abstract: | Federal, state and local wetlands protection laws that restrict landowners’ ability to develop their properties in certain ways could decrease the value of the affected properties. However, the regulations could also give benefits to nearby neighbors who no longer need worry about increased development in their area. Given that some properties may decline in value, while others increase, the impact on individual properties must be determined empirically. This study uses a data set from Newton, Massachusetts to examine the impact of wetlands laws on the regulated properties, as well as on proximate properties. Looking at house sales data from 1988 through 2005, the hedonic technique is used to estimate the effect of wetlands regulations on single family home prices and finds that having wetlands on a property decreases its value by 4% relative to non-regulated properties. Homes that are contiguous to regulated houses do not experience any change in price. Thus it seems unlikely that neighbors are receiving any benefit from knowing that further development is restricted in their immediate vicinity. |
| Keywords: | Environment, housing, amenities, hedonic pricing, wetlands |
| JEL: | Q51 Q53 R2 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:hcx:wpaper:0707&r=ure |
| By: | Wang, Fan |
| Abstract: | High loan-to-value (LTV) mortgage are residential mortgage loans with LTV ratio greater or equal to 90\%. Lenders are increasingly engaged in risk-based pricing. If properly quantified, the additional credit risk taken when originating high LTV mortgage can be compensated by higher interest rate charged to customers. High LTV mortgage is regulated to meet higher capital requirement and thus have higher funding cost. Current regulation raises regulatory capital requirement of banks on all high LTV mortgage holdings. However, it is not efficient to differentiate the risk between a high LTV first mortgage and a second lien mortgage with the same LTV. In the paper, I show how LTV ratio affects credit risk in mortgage. A structured credit modeling approach is taken to quantify the credit risk of first mortgage and second mortgage. The total risk in a combination of first and second mortgage is shown to be equal to that of a first mortgage with the same aggregate LTV. Default risk is derived implicitly. Optionality of defaultable debt results in an upward sloping credit supply curve in terms of a function of interest rate with respect to LTV. Current regulation in high LTV mortgage creates a funding advantage in seperating a high LTV mortgage into a lower funding cost first mortgage and a higher cost second mortgage. |
| Keywords: | mortgage lending; risk-based pricing; credit risk; regulatory capital |
| JEL: | G21 |
| Date: | 2007–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:4788&r=ure |
| By: | Dan Black; Natalia Kolesnikova; Lowell J. Taylor |
| Abstract: | In this paper we study whether location-specific price variation likely affects statistical inference and theoretical interpretation in the empirical implementation of human capital earnings functions. We demonstrate, in a model of local labor markets, that the ?return to schooling" is a constant across locations if and only if preferences are homothetic ? a special case that seems unlikely to generally pertain. Examination of U.S. Census data (for 1980, 1990, and 2000) provides persuasive evidence that the return to a college education, relative to a high school education, does indeed vary widely across cities, e.g., in 1990 the return in Houston is 0.54 while in Seattle it is only 0.33. We provide theoretical reasons to suspect that the returns to education are relatively lower in expensive high-amenity locations, and present evidence consistent with this prediction. Finally, we raise concerns about standard empirical exercises in labor economics which treat the returns to education as a single parameter. |
| Keywords: | Wages ; Labor market ; Education |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2007-031&r=ure |
| By: | Raffaella SANTOLINI (Universita' Politecnica delle Marche, Dipartimento di Economia) |
| Abstract: | In the literature, tax interaction is mainly due to tax and yardstick;competition. However, we suppose that tax interaction appears when the;local policy maker conforms his fiscal policy to decisions taken by his;neighbourhood to fill information gaps. Theoretical results show that;incomplete information leads to tax mimicking and a higher level of tax;rate. Moreover, leviathan governments are more sensitive than;benevolent ones to changes in neighbours tax rates (horizontal tax;interaction) but less to changes in the central government tax rate;(vertical tax interaction). Finally, there is no tax rate internalization;effects because an increase in the central government tax rate is not;followed by an equivalent decrease of local government tax rate. |
| Keywords: | incomplete information, informative trend, political trend, tax mimicking |
| JEL: | H30 H71 H77 |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wpaper:295&r=ure |
| By: | Rajashri Chakrabarti |
| Abstract: | The Milwaukee voucher program, as implemented in 1990, allowed only nonsectarian private schools to participate in the program. However, following a Wisconsin Supreme Court ruling, the program was expanded to include religious private schools in 1998. This second phase of the voucher program led to more than a three-fold increase in the number of private schools and almost a four-fold increase in the number of choice students. Moreover, because of some changes in funding provisions, the revenue loss per student from vouchers increased in the second phase of the program. This paper analyzes, both theoretically and empirically, the effects of these changes on public school performance (as measured by test scores) in Milwaukee. It argues that voucher design matters and that the choice of parameters in a voucher program is crucial in determining the effects of public school incentives and performance. In the context of a theoretical model of public school and household behavior, the paper establishes that the policy changes will lead to an improvement of the public schools in the second phase of the program as compared with the first phase. Following Hoxby (2003a, 2003b) in the classification of treatment and control groups and using 1987-2002 data and a difference-in-differences estimation strategy in trends, the paper then shows that the theoretical prediction is validated empirically. This result is robust to alternative samples and specifications and survives robustness checks, including correcting for mean reversion. |
