nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2008‒06‒07
twenty-two papers chosen by
Steve Ross
University of Connecticut

  1. How Differences in Property Taxes within Cities Affect Urban Sprawl? By Song, Yan; Zenou, Yves
  2. Commuting times: Is there any penalty for immigrants? By Blázquez Cuesta, Maite; Llano, Carlos; Moral Carcedo, Julian
  3. Determinants of House Prices in Central and Eastern Europe By Balazs Egert; Dubravko Mihaljek
  4. Who Gentrifies Low-Income Neighborhoods? By Terra McKinnish; Randall Walsh; Kirk White
  5. Crime and Ethnicity in London By Patacchini, Eleonora; Zenou, Yves
  6. The Narrowing Gap in New York City Teacher Qualifications and its Implications for Student Achievement in High-Poverty Schools By Donald Boyd; Hamilton Lankford; Susanna Loeb; Jonah Rockoff; James Wyckoff
  7. Agglomeration Economies and Clustering – Evidence from German Firms By Kurt A. Hafner
  8. Local Public Funding of Higher Education when Students and Skilled Workers are Mobile By Thomas Lange
  9. Does Your Cohort Matter? Measuring Peer Effects in College Achievement By Scott E. Carrell; Richard L. Fullerton; James E. West
  10. Are Shirking and Leisure Substitutable? An Empirical Test of Efficiency Wages based on Urban Economic Theory By Ross, Stephen L.; Zenou, Yves
  11. Publicly provided private goods: education and selective vouchers By Piolatto, Amedeo
  12. Firm Concentration,Technology Promotion and Economic Performance:An Empirical Study on the Nature and Dynamics of Industrial Clusters in China’s Development Zones along the Down Reaches of Yangtze River By ZHENG , Jianghuai; GAO, Yanyan; Hu, Xiaowen
  13. Taking the Easy Way Out: How the GED Testing Program Induces Students to Drop Out By James J. Heckman; Paul A. LaFontaine; Pedro L. Rodriguez
  14. Designing state aid formulas: the case of a new formula for distributing municipal aid in Massachusetts By Bo Zhao; Katharine Bradbury
  15. The Own and Social Effects of an Unexpected Income Shock: Evidence from the Dutch Postcode Lottery By Peter J. Kuhn; Peter Kooreman; Adriaan R. Soetevent; Arie Kapteyn
  16. Local Knowledge Spillovers, Innovation and Economic Performance in Developing Countries: A discussion of alternative specifications By Kesidou, Effie; Szirmai, Adam
  17. The Choice of Transport Mode: Evidence from Japanese Exports to East Asia By Hayakawa, Kazunobu
  18. Propriété immobilière et déqualification dans l’emploi By Carole Brunet; Nathalie Havet
  19. Doctors, Patients, and the Racial Mortality Gap: What Are the Causes? By Eric A. Verhoogen
  20. An Ontology-based Knowledge Management System for Industry Clusters By Pradorn Sureephong; Nopasit Chakpitak; Yacine Ouzrout; Abdelaziz Bouras
  21. The Impact of Childhood Health on Adult Labor Market Outcomes By James P Smith
  22. The Allocative Cost of Price Ceilings in the U.S. Residential Market for Natural Gas By Lucas W. Davis; Lutz Kilian

  1. By: Song, Yan; Zenou, Yves
    Abstract: This article attempts a formal analysis of the connection between the differentiated property tax rates within urban areas and urban spatial pattern in U.S. cities. We first develop a duocentric-city model where the Central Business District (CBD) is located at the origin while the Suburban Business District (SBD) is at the other end of the city. We show that the ratio between the property tax in the suburbs and in the center has an ambiguous impact on the size of the city. We then test this model empirically to determine this sign by using a dataset of effective property tax rates we developed using GIS techniques for central cities and suburbs in 445 urbanized areas. The empirical analysis estimates the link between these two variables by controlling for variables such as population, income, agricultural rent, commuting cost, climate, crime, and employment structure. Results from the empirical analyses suggest that a lower property tax rate in the suburbs in comparison to the central city is associated with more expansive urban growth and greater level of decentralization of population and employment.
