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on Urban and Real Estate Economics |
| By: | Atif Mian; Amir Sufi |
| Abstract: | We demonstrate that a rapid expansion in the supply of mortgages driven by disintermediation explains a large fraction of recent U.S. house price appreciation and subsequent mortgage defaults. We identify the effect of shifts in the supply of mortgage credit by exploiting within-county variation across zip codes that differed in latent demand for mortgages in the mid 1990s. From 2001 to 2005, high latent demand zip codes experienced large relative decreases in denial rates, increases in mortgages originated, and increases in house price appreciation, despite the fact that these zip codes experienced significantly negative relative income and employment growth over this time period. These patterns for high latent demand zip codes were driven by a sharp relative increase in the fraction of loans sold by originators shortly after origination, a process which we refer to as "disintermediation." The increase in disintermediation-driven mortgage supply to high latent demand zip codes from 2001 to 2005 led to subsequent large increases in mortgage defaults from 2005 to 2007. Our results suggest that moral hazard on behalf of originators selling mortgages is a main culprit for the U.S. mortgage default crisis. |
| JEL: | E44 E51 G21 L85 O51 R21 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13936&r=ure |
| By: | Alena Bicakova; Eva Sierminska |
| Abstract: | This paper uses the newly constructed Luxembourg Wealth Study data to document cross-country variation in homeownership rates and the homeownership-income inequality among young households in Finland, Germany, Italy, the UK and the US, and relate it to cross-country differences in mortgage market maturity. We find that aside from Italy, homeownership rates and inequality in the four countries correspond to their mortgage take up rates and its distribution across income, reflecting the different degree of development of their respective mortgage markets. In Italy, alternative ways of financing, such as family transfers, substitute the limited mortgage availability and explains the second highest homeownership rate in our sample, despite the lowest mortgage take up. The mortgage market in the UK is the most open and the most equal, which leads to the highest and most equally distributed homeownership in this country as well. The mortgage market in Germany is on the other side of the spectrum with very low mortgage take-up rates and strong dependence of homeownership and mortgage take up on household income. Finland and the US are in-between. Counterfactual predictions suggest that although household characteristics play some role in explaining the variation in home ownership rates across the five countries, it is mostly the country specific effects of these characteristics determined by the institutional environment as well as the functioning of the housing and mortgage markets that drive the main result. |
| Keywords: | Homeownership, credit constraints, mortgage market |
| JEL: | D14 D31 G21 R21 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp778&r=ure |
| By: | William Roy (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat); Yves Croissant (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat) |
| Abstract: | Recently, some cities decided to divide their transport network into several attractive and accessible parts (this procedure is called allotment) in order to reduce urban transit costs. Gains obtained by introducing more competition for the market should be compared with costs associated with cutting the network into several parts, and this question is crucially linked with the measure of returns to scale. In this paper, we estimate a translog cost function on a panel of French urban transit networks. Our main conclusion is that scale economies are exhausted for a production corresponding to a city of about 200,000 inhabitants and that allotment, in terms of scale economies, would reduce costs for the seven biggest cities of our sample. |
| Keywords: | urban public transport industry, panel data, natural monopoly, allotment |
| Date: | 2008–05–29 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00122887_v2&r=ure |
| By: | Hajime Tomura |
| Abstract: | This paper considers a dynamic stochastic general equilibrium model for a small open economy and finds that an improvement in the terms of trade causes a housing boom-bust cycle if the duration of the improvement is uncertain. It is shown that as the economy has better access to the international financial market, the extent of the housing boom and bust gets larger. Also, an increase in the loan-to-value ratio in the domestic mortgage market tends to enhance the extent of the housing boom and bust when the economy has good access to the international financial market. |
| Keywords: | Business fluctuations and cycles; Credit and credit aggregates |
| JEL: | E44 F41 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:08-9&r=ure |
