nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2008‒05‒17
eleven papers chosen by
Steve Ross
University of Connecticut

  1. Does the Housing Market React to New Information on School Quality? By Jon H. Fiva and Lars J. Kirkebøen
  2. The Unequal Geographic Burden of Federal Taxation By David Y. Albouy
  3. The Non-Cognitive Returns to Class Size By Thomas Dee; Martin West
  4. Dartboard Tests for the Location Quotient By Paulo Guimarães; Octávio Figueiredo; Douglas Woodward
  5. Industrial Agglomeration and Industrial Policies: The Philippine Experience By Philippine Institute for Development Studies
  6. The welfare effects of freight travel time savings By massiani, jerome
  7. Size, Spillovers and Soft Budget Constraints By Ernesto Crivelli; Klaas Staal
  8. Trouble Ahead – The Subprime Crisis as Evidence of a New Regime in the Stock Market By Tanya Araújo; Francisco Louçã
  9. Discriminatory prices, endogenous locations and the Prisoner Dilemma problem By Stefano Colombo
  10. Industrial Agglomeration in the Philippines By Macasaquit, Mari-Len R.
  11. Apportionment, Fiscal Equalization and Decentralized Tax Enforcement By Christian Traxler; Andreas Reutter

  1. By: Jon H. Fiva and Lars J. Kirkebøen (Statistics Norway)
    Abstract: This paper analyzes housing market reactions to the release of previously unpublished information on school quality. Using the sharp discontinuity in the information environment allows us to study price changes within school catchment areas, thus controlling for neighborhood unobservables. We find a substantial housing market reaction to publication of school quality indicators, suggesting that households care about school quality, and may be willing to pay for better schools. The publication effect is robust to a number of sensitivity checks, but does not seem to be permanent as prices revert to prepublication levels after two to three months. We discuss this reversion in relation to the literature on behavioral finance and the concept of limited attention.
    Keywords: valuation of school quality; hedonic methods; price reversion
    JEL: I21 I28 R21 R23
    Date: 2008–05
  2. By: David Y. Albouy
    Abstract: In the United States, workers in cities offering above-average nominal wages – cities with high productivity, low quality-of-life, or inefficient housing sectors – pay 30 percent more in federal taxes than otherwise identical workers in cities offering below-average wages. According to simulation results, federal taxes lower long-run employment levels in high-wage areas by 15 percent and land and housing prices by 25 and 4 percent, leading to locational inefficiencies costing 0.28 percent of income, or $34 billion in 2005. Indexing taxes to local wage-levels eliminates these locational inefficiencies. Tax deductions index taxes partially to local cost-of-living and improve locational efficiency.
    JEL: H24 H5 H77 J61 R1
    Date: 2008–05
  3. By: Thomas Dee; Martin West
    Abstract: Although recent evidence suggests that non-cognitive skills such as engagement matter for academic and economic success, there is little evidence on how key educational inputs affect the development of these skills. We present a re-analysis of follow-up data from the Project STAR class-size experiment and find evidence that early-grade class-size reductions did improve subsequent student initiative. However, these effects did not persist into the 8th grade. Furthermore, the external and, possibly, the internal validity of these inferences is compromised by non-random attrition. We also present a complementary analysis based on nationally representative survey data and a research design that relies on contemporaneous within-student and within-teacher comparisons across two academic subjects. Our results indicate that smaller classes in 8th grade lead to improvements in measures of student engagement with effect sizes ranging from 0.05 to 0.09 and smaller effects persisting two years later. Using the estimated earnings impact of these non-cognitive skills and the direct cost of a class-size reduction, the implied internal rate of return from an 8th-grade class-size reduction is 4.6 percent overall, but 7.9 percent in urban schools.
    JEL: I20 I21 I28
    Date: 2008–05
  4. By: Paulo Guimarães (University of South Carolina and CEMPRE); Octávio Figueiredo (Universidade do Porto and CEMPRE); Douglas Woodward (University of South Carolina)
    Abstract: In this paper we reinterpret the location quotient, the commonly employed measure of regional industrial agglomeration, as an estimator derived from Ellison and Glaeser’s (1997) dartboard framework. This approach provides a theoretical foundation on which to build statistical tests for the measure. With a simple application, we show that these tests provide valuable information about the accuracy of the location quotient. The tests are relatively easy to implement using regional employment and establishment data.
    Keywords: Dartboard Location Model, Location Quotient, Statistical Tests
    JEL: R10 R12 C12
    Date: 2008–04
  5. By: Philippine Institute for Development Studies
    Abstract: In the relatively new body of ideas dubbed “new economic geography” and “spatial economics,” we find insights on the potentials of industrial agglomeration for regional and national economic development. This paper looked into the evolution of industrial development in the country as a means of elucidating the centripetal and centrifugal forces leading to agglomeration of firms and investments. A micro perspective was provided with the case study extended into the prime region in the country, Greater Manila Area. It was found that industrial agglomeration in the country takes the form of special economic zones and industry clusters, indicating that the government is taking the route toward regional dispersal of industries and the clustering strategy to spur industrial dynamism and competitiveness and consequently, regional and national economic development.