    Keywords: Central city; Differentiated property tax; Suburbs; Urban decentralization; Urban sprawl
    JEL: H3 H71 R14
    Date: 2008–05
  2. By: Blázquez Cuesta, Maite (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.); Llano, Carlos (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.); Moral Carcedo, Julian (Departamento de Análisis Económico: Teoría e Historia Económica. Universidad Autónoma de Madrid)
    Abstract: Studying the relation between workers’ nationality and their commuting time has been of paramount importance in countries with high immigration rates and ethnical heterogeneity. Most of these studies focus on the spatial mismatch of racial minorities, and consider urban and social structures of the countries/cities where this segregation phenomenon may occur.Currently, immigration is one of the main challenges of the Spanish society. Foreign residents in Madrid region increased 639 % between 1996 and 2004. In this paper we explore the connection between commuting time, residential location and worker’s nationality using an ordered logit model. Our findings reveal that immigrants from ‘transition economies’ and ‘third world’ countries are significantly more likely to suffer higher commuting times compared to natives. These differences can be explained by both housing and labour market restrictions due to discrimination. This commuting penalty is in line with the spatial mismatch hypothesis and residential segregation.
    Keywords: Commuting flows; Immigration; Spatial mismatch; Labour mobility
    JEL: R15
    Date: 2008–05
  3. By: Balazs Egert; Dubravko Mihaljek
    Abstract: This paper studies the determinants of house prices in eight transition economies of central and eastern Europe (CEE) and 19 OECD countries. The main question addressed is whether the conventional fundamental determinants of house prices, such as GDP per capita, real interest rates, housing credit and demographic factors, have driven observed house prices in CEE. We show that house prices in CEE are determined to a large extent by the underlying conventional fundamentals and some transition-specific factors, in particular institutional development of housing markets and housing finance and quality effects.
    Keywords: house prices, housing market, transition economies, central and eastern Europe, OECD countries
    JEL: E20 E39 P25 R21 R31
    Date: 2007–10–01
  4. By: Terra McKinnish; Randall Walsh; Kirk White
    Abstract: This paper uses confidential Census data, specifically the 1990 and 2000 Census Long Form data, to study the demographic processes underlying the gentrification of low-income urban neighborhoods during the 1990's. In contrast to previous studies, the analysis is conducted at the more refined census-tract level with a narrower definition of gentrification and more closely matched comparison neighborhoods. The analysis is also richly disaggregated by demographic characteristic, uncovering differential patterns by race, education, age and family structure that would not have emerged in the more aggregate analysis in previous studies. The results provide no evidence of displacement of low-income non-white households in gentrifying neighborhoods. The bulk of the increase in average family income in gentrifying neighborhoods is attributed to black high school graduates and white college graduates. The disproportionate retention and income gains of the former and the disproportionate in-migration of the latter are distinguishing characteristics of gentrifying U.S. urban neighborhoods in the 1990's.
    JEL: J15 J60 R23
    Date: 2008–05
  5. By: Patacchini, Eleonora; Zenou, Yves
    Abstract: This paper studies the relationship between a community's ethnic population density and its crime rate. We compare the spatial distribution of crime and the black population across the 32 London boroughs. Once endogeneity and sorting issues are taken into account, we find that the higher is the density of the ethnic population in a given borough, the higher is the crime rate. This effect is still positive but lower for neighbouring boroughs and ceases to exist beyond a 40 minute driving distance. Social interactions between individuals of the same ethnic group are the most likely explanation for this positive relationship.