| By: | Borzacchiello, M.T. (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics); Casas, I.; Ciuffo, B. |
| Abstract: | Since the first appearances of Geographical Information Systems (GIS), transportation science has found in them its natural support, to represent, first, the spatial and, later on, the temporal aspects of transportation networks and infrastructures. As GIS developed so did their use in transportation science, and they became essential not only in visualization but also to facilitate and speed data management, algorithmic operations, and decision making. This paper analyses the contributions and influence of GIS in transport science on the basis of three frameworks: geodatabase, geomapping, and geomodelling, all of which highlight the importance of location. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:vuarem:2008-1&r=ure |
| By: | Alejandro Gaviria; Carlos Medina; Leonardo Morales; Jairo Nuñez |
| Abstract: | We use hedonic price models to estimate the value households are willing to pay to avoid violent crime in the city of Bogotá. We find that households living in the highest socioeconomic level (stratum 6) pay up to 7.2% of their house values in order to prevent average homicide rates from increasing in one standard deviation. Households in stratum 5 pay up to 2.4% of their house values to prevent homicide rates from increasing. The results indicate the willingness to pay for security by households in Bogotá, and additionally, reveal that a pure public good like security, ends up creating urban private markets that auction security. These markets imply different levels of access to public goods among the population, and actually, the exclusion of the poorest. We find as well evidence of negative capitalization of the rate of attacks against life, and positive capitalization of the presence of police authority. |
| Date: | 2008–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:004600&r=ure |
| By: | Peter Arcidiacono; Patrick Bayer; Aurel Hizmo |
| Abstract: | In traditional signaling models, education provides a way for individuals to sort themselves by ability. Employers in turn use education to statistically discriminate, paying wages that reflect the average productivity of workers with the same given level of education. In this paper, we provide evidence that education (specifically, attending college) plays a much more direct role in revealing ability to the labor market. We use the NLSY79 to examine returns to ability early in careers; our results suggest that ability is observed nearly perfectly for college graduates but is revealed to the labor market much more gradually for high school graduates. As a result, from very beginning of the career, college graduates are paid in accordance with their own ability, while the wages of high school graduates are initially completely unrelated to their own ability. This view of ability revelation in the labor market has considerable power in explaining racial differences in wages, education, and the returns to ability. In particular, we find no racial differences in wages or returns to ability in the college labor market, but a 6-10 percent wage penalty for blacks (conditional on ability) in the high school market. These results are consistent with the notion that employers use race to statistically discriminate in the high school market but have no need to do so in the college market. That blacks face a wage penalty in the high school but not the college labor market also helps to explains why, conditional on ability, blacks are more likely to earn a college degree, a fact that has been documented in the literature but for which a full explanation has yet to emerge. |
| JEL: | J15 J24 J3 J7 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13951&r=ure |
| By: | Daniel A. Tirado; Julio Martinez-Galarraga (Universitat de Barcelona) |
| Abstract: | This article offers a new historical dataset of industrial GVA for Spanish provinces (NUTSIII) and autonomous regions (NUTS II). For doing that, a new methodology is proposed in order to estimate historical figures of regional GVA. Traditional estimates of regional industrial output in Spain have usually been based on fiscal sources. These data allowed the estimation of regional industrial capital stocks that were used as a proxy of industrial regional production. Opposite to this, in this article we offer an estimation based on regional industrial factor incomes. In order to carry out the estimation, we have followed the proposals by Geary and Stark (2002) and Crafts (2005). The new estimation offers data of Spanish regional industrial GVA for different years along the period 1860-1930. |
| Keywords: | regional industrial disparities, spatial analysis, economic history |
| JEL: | N93 R12 N94 O18 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:bar:bedcje:2008192&r=ure |
| By: | Charlie Karlsson (Jönköping International Business School, Jönköping University, Sweden); Gunther Maier (University of Economics and Business Administration, Vienna, Austria); Michaela Trippl (University of Economics and Business Administration, Vienna, Austria); Iulia Siedschlag (Economic and Social Research Institute (ESRI)); Robert Owen (University of Nantes, France); Gavin Murphy (Economic and Social Research Institute (ESRI)) |
