nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2007‒12‒19
seventeen papers chosen by
Steve Ross
University of Connecticut

  1. Do Agglomeration Economies Reduce the Sensitivity of Firm Location to Tax Differentials? By Mario Jametti; Marius Brülhart; Kurt Schmidheiny
  2. Private School Quality in Italy By Bertola, Giuseppe; Checchi, Daniele; Oppedisano, Veruska
  3. A Theory of Racial Diversity, Segregation, and Productivity By Sparber, Chad
  4. First in the Class? Age and the Education Production Function By Elizabeth Cascio; Diane Whitmore Schanzenbach
  5. The American High School Graduation Rate: Trends and Levels By James J. Heckman; Paul A. LaFontaine
  6. Assessing the functioning of land rental markets in Ethiopia By Alemu, Tekie; Ali, Daniel Ayalew; Deininger, Klaus
  7. Financial Structure, Liquidity, and Firm Locations By Andres Almazan; Adolfo de Motta; Sheridan Titman; Vahap Uysal
  8. Does Movie Violence Increase Violent Crime? By Gordon Dahl; Stefano DellaVigna
  9. Do Central Banks React to House Prices? By Finocchiaro, Daria; Queijo von Heideken, Virginia
  10. When is Seller Price Setting with Linear Fees Optimal for Intermediaries? By Simon Loertscher; Andras Niedermayer
  11. Noise Charges in Road Traffic: A Pricing Schedule Based on the Marginal Cost Principle By Andersson, Henrik; Ögren, Mikael
  12. Affordability and subsidies in public urban transport : what do we mean, what can be done? By Serebrisky,Tomas; Munoz-Raskin, Ramon; Gomez-Lobo, Andres; Estupinan, Nicolas
  13. Racial Diversity and Aggregate Productivity in US Industries: 1980-2000” By Sparber, Chad
  14. Contractual Design and Functions - Evidence from Service Contracts in the European Air Transport Industry By Johannes Fuhr
  15. How to Measure Segregation Conditional on the Distribution of Covariates By Åslund, Olof; Nordström Skans, Oskar
  16. Prejudice and The Economics of Discrimination By Kerwin Kofi Charles; Jonathan Guryan

  1. By: Mario Jametti (Department of Economics, York University); Marius Brülhart (University of Lausanne); Kurt Schmidheiny (Department of Economics and Business, Universitat Pompeu Fabra)
    Abstract: Low corporate taxes can help attract new firms. This is the main mechanism underpinning the standard race-to-the-bottom view of tax competition. A recent theoretical literature has qualified this view by formalizing the argument that agglomeration forces can reduce firms' sensitivity to tax differentials across locations. We test this proposition using data on firm startups across Swiss municipalities. We found that, on average, high corporate income taxes do deter new firms, but that this relationship is significantly weaker in the most spatially concentrated sectors. Location choices of firms in sectors with an agglomeration intensity at the twentieth percentile of the sample distribution are estimated to be twice as responsive to a given difference in local corporate tax burdens as firms in sectors with an agglomeration intensity at the eightieth percentile. Hence, our analysis confirms the theoretical prediction: agglomeration economies can neutralize the impact of tax differentials on firms' location choices.
    Keywords: Firm location, agglomeration economies, local taxation, count models, Switzerland
    JEL: R3 H32
    Date: 2007–12
  2. By: Bertola, Giuseppe; Checchi, Daniele; Oppedisano, Veruska
    Abstract: We discuss how a schooling system’s structure may imply that private school enrolment leads to worse subsequent performance in further education or in the labour market, and we seek evidence of such phenomena in Italian data. If students differ not only in terms of their families’ ability to pay but also in terms of their own ability to take advantage of educational opportunities (“talent” for short), theory predicts that private schools attract a worse pool of students when publicly funded schools are better suited to foster progress by more talented students. We analyze empirically three surveys of Italian secondary school graduates, interviewed 3 year after graduation. In these data, the impact of observable talent proxies on educational and labour market outcomes is indeed more positive for students who (endogenously) choose to attend public schools than for those who choose to pay for private education.
    Keywords: ability; education; vouchers
    JEL: I21 J24
    Date: 2007–12
  3. By: Sparber, Chad (Department of Economics, Colgate University)
    Abstract: Empirical evidence illustrates that diversity generates both economic costs and benefits. This paper develops a theoretical model that accounts for the positive and deleterious effects of heterogeneity. First, an expanded Solow Growth Model demonstrates that the direct effects of diversity can be positive or negative, and depend upon the size of fixed parameter values. Second, diversity also influences individuals' location decisions. Segregation (variation of diversity across regions) always reduces national output per worker, so if diversity induces integration, it indirectly augments productivity as well. Finally, political policies aimed at reducing interaction costs across groups may actually reduce aggregate output per worker by encouraging segregation.