    Keywords: Crime; Ethnic minorities; Panel data; Social interactions; Spatial correlation
    JEL: C21 K42 R12
    Date: 2008–05
  6. By: Donald Boyd; Hamilton Lankford; Susanna Loeb; Jonah Rockoff; James Wyckoff
    Abstract: The gap between the qualifications of New York City teachers in high-poverty schools and low-poverty schools has narrowed substantially since 2000. Most of this gap-narrowing resulted from changes in the characteristics of newly hired teachers, and largely has been driven by the virtual elimination of newly hired uncertified teachers coupled with an influx of teachers with strong academic backgrounds in the Teaching Fellows program and Teach for America. The improvements in teacher qualifications, especially among the poorest schools, appear to have resulted in improved student achievement. By estimating the effect of teacher attributes using a value-added model, the analyses in this paper predict that observable qualifications of teachers resulted in average improved achievement for students in the poorest decile of schools of .03 standard deviations, about half the difference between being taught by a first year teacher and a more experienced teacher. If limited to teachers who are in the first or second year of teaching, where changes in qualifications are greatest, the gain equals two-thirds of the first-year experience effect.
    JEL: I21 J24 J45
    Date: 2008–05
  7. By: Kurt A. Hafner
    Abstract: The paper quantifies the impact of agglomeration economies on the clustering of German firms. Therefore, I use the 2006 Innobarometer survey, which focuses on cluster characteristics and activities of German firms, to empirically identify agglomeration economies derived from the New Economic Geography and Marshall externalities. At the industry specific level, I find that within-industry spillovers are important for German low-tech firms but not for high-tech firms or knowledge intensive firms. At the department level, Marshall externalities such as hiring skilled labor and technological spillover effects are empirically confirmed for some departments like Human Resources or R&D but rarely for others like Production.
    Keywords: Agglomeration Economies, New Economic Geography, Externalities, Cluster
    JEL: C20 D21 F12 R12
    Date: 2008–05–08
  8. By: Thomas Lange (University of Konstanz, ifo Institute for Economic Research Munich & University of Paderborn)
    Abstract: The interregional mobility of high skilled workers might induce an underinvestment in local public higher education when sub-federal entities independently decide on education expenditures to maximize local output. This well-known result is due to interregional spillovers and provides a justification for coordinated education policy or rather a federal intervention. However, things might change completely when taking into account the interregional mobility of students. Now, local education expenditures not only affect labor migration (through wage differentials) but also student migration flows. The model in this paper then shows that local output maximization does not necessarily imply underprovision of higher education, since regions now have an incentive to attract students as future human capital. The stay rates of graduates in equilibrium and the sensitivity of wages to migration are key determinants of local policy. Furthermore, results depend on local government objectives or rather the weighting of natives relative to foreigners. Therefore, the paper also considers natives’ preferred local policy.
    Keywords: higher education, student mobility, labor mobility, local public finance
    JEL: I22 J61 H77
    Date: 2008–05
  9. By: Scott E. Carrell; Richard L. Fullerton; James E. West
    Abstract: To estimate peer effects in college achievement we exploit a unique dataset in which individuals have been exogenously assigned to peer groups of about 30 students with whom they are required to spend the majority of their time interacting. This feature enables us to estimate peer effects that are more comparable to changing the entire cohort of peers. Using this broad peer group, we find academic peer effects of much larger magnitude than found in previous studies that have measured peer effects among roommates alone. We find the peer effects persist at a diminishing rate into the sophomore, junior, and senior years, indicating social network peer effects may have long lasting effects on academic achievement. Our findings also suggest that peer effects may be working through study partnerships versus operating through establishment of a social norm of effort.
    JEL: I20
    Date: 2008–05
  10. By: Ross, Stephen L.; Zenou, Yves
    Abstract: Recent theoretical work has examined the spatial distribution of unemployment using the efficiency wage model as the mechanism by which unemployment arises in the urban economy. This paper extends the standard efficiency wage model in order to allow for behavioural substitution between leisure time at home and effort at work. In equilibrium, residing at a location with a long commute affects the time available for leisure at home and therefore affects the trade-off between effort at work and risk of unemployment. This model implies an empirical relationship between expected commutes and labour market outcomes, which is tested using the Public Use Microdata sample of the 2000 U.S. Decennial Census. The empirical results suggest that efficiency wages operate primarily for blue collar workers, i.e. workers who tend to be in occupations that face higher levels of supervision. For this subset of workers, longer commutes imply higher levels of unemployment and higher wages, which are both consistent with shirking and leisure being substitutable.