    Keywords: industrial agglomeration, industry clustering, trade and industry policy, special economic zones
    Date: 2008
  6. By: massiani, jerome
    Abstract: In this article we investigate the welfare effect of freight travel time savings. The general setup of this article is to suppose that transport operators face a constraint on minimum travel time and to examine what is occurring when this minimum travel time is changed. We briefly examine the current assessment methods and propose a less restrictive approach, in which we analyse how different economic agents trade off between the duration and cost of the different operations that are used in production and transport activities. We analyse how the change in the minimum travel time affects the different economic agents and investigate how these changes should be valued in cost benefit analysis.
    Keywords: freight value of time; cost benefit analysis
    JEL: L91 R41
    Date: 2008
  7. By: Ernesto Crivelli (Max Planck Institute for Research on Collective Goods, Bonn); Klaas Staal (University of Bonn)
    Abstract: There is much evidence against the so-called "too big to fail" hypothesis in the case of bailouts to subnational governments. We look at a model where districts of different size provide local public goods with positive spillovers. Matching grants of a central government can induce so-cially-efficient provision, but districts can still exploit the intervening central government by induc-ing direct financing. We show that the ability and willingness of a district to induce a bailout and district size are negatively correlated. We also discuss the effect economies of scale in local public goods provision has on the bailout policies and argue that these policies can be subgame perfect equilibrium strategies.
    Keywords: bailouts, soft-budget constraints, district size, spillovers
    JEL: H4 H7 R1
    Date: 2008–04
  8. By: Tanya Araújo; Francisco Louçã
    Date: 2008–04
  9. By: Stefano Colombo (DISCE, Università Cattolica, Milan)
    Abstract: In the Hotelling framework, the equilibrium first-degree discriminatory prices are all lower than the equilibrium uniform price. When firms’ locations are fixed, price discrimination emerges as the unique equilibrium in a game in which every firm may commit not to discriminate before setting the price schedule. This paper assumes endogenous locations and shows that uniform pricing emerges as the unique equilibrium in a game in which every firm may commit not to discriminate before choosing where to locate in the market. Price discrimination still is the unique equilibrium outcome when firms may commit only after the location choice.
    Keywords: Price discrimination; Commitment; Location
    JEL: D43 L11
    Date: 2008–04
  10. By: Macasaquit, Mari-Len R.
    Abstract: <p>The economic reform process in the Philippines was accelerated in the 1980s and 1990s. The reforms were found to have yielded positive results in terms of the nature of industrial agglomeration in the country as this was found to have occurred in the 1990s based on the results of the survey and econometrics analyses. The latter also identified the factors that influenced firms to agglomerate in the country, referring to economic fundamentals and deliberate policy and public action by government.</p> <p>However, industrial upgrading and innovation in the country was found to be weak. Expenditures on R&D are low and linkages between stakeholders are not strong. There are firms that have undergone upgrading in terms of introduction of new goods, upgrading of machineries, and opening of new markets but they tended to rely more on their in-house capabilities probably due to inadequate support from the government’s institutional infrastructure and financial system, which came out from the estimation results. The agglomeration strategies that are currently being pursued in the Philippines--establishment of economic zones and industry clustering--have the potential to address some of the issues and problems identified.</p>
    Keywords: innovation, industrial agglomeration, industrial clusters, industrial upgrading, economic zones
    Date: 2008
  11. By: Christian Traxler (Max Planck Institute for Research on Collective Goods, Bonn); Andreas Reutter (University of Konstanz)
    Abstract: We study tax evasion and decentralized tax enforcement in a federal economy with mobile capital and the endogenous formation of multiregional companies. Regions use their enforcement policy as a strategic instrument to engage in fiscal competition. Within this framework, we analyze the uncoordinated policy choice under formula apportionment (FA) and compare it to the incentives which derive from fiscal equalization (FE). As both systems redistribute collected revenues but not enforcement costs, they distort the regions' incentives to enforce taxes. At the same time, jurisdictions partially internalize the fiscal externalities caused by their enforcement policy. We show that the tradeoff between these two opposing effects differs between FA and FE, and crucially depends on the degree of interregional firm integration under FA. We discuss conditions under which FA, FE or a joint system of FA cum FE provides the ‘best’ incentives for decentralized tax enforcement.
    Keywords: Tax Enforcement, Tax Evasion, Formula Apportionment, Fiscal Equalization, Tax Revenue Sharing
    JEL: H77 H71 H26
    Date: 2008–04

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