    Keywords: Racial Diversity, Macroeconomic Productivity
    JEL: O40 J24 O51 J10
    Date: 2007–11–30
  4. By: Elizabeth Cascio; Diane Whitmore Schanzenbach
    Abstract: Older children outperform younger children in a school-entry cohort well into their school careers. The existing literature has provided little insight into the causes of this phenomenon, leaving open the possibility that school-entry age is zero-sum game, where relatively young students lose what relatively old students gain. In this paper, we estimate the effects of relative age using data from an experiment where children of the same biological age were randomly assigned to different classrooms at the start of school. We find no evidence that relative age impacts achievement in the population at large. However, disadvantaged children assigned to a classroom where they are among the youngest students are less likely to take a college-entrance exam than others of the same biological age. Controlling for relative age also reveals no long-term effect of biological age at school entry in the aggregate, but striking differences by socioeconomic status: Disadvantaged children who are older at the start of kindergarten are less likely to take the SAT or ACT, while the opposite may be true for children from more advantaged families. These findings suggest that, far from being zero-sum, school-entry age has far-reaching consequences for the level of achievement and achievement gaps between the rich and poor.
    JEL: I20 J18 J24
    Date: 2007–11
  5. By: James J. Heckman; Paul A. LaFontaine
    Abstract: This paper uses multiple data sources and a unified methodology to estimate the trends and levels of the U.S. high school graduation rate. Correcting for important biases that plague previous calculations, we establish that (a) the true high school graduation rate is substantially lower than the official rate issued by the National Center for Educational Statistics; (b) it has been declining over the past 40 years; (c) majority/minority graduation rate differentials are substantial and have not converged over the past 35 years; (d) the decline in high school graduation rates occurs among native populations and is not solely a consequence of increasing proportions of immigrants and minorities in American society; (e) the decline in high school graduation explains part of the recent slowdown in college attendance; and (f) the pattern of the decline of high school graduation rates by gender helps to explain the recent increase in male-female college attendance gaps.
    JEL: I21
    Date: 2007–11
  6. By: Alemu, Tekie; Ali, Daniel Ayalew; Deininger, Klaus
    Abstract: Although a large theoretical literature discusses the possible inefficiency of sharecropping contracts, the empirical evidence on this phenomenon has been ambiguous at best. Household-level fixed-effect estimates from about 8,500 plots operated by households that own and sharecrop land in the Ethiopian highlands provide support for the hypothesis of Marshallian inefficiency. At the same time, a factor adjustment model suggests that the extent to which rental markets allow households to attain their desired operational holding size is extremely limited. Our analysis points towards factor market imperfections (no rental for oxen), lack of alternative employment opportunities, and tenure insecurity as possible reasons underlying such behavior, suggesting that, rather than worrying almost exclusively about Marshallian inefficiency, it is equally warranted to give due attention to the policy framework within which land rental markets operate.
    Keywords: Rural Land Policies for Poverty Reduction,Land Use and Policies,Labor Policies,Municipal Housing and Land,Economic Theory & Research
    Date: 2007–12–01
  7. By: Andres Almazan; Adolfo de Motta; Sheridan Titman; Vahap Uysal
    Abstract: This paper investigates the relation between a firm's location and its corporate finance decisions. We develop a simple model where being located within an industry cluster increases opportunities to make acquisitions, and to facilitate those acquisitions, firms within clusters maintain more financial slack. Consistent with our model we find that firms that are located within industry clusters tend to make more acquisitions, and have lower debt ratios and larger cash balances than their industry peers located outside clusters. In addition, we document that firms in growing cities and technology centers also maintain more financial slack. Overall, these findings, which reveal systematic patterns between geography and corporate finance choices, suggest the importance of growth opportunities in firms’ financial decisions.