| Keywords: | Educational vouchers ; Education - Economic aspects ; Private schools ; Public schools ; School choice ; Households |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:300&r=ure |
| By: | Danielle GALLIANO (LEREPS–GRES & INRA–ESR); Olivier SOULIE (LEREPS-GRES & INRA–ESR) |
| Abstract: | This article aims to analyse the factors that determine the existence of multi-unit firms and that influence the intensity of their organisational fragmentation. More precisely, we identify the firm’s internal characteristics and their spatial, sectoral and competitive environments that are conducive (or not) to the adoption of a multi-unit form of organisation. We test these hypotheses by using a two stage Heckman type model (1979). This model allows us to take into account the determinants of the organisational choice in the intensity of multi-location. Beyond the general model, we seek to highlight that the logics differ according to the location of the firm’s head office (urban, peri-urban or rural) and according to the firm’s industrial profile (horizontal or vertical). These empirical models are based on individual data on all French industrial firms, derived from the annual survey on firms and their establishments conducted by the French National Institute of Statistics (INSEE). One of our main results is to reveal the role of this complex interaction between industrial and spatial dynamics in organisational choices. |
| Keywords: | Multi-unit firm, Firm location, Organisation of the firm, French industry |
| JEL: | L2 L6 R3 O18 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:grs:wpegrs:2007-17&r=ure |
| By: | Roberto Antonietti (University of Bologna); Giulio Cainelli (University of Bari and CERIS-CNR) |
| Abstract: | Aim of this paper is to explore the main drivers of outsourcing of knowledge intensive business services by Italian manufacturing firms. While anecdotal and empirical evidence has emphasized labour cost and scale economies as behind firms’ choices to outsource production or service activities, here we focus on spatial agglomeration and technology as important factors. Using microeconomic data on a repeated cross-section of Italian manufacturing firms for the period 1998-2003, we develop a two-stage model in order to avoid selection bias: first, we estimate the determinants of the firm's decision to outsource business-related services; second, we estimate the main factors underlying the intensity and complexity of KIBS outsourcing, expressed by the number of service activities that are externalized. Our results show that labour cost-savings are not relevant in driving the decision to outsource KIBS, but ICT, R&D and location within a dense and technologically developed industrial district have very positive effects. |
| Keywords: | KIBS, Service Outsourcing, R&D, ICT, Spatial Agglomeration |
| JEL: | L24 L84 R32 R12 |
| Date: | 2007–07 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2007.79&r=ure |
| By: | Anne ter Wal; Ron A. Boschma |
| Abstract: | The cluster literature suffers from a number of shortcomings: (1) by and large, cluster studies do not take into account that firms in a cluster are heterogeneous in terms of capabilities; (2) cluster studies tend to overemphasize the importance of place and geographical proximity and underestimate the role of networks which are, by definition, a-spatial entities; (3) most, if not all cluster studies have a static nature, and do not address questions like the origins and evolution of clusters. Our aim is to overcome these shortcomings and propose a theoretical framework on the evolution of clusters. Bringing together bodies of literature on clusters, industrial dynamics, the evolutionary theory of the firm and network theory, we describe how clusters co-evolve with: (1) the industry they adhere to; (2) the (dynamic) capabilities of the firms they contain; and (3) the industry-wide knowledge network they are part of. Based on this framework, we believe the analysis of cluster evolution provides a promising research agenda in evolutionary economic geography for the years to come. |
| Keywords: | cluster evolution, network dynamics, industrial dynamics, co-evolution, evolutionary economic geography |
| Date: | 2007–08 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:0707&r=ure |
| By: | Lawrence J. White |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:ste:nystbu:07-21&r=ure |
| By: | Ricardo Lopez (Indiana University Bloomington); Jens Suedekum (University of Konstanz) |
| Abstract: | We use disaggregated data on Chilean plants, and the Chilean input-output table to examine the impact of agglomeration spillovers on total factor productivity (TFP). In common with previous studies, we find evidence of intra-industry spillovers, but no evidence of cross-industry spillovers in general. This picture changes, however, when we take vertical industry relations into account. We find important productivity spillover effects from plants in upstream industries. Interestingly, a similar effect cannot be found from plants in downstream industries. The number of plants in these sectors has no effect on firm level TFP, just as the number of plants in other industries that are neither important upstream suppliers nor downstream customers also has no effect. Agglomeration effects are stronger for small than for large plants. |
