nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2007‒10‒20
twenty-one papers chosen by
Steve Ross
University of Connecticut

  1. The producer service sector in Italy: Long-term growth and its local determinants By Valter Di Giacinto; Giacinto Micucci
  2. Housing Price Volatility and Downsizing in Later Life By James Banks; Richard Blundell; Zoë Oldfield; James P. Smith
  3. Why Do the Swiss Rent? By Steven C. Bourassa; Martin Hoesli
  4. Educational quality, stratification, and the formation of communities : a theoretical analysis By Saïd Hanchane; Tarek Mostafa
  5. Spatial Competition and Agglomeration: An Application to Motion Pictures By Darlene C. Chisholm; George Norman
  6. A Causal Framework for Credit Default Theory By Wilson Sy
  7. Intergenerational Mobility and Schooling Decisions in Germany and Italy: the Impact of Secondary School Tracks. By Luca Flabbi; Daniele Checchi
  8. The Effect of Grade Retention on High School Completion By Brian Jacob; Lars Lefgren
  9. House Prices, Real Estate Returns and the Business Cycle By Ivan Jaccard
  10. The Geography of the European Creative Class: A Rank-Size Analysis By Mark Lorenzen; Kristina Vaarst Andersen
  11. No Place like Home? Location choice and firm survival after forced relocation in the German machine tool industry By Guido Buenstorf; Christina Guenther
  12. When Should Children Start School? By Aliprantis, Dionissi
  13. "Homeless Networks: Testing Peer and Homed Networks Against Location Choice" By Shinichiro Iwata; Koji Karato
  14. Absenteeism and beyond : instructional time loss and consequences By Abadzi, Helen
  15. Investimentos em infra-estrutura no Nordeste: projeções de impacto e perspectivas de desenvolvimento By Edson Paulo Domingues; Francisca Diana Ferreira Viana; Heder Carlos de Oliveira
  16. Impact of Cultural Tourism upon Urban Economies: An Econometric Exercise By Elena Bellini; Ugo Gasparino; Barbara Del Corpo; William Malizia
  17. An Economic Model of Friendship: Homophily, Minorities and Segregation By Sergio Currarini; Paolo Pin; Matthew O. Jackson
  18. A multilevel approach to geography of innovation By Martin Srholec
  19. Early childhood education in Mexico: expansion, quality improvement, and curricular reform By Robert G. Myers; Hirokazu Yoshikawa; Kathleen McCartney; Kristen L. Bub; Julieta Lugo-Gil; Maria A. Ramos; Felicia Knaul; UNICEF Innocenti Research Centre
  20. The Impact of Taxation on the Location of Capital, Firms and Profit: a Survey of Empirical Evidence By Michael P Devereux
  21. Vehicle Routing with Stochastic Time-Dependent Travel Times By Lecluyse C.; Van Woensel T.; Peremans H.

  1. By: Valter Di Giacinto (Bank of Italy, Branch of L'Aquila); Giacinto Micucci (Bank of Italy, Branch of Ancona)
    Abstract: This paper analyses the local determinants of producer service growth in Italy, focusing on agglomeration economies, and taking into account the particular features of this sector with respect to manufacturing. Using an OECD classification, we estimate a dynamic specification allowing for transitory dynamics around the long-run employment path derived from a model in which both demand and supply factors are considered. Compared with the prevailing modelling approach, the spatial scope of externalities is extended to include possible interactions across different urban areas. Our main findings are the following. Long-run employment growth is positively affected by Marshall-Arrow-Romer externalities, with a minor role played by urbanization externalities, a result similar to that obtained by more recent research on the Italian manufacturing sector and its industrial districts. Among the remaining supply factors, human capital exerts a positive influence on the long-run employment level in producer services industry; among demand factors, the size of the local market appears to be important, given the still incomplete tradability of service output. Significant interactions across urban areas are shown to occur; in particular, positive knowledge externalities on local productivity appear to be induced by location in urban areas contiguous to cities specializing in producer services.