    JEL: G30 G32 G34 R3
    Date: 2007–11
  8. By: Gordon Dahl; Stefano DellaVigna
    Date: 2007–12–13
  9. By: Finocchiaro, Daria (Research Department, Central Bank of Sweden); Queijo von Heideken, Virginia (Research Department, Central Bank of Sweden)
    Abstract: The substantial fluctuations in house prices recently experienced by many industrialized economies have stimulated a vivid debate on the possible implications for monetary policy. In this paper, we ask whether the U.S. Fed, the Bank of Japan and the Bank of England have reacted to house prices. We study the responses of these central banks by estimating a structural model for each country where credit constrained agents borrow against real estate. The main result is that house price movements did play a separate role in the U.K. and Japanese central bank reaction functions, while they did not in the U.S.
    Keywords: House prices; monetary policy; DSGE models; Bayesian estimation
    JEL: E31 E44 E52 E58
    Date: 2007–11–01
  10. By: Simon Loertscher; Andras Niedermayer
    Abstract: Mechanisms where sellers set the price and are charged a linear commission fee are widely used by real world intermediaries, e.g. by real estate brokers. Empirically these commission fees exhibit very little variance, both across heterogeneous regional markets and over time. So far, there is no theoretical explanation why such seller price setting mechanisms are used and why the linear fees vary so little. In this paper, we first show that in a Bayesian setup seller price setting with linear fees is revenue equivalent to the intermediary optimal direct mechanism derived by Myerson and Satterthwaite (1983) if and only if the seller’s cost is drawn from a generalized power distribution. Whenever such a mechanism is optimal, the fee structure is independent of the distribution from which the buyer’s valuation is drawn. Second, we derive the intermediary optimal direct mechanism when there are many buyers and possibly many sellers and we show that with one seller any standard auction with linear fees and reserve price setting by the seller (which are used e.g. by eBay) implements this mechanism if the seller’s cost is drawn from a power distribution and if buyers’ valuations are identically distributed. Third, we show that when the number of buyers approaches infinity while there is still one seller, seller price setting and price setting by the intermediary are equivalent, intermediary optimal mechanisms.
    Keywords: Brokers; linear commission fees; optimal indirect mechanisms
    JEL: C72 C78 L13
    Date: 2007–10
  11. By: Andersson, Henrik (VTI); Ögren, Mikael (VTI)
    Abstract: One way of mitigating the negative effects of noise from road traffic is to include the external cost of noise in a road charging system. This study shows how standardized calculation methods for road traffic noise can be used together with monetary estimates of the social cost of noise exposure to calculate charges based on the social marginal cost. Using Swedish data on traffic volume and individuals exposed to road noise, together with official Swedish monetary values for noise exposure, we estimate road-noise charges for light (cars) and heavy (trucks) vehicles.
    Keywords: Externalities; Marginal Cost; Noise; Road Traffic
    JEL: D62 Q51 R41
    Date: 2007–12–13
  12. By: Serebrisky,Tomas; Munoz-Raskin, Ramon; Gomez-Lobo, Andres; Estupinan, Nicolas
    Abstract: Subsidy policies on public urban transport have been adopted ubiquitously. In both developed and developing countries, subsidies are implemented to make transport more affordable. Despite their widespread implementation, there are virtually no quantitative assessments of their distributional incidence, making i t impossible to determine if these instruments are pro-poor. This paper reviews the arguments used to justify subsidy policies in public urban transport. Using different tools to quantitatively evaluate the incidence and distributive impacts of subsidy policy options, the paper analyzes the findings of a series of research papers that study urban public transport subsidy policies in developed and developing countries. The available evidence indicates that current public urban transport subsidy policies do not make the poorest better off. Supply-side subsidies are, for the most part, neutral or regressive; while demand-side subsidies perform better-although many of them do not improve income distribution. Considering that the policy objective is to improve the welfare of the poorest, it is imperative to move away from supply-side subsidies towards demand-side subsidies and to integrate transport social concerns into wider poverty alleviation efforts, which include the possibility of channeling subsidies through monetary transfer systems or through other transfer instruments (food subsidies, health services and education for the poor). The general conclusion of the paper is that more effort should be devoted to improve the targeting properties of public urban transport subsidies using means-testing procedures to ensure a more pro-poor incidence of subsidies.
    Keywords: Transport Economics Policy & Planning,Transport in Urban Areas,Urban Transport,Taxation & Subsidies,Economic Theory & Research
    Date: 2007–12–01
  13. By: Sparber, Chad (Department of Economics, Colgate University)
    Abstract: This paper employs industry-level US Census data from 1980-2000 to assess the aggregate effects of racial diversity. While most international accounts find that diversity reduces productivity, I argue that the US experience is more nuanced. Unqualified statements about the costs and merits of diversity are unwarranted, as racial heterogeneity increases productivity within many, but not all, industries. Sectors employing a large number of workers responsible for creative decision-making and customer service experience gains from diversity, while industries characterized by high levels of group effort suffer losses. The results thus reconcile two competing literatures by suggesting that diversity improves decision-making and problem solving, but also encumbers common action and public goods provision.