| Abstract: | The objective of this paper is to review the relevant theoretical and empirical literature to provide a conceptual and methodological background for the analysis of the consequences of ICT use and globalisation on the regional economies in the European Union. We highlight the key aspects of ICT as a general purpose technology, discuss the economic impacts of ICT diffusion from a macro as well as from a micro perspective, and examine the spatial consequences of ICT diffusion. We focus on regional innovation systems and globalisation in order to propose an organizing framework for the analysis of the impact of ICT diffusion on regional development. |
| Keywords: | Technology diffusion, Innovation systems, Globalisation, Regional development |
| JEL: | F23 O33 R11 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp233&r=ure |
| By: | Pangotra Prem; Astha Govil |
| Date: | 2008–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2008-04-02&r=ure |
| By: | Malamud, Ofer (University of Chicago); Wozniak, Abigail (University of Notre Dame) |
| Abstract: | College-educated workers are twice as likely as high school graduates to make lasting long-distance moves, but little is known about the role of college itself in determining geographic mobility. Unobservable characteristics related to selection into college might also drive the relationship between college education and geographic mobility. We explore this question using a number of methods to analyze both the 1980 Census and longitudinal sources. We conclude that the causal impact of college completion on subsequent mobility is large. We introduce new instrumental variables that allow us to identify educational attainment and veteran status separately in a sample of men whose college decisions were exogenously influenced by their draft risk during the Vietnam War. Our preferred IV estimates imply that graduation increases the probability that a man resides outside his birth state by approximately 35 percentage points, a magnitude nearly twice as large as the OLS migration differential between college and high school graduates. IV estimates of graduation’s impact on total distance moved are even larger, with IV estimates that exceed OLS considerably. We provide evidence from the National Longitudinal Survey of Youth (NLSY) 1979 that our large IV estimates are plausible and likely explained by heterogeneous treatment effects. Finally, we provide some suggestive evidence on the mechanisms driving the relationship between college completion and mobility. |
| Keywords: | geographic mobility, education, college graduates, internal migration, instrumental variables |
| JEL: | J61 J24 I23 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3432&r=ure |
| By: | Maciej Jakubowski |
| Abstract: | This paper considers value-added models of school assessment and their implementation in Poland. Value-added estimates can be very helpful for schools and policy makers who need a reliable way to control teaching effectiveness, or for parents who need information about school quality in their area. However, their usefulness depends on several statistical issues and specific decisions made during implementation. The paper discusses several value-added models and describes details of the solution implemented in Poland. Statistical problems are discussed according to their policy relevance. It is shown that what bothers statisticians is less important in practice than several problems encountered when one wants to apply these models to a policy relevant context. Problems of proper regression specification, omitted variables bias, and measurement error are discussed, but the ways value-added estimates could be published and used as policy evaluation tools are also presented. All this problems are discussed from a practical point of view using three years of experience in implementation of these methods in Poland. |
| Keywords: | education, school assessment, school effectiveness, value-added models |
| JEL: | I21 I28 J24 |
| Date: | 2008–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:rsc:rsceui:2008/06&r=ure |
| By: | Chollete, Lorán (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration) |
| Abstract: | What drives extreme and rare economic events? Motivated by recent theory, and events in US subprime markets, we begin to open the black box of extremes. Specifically, we build a taxonomy of extremes, then extend standard economic analysis of extreme risk. First, we model the potentially relevant dimensions of dynamics and endogeneity. In characterizing individuals' endogenous propagation of extremes, we relate the latter to public goods. Second, using over a century of daily stock price data, we construct empirical probabilities of extremes. We document that extremes are relatively frequent and persistent. We find evidence that extremes are endogenous, raising the possibility that control of extremes is a public good. |