    Keywords: Efficiency wage; Leisure; Urban unemployment
    JEL: J41 R14
    Date: 2008–05
  11. By: Piolatto, Amedeo
    Abstract: The literature on vouchers often concludes that a vouchers-based system cannot be the outcome of a majority vote. This paper shows that, when the value of vouchers and who is entitled to receive them are fixed exogenously, the majority of voters are in favour of selective vouchers. On top of that, as long as the introduction of vouchers does not undermine the existence of the public school system, introducing selective vouchers induces a Pareto improvement. Middle class agents are the only one using vouchers in equilibrium, while the poorest agents in the economy profit from the reduction in public school congestion.
    Keywords: public economics; education; vouchers; voting
    JEL: H42 I2 D70
    Date: 2008
  12. By: ZHENG , Jianghuai; GAO, Yanyan; Hu, Xiaowen
    Abstract: Based on micro-firm data of development zones in Jiangsu Province along the Yangtze River, the effects of local factors special to development zones and of technology promotion on firm’s performance are tested, from which we try to illustrate the nature and dynamics of industrial clusters built on development zones. The results show that the primary reasons firms locate into development zones are not clustering benefits in general meaning brought by interactions among firms locally concentrated, but are the attraction of “policy rents” and the scale economy of infrastructure brought by government behaviors. Once located in the zone, the firm is doom to interact with local government as well as industry-related factors, and the clustering effects may emerge. Thus, the key to keep development zones’ competition sustainable, when governments’ bidding wars and policy adjustment fade away “policy rents” and scale economy of infrastructure, is to cultivate clustering effects.
    Keywords: Development Zones along Yangtze River; Firms’ Spatial Concentration; Industrial Clustering Effects; Technology Promotion; Policy Rents
    JEL: R53 R58 R30 R50 O53
    Date: 2008–02
  13. By: James J. Heckman; Paul A. LaFontaine; Pedro L. Rodriguez
    Abstract: We exploit an exogenous increase in General Educational Development (GED) testing requirements to determine whether raising the difficulty of the test causes students to finish high school rather than drop out and GED certify. We find that a six point decrease in GED pass rates induces a 1.3 point decline in overall dropout rates. The effect size is also much larger for older students and minorities. Finally, a natural experiment based on the late introduction of the GED in California reveals, that adopting the program increased the dropout rate by 3 points more relative to other states during the mid-1970s.
    JEL: C61
    Date: 2008–05
  14. By: Bo Zhao; Katharine Bradbury
    Abstract: This paper designs a new equalization-aid formula based on fiscal gaps of local communities. Using conceptual analysis and simulations with Massachusetts data, the authors illustrate the tradeoffs that policymakers face in deciding on the policy variables in the formula and lay out several general guidelines for setting up these variables. When states are in transition to a new local aid formula, the issue of whether and how to hold existing aid harmless poses a challenge. The authors show that previous studies and the formulas derived from them give differential weights to existing and new aid in filling the gap and hence effectively treat communities receiving greater amounts of existing aid more favorably than communities receiving less or no existing aid. As a fairer alternative, the authors propose a new approach that considers existing and new aid within a consistent framework by taking account of both in filling the gap. In addition, unlike previous research that focuses only on a single year’s new aid distribution, the authors simulate the dynamics of aid distributions over multiple years and examine their evolution over time. The authors further provide and compare several possible solutions to addressing the possible tradeoffs between short-term and long-term goals. Although the proposed aid formula is designed for municipal aid and tailored to Massachusetts, the authors note that foundation aid formulas for education implicitly treat existing aid in the same way and suggest that the framework, principles, and policy recommendations might also be applicable to other states designing new municipal aid formulas. ; Also issued as New England Public Policy Center Working Paper, 08-2
    Keywords: Municipal finance - Massachusetts ; Municipal finance ; Local finance - Massachusetts ; Local finance
    Date: 2008
  15. By: Peter J. Kuhn; Peter Kooreman; Adriaan R. Soetevent; Arie Kapteyn
    Abstract: In the Dutch Postcode Lottery a postal code (19 households on average) is randomly selected weekly, and prizes - consisting of cash and a new BMW - are awarded to lottery participants living in that postal code. On average, this generates a temporary, unexpected income shock equal to about eight months of income for about one third of the households in a typical winning code, while leaving the incomes of nonwinning, neighboring households unaffected. We study the responses of consumption and reported happiness of both winners and nonwinners to these shocks. Consistent with simple models of in-kind transfers, the overwhelming majority of households who won a BMW convert it into cash. With the exception of food away from home, the only 'own' effects of cash winnings we detect are on durables expenditures and car consumption; these results support a version of the permanent income hypothesis in which durable spending is used to smooth consumption. We detect social effects of neighbors' winnings on two types of consumption: cars and exterior home renovations. Six months after the fact, winning the lottery does not make households happier, nor do neighbors' winnings reduce happiness.