    Keywords: agglomeration economies, human capital, producer services
    JEL: L80 R10 R12
    Date: 2007–09
  2. By: James Banks; Richard Blundell; Zoë Oldfield; James P. Smith
    Abstract: In this paper, we modeled several types of housing transitions of the elderly in two countries -- Britain and the United States. One important form of these transitions involves downsizing of housing consumption, the importance of which among older households is still debated. This downsizing takes multiple forms, including reductions in the number of rooms per dwelling and the value of the home. There is also evidence that this downsizing is greater when house price volatility is greater and that American households try to escape housing price volatility by moving to places that are experience significantly less housing price volatility. Our comparative evidence in suggests that there is less evidence of downsizing in Britain. Our results indicate that housing consumption appears to decline with age in the US, even after controlling for the other demographic and work transitions associated with age that would normally produce such a decline. No such fall in housing consumption is found in Britain, largely because British households are much more likely to stay in their original residence.
    JEL: D12 D91
    Date: 2007–10
  3. By: Steven C. Bourassa (University of Louisville, School of Urban and Public Affairs); Martin Hoesli (University of Geneva, HEC and Swiss Finance Institute)
    Abstract: At 34%, Switzerland has the lowest home ownership rate in Western Europe. This is a puzzle given the economic strength of the country. We use 1998 household survey data for five Swiss cantons to explore some possible reasons for this. We estimate a tenure choice equation that allows us to analyze the impacts of a number of key variables on the ownership rate. We pay particular attention to the relative cost of owning and renting, which is a function of house prices, rents, and the user cost of owning. The latter is a function of income tax policy and expected house price inflation, among other things. We also measure mortgage underwriting criteria and consider rent control and other policies affecting rental housing. By simulating a number of hypothetical changes to taxation and other policies, underwriting criteria, and price levels, we assess the importance of these variables in explaining the ownership rate. We conclude that high house prices—relative to rents and to household incomes and wealth—are by far the most important cause of Switzerland’s low ownership rate.
    Keywords: Home ownership, Switzerland
    JEL: R21 R31
    Date: 2006–12
  4. By: Saïd Hanchane (LEST - Laboratoire d'économie et de sociologie du travail - [CNRS : UMR6123] - [Université de Provence - Aix-Marseille I][Université de la Méditerranée - Aix-Marseille II]); Tarek Mostafa (LEST - Laboratoire d'économie et de sociologie du travail - [CNRS : UMR6123] - [Université de Provence - Aix-Marseille I][Université de la Méditerranée - Aix-Marseille II])
    Abstract: In this paper, we develop a multicommunity model where public mixed finance and private schools coexist. Students are differentiated by income, ability and social capital. Schools maximize their profits under a quality constraint; the pricing function is dependent on the cost of producing education and on the position of an individual relatively to mean ability and mean social capital. Income plays an indirect role since it determines the type of schools and communities that can be afforded by a student given his ability and social capital.<br />Three dimensional stratification results from schools’ profit maximization and individuals’ utility maximization. This stratification is the corner stone of the distribution of students across communities and schools. Finally, we study majority voting over tax rates; property tax is used to finance educational quality not only in pure public schools but also in mixed finance schools. We provide the necessary conditions for the existence of a majority voting equilibrium determined by the median voter.
    Keywords: Education market; Majority voting equilibrium; Peer group effects; Social Capital; Students; Formation of communities; School choice
    Date: 2007–10–08
  5. By: Darlene C. Chisholm; George Norman
    Abstract: This paper presents an empirical assessment of movie theatre attendance in two major metropolitan markets and provides strong support for the importance of spatial characteristics in determining attendance. We consider the hypothesis that attendance at a particular movie theatre reflects a tension between two effects: a competition effect and an agglomeration effect. We find evidence that the agglomeration effect dominates. Further, we identify a pattern of systematic spatial decay in the benefits deriving from agglomeration.
    JEL: L11 D43 L82
    Date: 2007
  6. By: Wilson Sy (Australian Prudential Regulatory Authority)
    Abstract: Most existing credit default theories do not link causes directly to the effect of default and are unable to evaluate credit risk in a rapidly changing market environment, as experienced in the recent mortgage and credit market crisis. Causal theories of credit default are needed to understand lending risk systematically and ultimately to measure and manage credit risk dynamically for financial system stability. Unlike existing theories, credit default is treated in this paper by a joint model with dual causal processes of delinquency and insolvency. A framework for developing causal credit default theories is introduced through the example of a new residential mortgage default theory. This theory overcomes many limitations of existing theories, solves several outstanding puzzles and integrates both micro and macroeconomic factors in a unified financial economic theory for mortgage default.