| Keywords: | Vertical linkages, agglomeration, productivity, Chile |
| JEL: | R11 R15 O18 O54 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2007016&r=ure |
| By: | Koethenbuerger, Marko (CES, University of Munich,); Lockwood, Ben (Department of Economics, University of Warwick,) |
| Abstract: | This paper considers the relationship between tax competition and growth in an endogenous growth model where there are stochastic shocks to productivity, and capital taxes fund a public good which may be for final consumption or an infrastructure input. Absent stochastic shocks, decentralized tax setting (two or more jurisdictions) maximizes the rate of growth, as the constant returns to scale present with endogenous growth implies “extreme” tax competition. Stochastic shocks imply that households face a portfolio choice problem, which may dampen down tax competition and may raise taxes above the centralized level. Growth can be lower with decentralization. Our results also predict a negative relationship between output volatility and growth, consistent with the empirical evidence. |
| Keywords: | tax competition ; uncertainty ; stochastic growth |
| JEL: | H77 E62 F43 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:810&r=ure |
| By: | Holger Graf (Friedrich-Schiller University Jena, School of Business and Economics) |
| Abstract: | The internal density of a local network is said to increase the region-specific knowledge-stock and might lead to a comparative advantage. However, it might also lead to a lock-in situation, if local trajectories are directed towards inferior solutions. Accordingly it is argued that successful clusters are characterised by the existence of gatekeepers, i.e. actors that generate novelty by drawing on local and external knowledge. We attempt to answer questions related to the role and characteristics of gatekeepers within regional innovation systems by applying social network analysis based on patent data for four East-German regions. The regional networks appear to be significantly different with respect to the overall degree of interaction and with respect to their relative outward orienta- tion. Concerning the characteristics of gatekeepers, we find that size does not play the major role for being a gatekeeper. It is rather absorptive capacity that matters for gatekeepers. It also shows that public research organisations serve the functions of a gatekeeper to a higher degree than private actors. |
| Keywords: | Innovator networks; Gatekeeper; R+D co-operation; Scientist mobility |
| JEL: | O31 Z13 R11 |
| Date: | 2007–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2007-054&r=ure |
| By: | Paul S. Mills; John Kiff |
| Abstract: | After a number of warning signs, the U.S. "subprime mortgage crisis" became a headline issue in February 2007. Notwithstanding the bankruptcy of numerous mortgage companies, historically high delinquencies and foreclosures, and a significant tightening in subprime lending standards, the impact thus far on core U.S. financial institutions has been limited. This paper reviews the history and structure of the subprime market. The results suggest that new origination and funding technology appear to have made the financial system more stable at the expense of undermining the effectiveness of consumer protection regulation. Potential solutions to the management of this trade-off are then explored. |
| Keywords: | Working Paper , United States , |
| Date: | 2007–08–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:07/188&r=ure |
| By: | Kris Gerardi; Adam Hale Shapiro |
| Abstract: | This paper analyzes the effects of market structure on price dispersion in the airline industry, using panel data from 1993 through 2006. The results found in this paper contrast with those of Borenstein and Rose (1994), who found that price dispersion increases with competition. We find that competition has a negative effect on price dispersion, in line with the textbook treatment of price discrimination. Specifically, the effects of competition on price dispersion are most significant on routes that we identify as having consumers characterized by relatively heterogeneous elasticities of demand. On routes with a more homogenous customer base, the effects of competition on price discrimination are largely insignificant. We conclude from these results that competition acts to erode the ability of a carrier to price discriminate, resulting in reduced overall price dispersion. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:07-7&r=ure |
| By: | Kerwin Kofi Charles; Erik Hurst; Nikolai Roussanov |
| Abstract: | Using nationally representative data on consumption, we show that Blacks and Hispanics devote larger shares of their expenditure bundles to visible goods (clothing, jewelry, and cars) than do comparable Whites. We demonstrate that these differences exist among virtually all sub-populations, that they are relatively constant over time, and that they are economically large. While racial differences in utility preference parameters might account for a portion of these consumption differences, we emphasize instead a model of status seeking in which conspicuous consumption is used to reflect a household's economic position relative to a reference group. Using merged data on race and state level income, we demonstrate that a key prediction of our model -- that visible consumption should be declining in mean reference group income -- is strongly borne out in the data separately for each racial group. Moreover, we show that accounting for differences in reference group income characteristics explains most of the racial difference in visible consumption. We conclude with an assessment of the role of conspicuous consumption in explaining lower spending by racial minorities on items likes health and education, as well as their lower rates of wealth accumulation. |
| JEL: | D12 D83 D91 J15 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13392&r=ure |