    JEL: C21 D12
    Date: 2008–05
  16. By: Kesidou, Effie (Nottingham University Business School); Szirmai, Adam (UNU-MERIT)
    Abstract: This paper examines the importance of local knowledge spillovers for the innovative and economic performance of firms in a developing country context. Theoretical and empirical studies in advanced economies underline the significance of local knowledge spillovers for innovation. However, not much is known about whether local knowledge spillovers work similarly in developing countries. This analysis is based on an original innovation survey in the software industry in Uruguay. The survey focuses on the direct identification and measurement of local knowledge spillovers; pure knowledge spillovers are distinguished from commercial knowledge transactions. Both knowledge spillovers and knowledge transactions are measured at the local and at the international level. The study concludes that local knowledge spillovers play a crucial role in enhancing the innovative performance of software firms in Uruguay. However, for the economic performance of the firms, international knowledge transactions turn out to be more important than local knowledge spillovers. Local Knowledge Spillovers may be essential for innovation, but not sufficient for economic success. Firms in developing countries need to be connected to both the local and the international economy.
    Keywords: local knowledge spillovers, innovation, economic performance, developing economies
    JEL: L86 O31 O33
    Date: 2008
  17. By: Hayakawa, Kazunobu
    Abstract: This paper investigates Japanese trade by mode of transport, i.e., air transport versus maritime shipping. Some facts about Japanese machinery exports by mode of transport in the 1990s are examined first. Then it will be shown that products of the machinery sector where international fragmentation prevails are more likely to be exported by air.
    Keywords: Transport, Fragmentation, East Asia, Japan, Transportation, International trade, Exports
    JEL: F14 L91 N75
    Date: 2008–05
  18. By: Carole Brunet (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France); Nathalie Havet (GATE, University of Lyon, CNRS, ENS-LSH, Centre Léon Bérard, France)
    Abstract: Homeownership and job downgrading : our empirical study stems from previous research on the effects of residential status on microeconomic labour market outcomes. It focuses on employees and assesses the a priori ambiguous impact of homeownership on downgrading. We use the French data set of the 1995-2001 European Household Panel Survey to build a statistical measure of wage downgrading and a subjective measure of overeducation. We estimate a recursive bivariate probit that simultaneously models the residential status choice and its impact on the probability to be in a downgraded/overeducated job. Our results show that homeowners are, ceteris paribus, more wage downgraded and overeducated than renters. Consequently, homeownership could be a source of mismatch between workers and jobs on the labour market.
    Keywords: job matching, overeducation, residential status, wage downgrading
    JEL: C35 J4 R21
    Date: 2008
  19. By: Eric A. Verhoogen (Columbia University - Department of Economics)
    Abstract: Disparities in health outcomes between white and minority Americans are a significant and well documented challenge in improving equity in health care. Two frequently cited explanations are discrimination in treatment - doctors treating minority patients differently, and unequal access to care - patients being trapped in facilities of inferior quality. I use a new dataset from the Department of Veterans Affairs and employ a novel estimation strategy to investigate the sources of the racial gap in mortality for chronic heart disease, the most expensive chronic condition in the elderly. I find that racial differences in mortality persist even when the quality of clinics and doctors is controlled for. Investigating the doctor-patient interaction, I show that doctor quality significantly influences patient outcomes. While minority patients visit slightly less competent doctors, this does not explain the large gap in survival. Individual doctors are found to treat their patients similarly regardless of race. On the patient side, I demonstrate that variation in compliance triggers a racial mortality gap. Differences in patient response to treatment significantly alter survival probabilities. Considerable reductions in medical costs could be achieved by convincing patients of the importance of strictly following the therapy regimen. I estimate that targeting compliance patterns could reduce the black-white mortality gap by at least two-thirds.