    Keywords: causal framework; credit default risk; delinquency; insolvency; mortgage defualt
    JEL: B41 C81 D14 E44 G21 G32 G33
    Date: 2007–10–01
  7. By: Luca Flabbi; Daniele Checchi (Department of Economics, Georgetown University)
    Abstract: Intergenerational mobility in income and education is affected by the influence of parents on children's school choices. Our focus is on the role played by different school systems in reducing or magnifying the impact of parents on children's school choices and therefore on intergenerational mobility in general. We compare two apparently similar educational systems, Italy and Germany, to see how the common feature of separate tracks at Secondary School level may produce different impacts on children choices. Using data from a cross-country survey (PISA 2003), we study the impact of parental education on track choice, showing that the greater flexibility of the Italian system (where parents are free to choose the type of track) translates into greater dependence from parental background. These effects are reinforced when moving to post-secondary education, where the aspiration to go to college is affected not only by the school type but also (in the case of Italy only) by parental education. We then move to country-specific data sets (ISTAT 2001 for Italy and GSOEP 2001 and 2002 for Germany) to study the impact of family background on post-secondary school choices: we find this impact is greatly reduced when we control for secondary school tracks. Overall, we estimate large asymmetries by gender, with women's behavior more independent from family backgrounds than men's behavior. Classification-JEL Codes: I2, J1
    Keywords: gender Secondary School tracks; Education; Intergenerational Mobility
    Date: 2007–07–08
  8. By: Brian Jacob; Lars Lefgren
    Abstract: Low-achieving students in many school districts are retained in a grade in order to allow them to gain the academic or social skills that teachers believe are necessary to succeed academically. This practice is highly controversial, with many researchers claiming that it leads to higher dropout rates although selection issues have complicated previous analyses. In this paper, we use a regression discontinuity design to examine the impact of grade retention on high school completion. We find that grade retention leads to a modest increase in the probability of dropping out for older students, but has no significant effect on younger students.
    JEL: I21 I28 J01 J24
    Date: 2007–10
  9. By: Ivan Jaccard (Wharton School of Finance)
    Abstract: The main objective of this work is to develop a general equilibrium business cycle model linking financial and real estate markets to the macroeconomy. The ability of a production economy to account simultaneously for asset pricing, business cycle and real estate market facts is then evaluated by comparing the model predictions to the empirical facts. The observed high volatility of house prices, the equity premium and the difference between equity and real estate excess returns can be explained without giving rise to excessive risk-free rate variation.
    Keywords: house prices, real estate returns, equity premium, business cycles, production economies.
    JEL: E30 E22 G12
    Date: 2006–12
  10. By: Mark Lorenzen; Kristina Vaarst Andersen
    Abstract: Using novel statistical data, the paper analyzes the geographical distribution of Richard Florida’s creative class among 445 European cities. The paper demonstrates that size matters, i.e. cities with a high proportion of creative class tend to get more creative through attraction of still more creative labor. More specifically, the distribution of the European creative class falls into three phases, each approximating a rank-size rule, with different exponents (i.e., inequality). The exponent for the smallest cities is profoundly more negative than for the middle-sized cities, and this tendency is stronger for the creative class than for the general population. Furthermore, the exponent of the largest cities is slightly less negative than the middle-sized cities, and this tendency is also stronger for the creative class. In order to explain this, the paper presents four propositions about how effects of large and small population sizes of cities may be more detrimental to attracting the creative class than attracting the population in general. Below a population size of approximately 70,000 inhabitants, there is a rapid drop of attractiveness to the creative class with decreasing city size. We propose that this may be because below this size, cities begin to drop below minimum efficient market sizes for particular creative services, below minimum labor market sizes for particular creative job types, and below minimum levels of political representation by the creative class. Above a European city population size of approximately 1,2 million inhabitants, the attractiveness of increasing city size for the creative class drops, and we propose that the creative class may respond particularly adversely to urban congestion.
    Date: 2007
  11. By: Guido Buenstorf; Christina Guenther
    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 R20 R30
    Date: 2007
  12. By: Aliprantis, Dionissi
    Abstract: Many states in the United States have changed their enrollment cutoff dates in the past 30 years to increase the age at which children start school. As well, around 7% of parents are choosing to delay their children's enrollment in primary school. This paper estimates the average treatment effect (ATE) of delaying children's enrollment in the US by six months using the variation in birth dates that is exogenous in the ECLS-K data set. My estimates of the Math and Reading test score ATE start in the fall of kindergarten at 0.28 and 0.13 standard deviations and decline to 0.05 and 0.10 standard deviations by the spring of fifth grade. Estimating the ATE by demographic characteristics indicates that delayed enrollment could help explain the racial test score gap, and provides support for the hypothesis that the production of test scores is a cumulative process.