    Keywords: Racial Diversity, Productivity
    JEL: O40 J24 O51
    Date: 2007–11–30
  14. By: Johannes Fuhr (Workgroup for Infrastructure Policy (WIP), Technische Universität Berlin)
    Abstract: Contracts within governance classes, e.g., alliances or supply chain contracts, display a great degree of variation in contractual design. In this paper, we explore (i) the alignment between provisions in functional classes and the underlying transaction attributes, and (ii) the impact of learning on transaction costs (via standardization of contract provisions). Drawing on a sample of 42 service contracts in the European air transport industry, we show that asset specificity has a dominant impact on the observed variation in all the provisions/attachments analyzed. The results do not support the proposition that individual transaction attributes drive the design of provisions in distinct functional dimensions (safeguarding, coordination, and contingency adaptability function). However, they demonstrate that the provision’s function determines whether standardization occurs in ‘learning arrangements’ at the industry level or at the firm level.
    Keywords: Transaction Cost Economics, Contract Design, Contractual Function, Learning, Air Transport
    JEL: L93 D23 L22
    Date: 2007
  15. By: Åslund, Olof (Department of Economics); Nordström Skans, Oskar (Department of Economics)
    Abstract: This short paper proposes a non-parametric method of accounting for the distribution of background characteristics when testing for segregation in empirical studies. It is shown and exemplified—using data on workplace segregation between immigrants and natives in Sweden—how the method can be applied to correct any measure of segregation for differences between groups in the distribution of covariates by means of simulation, and how analytical results can be used when studying segregation by means of peer group exposure.
    Keywords: Segregation; Covariates; Workplaces; Immigrants
    JEL: C10 J10 J20
    Date: 2007–12–07
  16. By: Kerwin Kofi Charles; Jonathan Guryan
    Abstract: This paper tests the predictions about the relationship between racial prejudice and racial wage gaps from Becker's (1957) seminal work on employer discrimination - something which has not previously been done in the large economics discrimination literature. Using rich data on racial prejudice from the General Social Survey, we find strong support for all of the key predictions from Becker about the relationship between prejudice and racial wage gaps. In particular, we show that, relative to white wages, black wages: (a) vary negatively with a measure of the prejudice of the "marginal" white in a state; (b) vary negatively with the prejudice in the lower tail of the prejudice distribution, but are unaffected by the prejudice of the most prejudiced persons in a state; and (c) vary negatively with the fraction of a state that is black. We show that these results are robust to a variety of extensions, including directly controlling for racial skill quality differences and instrumental variables estimates. We present some initial evidence to show that racial wage gaps are larger the more racially integrated is a state’s workforce, also as Becker's model predicts. The paper also briefly discusses familiar criticisms and extensions of the standard Becker model, including an argument of our own which, like some recent work, shows that the model's main predictions can be shown theoretically to survive the effects of long run competition.
    JEL: J01 J7
    Date: 2007–11
  17. By: Sergio Lodde
    Abstract: The paper examines the relationship between human capital and productivity growth with reference to the Italian regions. Two approaches can be distinguished. One belonging to the neoclassical tradition stresses the accumulation of human capital as a determinant of growth, while the other, inspired by Nelson and Phelps, emphasizes the role of the stock in developing endogenous technology and catching up with more advanced economies. These hypotheses have been tested at an aggregate level but results might be the overall outcome of different processes across sectors due to the different catching-up potential. In particular we expect the Nelson-Phelps hypothesis to be more relevant in the industrial sector where innovation is the most important growth determinant. A model is estimated which allows to test both the neoclassical and the Nelson-Phelps hypotheses breaking down the analysis by sector. The results do not confirm our expectations. In the industrial sector the neoclassical hypothesis is clearly rejected by the data. Some evidence supporting the Schumpeterian one can be detected when the technical component of human capital is taken into account but it is not robust to changes in the model specification. In the service sector the results are inconclusive as well. A positive and significant effect of human capital accumulation has been found for the whole sector but the explanatory power of this variable decreases considerably in the marketable services branch.
    Keywords: growth, human capital, regions, sectors
    JEL: J24 O40 R11
    Date: 2007

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