    Date: 2008
  20. By: Pradorn Sureephong (LIESP - Laboratoire d'Informatique pour l'Entreprise et les Systèmes de Production - Université Claude Bernard - Lyon I - Université Lumière - Lyon II - Institut National des Sciences Appliquées de Lyon, CAMT - College of Arts, Media and Technology - Chiang Mai University); Nopasit Chakpitak (CAMT - College of Arts, Media and Technology - Chiang Mai University); Yacine Ouzrout (LIESP - Laboratoire d'Informatique pour l'Entreprise et les Systèmes de Production - Université Claude Bernard - Lyon I - Université Lumière - Lyon II - Institut National des Sciences Appliquées de Lyon); Abdelaziz Bouras (LIESP - Laboratoire d'Informatique pour l'Entreprise et les Systèmes de Production - Université Claude Bernard - Lyon I - Université Lumière - Lyon II - Institut National des Sciences Appliquées de Lyon)
    Abstract: Knowledge-based economy forces companies in the nation to group together as a cluster in order to maintain their competitiveness in the world market. The cluster development relies on two key success factors which are knowledge sharing and collaboration between the actors in the cluster. Thus, our study tries to propose knowledge management system to support knowledge management activities within the cluster. To achieve the objectives of this study, ontology takes a very important role in knowledge management process in various ways; such as building reusable and faster knowledge-bases, better way for representing the knowledge explicitly. However, creating and representing ontology create difficulties to organization due to the ambiguity and unstructured of source of knowledge. Therefore, the objectives of this paper are to propose the methodology to create and represent ontology for the organization development by using knowledge engineering approach. The handicraft cluster in Thailand is used as a case study to illustrate our proposed methodology.
    Keywords: Ontology, Knowledge Management System, Industry Clusters
    Date: 2007–08–07
  21. By: James P Smith (Visiting Professor of Economics, University College Dublin + The RAND Corporation)
    Abstract: This paper examines impacts of childhood health on SES outcomes observed during adulthood- levels and trajectories of education, family income, household wealth, individual earnings and labor supply. The analysis is conducted using data that collects these SES measures in a panel who were originally children and who are now well into their adult years. Since all siblings are in the panel, one can control for unmeasured family and neighborhood background effects. With the exception of education, poor childhood health has a quantitatively large effect on all these outcomes. Moreover, these estimated effects are larger when unobserved family effects are controlled.
    JEL: I10 J00
    Date: 2008–04–21
  22. By: Lucas W. Davis; Lutz Kilian
    Abstract: A direct consequence of imposing a ceiling on the price of a good for which secondary markets do not exist, is that, when there is excess demand, the good will not be allocated to the buyers who value it the most. The resulting allocative cost has been discussed in the literature as a potentially important component of the total welfare loss from price ceilings, but its practical importance has yet to be established empirically. In this paper, we address this question using data for the U.S. residential market for natural gas which was subject to price ceilings during 1954-1989. This market is well suited for such an empirical analysis and natural gas price ceilings affected millions of households. Using a household-level, discrete-continuous model of natural gas demand, we estimate that the allocative cost in the U.S. residential market for natural gas averaged $4.6 billion annually since the 1950s, effectively tripling previous estimates of the net welfare loss to U.S. consumers. We quantify the evolution of this allocative cost and its geographical distribution during the post-war period, and we highlight implications of our analysis for the regulation of other markets.
    JEL: D45 L51 L71 Q41 Q48
    Date: 2008–05

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