    JEL: I21 I2
    Date: 2007–05–26
  13. By: Shinichiro Iwata (Faculty of Economics, University of Toyama); Koji Karato (Faculty of Economics, University of Toyama)
    Abstract: This paper examines the location choices of homeless people in Osaka City, and .nds them concentrated because of homeless networks. The paper also shows that different types of homeless networks operate in two different homeless groups: (1) peer networks that provide a social tie inside homeless communities are observed in groups that had not had work experience in the day labor market; (2) homed networks that provide a social tie outside homeless communities affect location choice in the expected way, although the effect is statistically insigni.cant in groups that had worked in the day labor market.
    Date: 2007–10
  14. By: Abadzi, Helen
    Abstract: Studies have shown that learning outcomes are related to the amount of time students engage in learning tasks. However, visits to schools have revealed that students are often taught for only a fraction of the intended time, particularly in lower-income countries. Losses are due to informal school closures, teacher absenteeism, delays, early departures, and sub-optimal use of time in the classroom. A study was undertaken to develop an efficient methodology for measuring instructional time loss. Thus, instructional time use was measured in sampled schools in Tunisia, Morocco, Ghana, and the Brazilian state of Pernambuco. The percentage of time that students were engaged in learning vis-à-vis government expectations was approximately 39 percent in Ghana, 63 percent in Pernambuco, 71 percent in Morocco, and 78 percent in Tunisia. Instructional time use is a mediator variable that is challenging to measure, so it often escapes scrutiny. Research suggests that merely financing the ingredients of instruction is not enough to produce learning outcomes; students must also get sufficient time to process the information. The quantity-quality tradeoff that often accompanies large-scale enrollments may be partly due to instructional time restrictions. Time wastage also distorts budgetary outlays and teacher salary rates. To achieve the Millennium Development Goals students must get more of the time that governments, donors, and parents pay for.
    Keywords: Tertiary Education,Primary Education,Secondary Education,Education For All,Teaching and Learning
    Date: 2007–10–01
  15. By: Edson Paulo Domingues (Cedeplar-UFMG); Francisca Diana Ferreira Viana (Cedeplar-UFMG); Heder Carlos de Oliveira (Cedeplar-UFMG)
    Abstract: This paper analyzes a set of infrastructure programs (Sewer, Housing, Transports, Communications and Energy) in the Northeast region of Brazil, announced by the federal government in the scope of the PAC (Plano de Aceleração do Crescimento). We use an interregional computable general equilibrium model in order to estimate short run and long run impacts in the region’s states. The results indicate the potential impact of these projects on growth and regional inequality.
    Keywords: regional economics; regional inequality; infrastructure; computable general equilibrium; Brazil
    JEL: R11 R13 R40 C68
    Date: 2007–09
  16. By: Elena Bellini (Fondazione Eni Enrico Mattei); Ugo Gasparino (Fondazione Eni Enrico Mattei); Barbara Del Corpo (Fondazione Eni Enrico Mattei); William Malizia (Fondazione Eni Enrico Mattei)
    Abstract: In recent years, interest in tourism has spread rapidly throughout many small and medium European cities, which previously have not necessarily considered themselves as tourist destinations. Tourism is increasingly seen as a potential lever towards high economic growth, measured both in terms of income and employment. In the present Working Paper we report the analysis on the economic impact undertaken in the framework of the PICTURE Project, showing the results of a novel econometric exercise to statistically assess the impacts of cultural tourism upon European municipalities. More precisely the analysis aims at estimating the effects of tourism specialisation on local income and prices. The Working Paper is built as follows. Section 1 presents and discusses secondary data about tourism facts and figures, including the economic impact of tourism upon European economies, with a focus on cultural tourism. An extensive review of literature, which identifies the main categories of impacts and the currently available methodologies to assess them, is undertaken. Section 2 focuses on the state of the art. Section 3 describes the database built for the analysis, sources and variables. In order to visually represent the spatial variability of the main parameters, a series of thematic maps at NUTS 3 level(“Maps of European tourism”), using GIS (Geographical Information System) are also included in the Working Paper. Section 4 shows the results of the econometric analysis of European panel data for the estimation of the effects of tourism specialisation on both local incomes and prices. Section 5 concludes.