| Keywords: | Extreme event; Subprime Market; Dynamics; Endogeneity; Public Good |
| JEL: | C10 E44 E51 H23 H41 |
| Date: | 2008–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2008_002&r=ure |
| By: | Toshihiro Ihori (Faculty of Economics, University of Tokyo) |
| Abstract: | This paper investigates how the soft budget constraint with grants from the central government to local governments tends to internalize the vertical externality by stimulating insufficient local expenditure when both the central and local governments impose taxes on the same economic activities from public investment. The theoretical model incorporates local governments' rent-seeking activities in a multi-government setting with and without central controls on local borrowing. Two channels through debt issuance and public investment cause the soft budget outcome. In the unrestricted scheme of local debt issuance we have the positive effect on public investment and debt issuance although it would also stimulate wasteful rent seeking activities. In the restricted scheme of local debt issuance the soft budget case may not stimulate public investment since its effect through debt issuance is absent. In either case the soft budget constraint is welfare improving if the marginal valuation of central public goods is relatively small and/or the tax share of local government is relatively small. |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2008cf552&r=ure |
| By: | Patrick Bayer; Shakeeb Khan; Christopher Timmins |
| Abstract: | This paper considers nonparametric identification and estimation of a generalized Roy model that includes a non-pecuniary component of utility associated with each choice alternative. Previous work has found that, without parametric restrictions or the availability of covariates, all of the useful content of a cross-sectional dataset is absorbed in a restrictive specification of Roy sorting behavior that imposes independence on wage draws. While this is true, we demonstrate that it is also possible to identify (under relatively innocuous assumptions and without the use of covariates) a common non-pecuniary component of utility associated with each choice alternative. We develop nonparametric estimators corresponding to two alternative assumptions under which we prove identification, derive asymptotic properties, and illustrate small sample properties with a series of Monte Carlo experiments. We demonstrate the usefulness of one of these estimators with an empirical application. Micro data from the 2000 Census are used to calculate the returns to a college education. If high-school and college graduates face different costs of migration, this would be reflected in different degrees of Roy-sorting-induced bias in their observed wage distributions. Correcting for this bias, the observed returns to a college degree are cut in half. |
| JEL: | C1 C13 C14 J24 J3 J32 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13949&r=ure |
| By: | Toshihiro Ihori (Faculty of Economics, University of Tokyo); C. C. Yang (Institute of Economics, Academia Sinica and Department of Public Finance, National Chengchi University) |
| Abstract: | This paper explores the implications of the interaction between interregional tax competition and intraregional political competition for the optimal provision of public goods. In contrast to Hoyt's (1991) finding that the extent to which public goods are undersupplied is monotonically increasing in the number of competing regions, we show that the relationship between the level of public good supply and the number of competing regions is nonmonotonic if political as well as tax competition is considered. Interestingly, some certain interaction between interregional tax competition and intraregional political competition can result in the optimal provision of public goods. |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2008cf553&r=ure |
| By: | John B. Taylor; John C. Williams |
| Abstract: | At the center of the financial market crisis of 2007-2008 was a highly unusual jump in spreads between the overnight inter-bank lending rate and term London inter-bank offer rates (Libor). Because many private loans are linked to Libor rates, the sharp increase in these spreads raised the cost of borrowing and interfered with monetary policy. The widening spreads became a major focus of the Federal Reserve, which took several actions -- including the introduction of a new term auction facility (TAF) --- to reduce them. This paper documents these developments and, using a no-arbitrage model of the term structure, tests various explanations, including increased risk and greater liquidity demands, while controlling for expectations of future interest rates. We show that increased counterparty risk between banks contributed to the rise in spreads and find no empirical evidence that the TAF has reduced spreads. The results have implications for monetary policy and financial economics. |
| JEL: | E43 E44 E52 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13943&r=ure |