    Keywords: Cultural Tourism, Economic Growth
    JEL: O4 R0 L83
    Date: 2007–09
  17. By: Sergio Currarini (Department of Economics, University Of Venice Cà Foscari and School for Advanced Studies in Venice); Paolo Pin (Abdus Salam International Center for Theoretical Physics, Trieste and University of Venice); Matthew O. Jackson (Department of Economics, Stanford University and the Santa Fe Institute.)
    Abstract: We develop a model of friendship formation that sheds light on segregation patterns observed in social and economic networks. Individuals come in different types and have type-dependent benefits from friendships; we examine the properties of a steady-state equilibrium of a matching process of friendship formation. We use the model to understand three empirical patterns of friendship formation: (i) larger groups tend to form more same-type ties and fewer other-type ties than small groups, (ii) larger groups form more ties per capita, and (iii) all groups are biased towards same-type relative to demographics, with the most extreme bias coming from middle-sized groups. We trace each of these empirical observations to specific properties of the theoretical model and highlight the role of choice and chance in generating homophilous behavior. Finally we discuss welfare implications of the model.
    Keywords: Networks, Homophily, Segregation, Friendships, Social Networks, Integration, Diversity, Minorities
    JEL: D85 A14 J15 J16
  18. By: Martin Srholec (Centre for Technology, Innovation and Culture, University of Oslo)
    Abstract: The aim of this paper is to demonstrate how research on geography of innovation can benefit from multilevel modeling. Using explanatory factors operating at different levels of the analysis, we assess the hypothesis that regional innovation systems influence the firm’s likelihood to innovate. We estimate a logit multilevel model of innovation on micro data from the third Community Innovation Survey in the Czech Republic. The results indicate that the quality of the regional innovation system directly determines firm’s likelihood to innovate and mediates the effect of some firm-level factors. Also structural problems in the region influence innovation in firms.
    Keywords: innovation, multilevel modeling, regional innovation system, Czech Republic.
    JEL: O32 R15 D21
    Date: 2007–10
  19. By: Robert G. Myers; Hirokazu Yoshikawa; Kathleen McCartney; Kristen L. Bub; Julieta Lugo-Gil; Maria A. Ramos; Felicia Knaul; UNICEF Innocenti Research Centre
    Abstract: An accumulation of research across hundreds of studies shows the benefits of quality early childhood care and education for children’s later learning, school success and social development. In recognition of the value of providing early learning opportunities, many nations have expanded early childhood care and education in recent years. Mexico provides an interesting case in which expansion of early childhood care and education has occurred in the past 5 years, as have initiatives to improve quality and revise the national curriculum for preschoolers. This paper examines three policy initiatives that occurred in Mexico between 2000 and 2006 – preschool expansion, quality improvement and curricular reform. The preschool expansion included a mandate for all parents in Mexico to send their preschool-aged children (3, 4 and 5 years old) to preschool, with target dates of 2004, 2005 and 2008 for 100 per cent coverage of 5-year-olds, 4-yea-olds and 3-year-olds, respectively. The quality improvement initiative was part of a larger programme providing supplemental funds to select preschools and schools in Mexico’s public education system. Finally, the curricular reform instituted a new preschool curriculum to be implemented nationwide for all programmes across the 3- to 5-year-old age range.
    Keywords: child care; early childhood development; early childhood education; preschool education; right to care and protection; right to child care services;
    JEL: I29
    Date: 2007
  20. By: Michael P Devereux (Oxford University Centre for Business Taxation, IFS, CEPR and CESifo)
    Date: 2007
  21. By: Lecluyse C.; Van Woensel T.; Peremans H.
    Abstract: Assigning and scheduling vehicle routes in a stochastic time-dependent environment is a crucial management problem. The assumption that in a real-life environment everything goes according to an a priori determined static schedule is unrealistic. Our methodology builds on earlier work in which the traffic congestion is captured based on queueing theory in an analytical way and applied to the VRP problem. In this paper, we introduce the variability in the traffic flows into the model. This allows for an evaluation of the routes based on the uncertainty involved. Different experiments show that the risk taking/avoiding behaviour of the planner can be taken into account during optimization. As more weight is contributed to the variability component, the resulting optimal route will be slightly slower, but more reliable. The solution quality in terms of the 95th-percentile of the travel time distribution (assumed lognormal) will also improve.
    Date: 2007–09

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