nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2008‒08‒21
23 papers chosen by
Steve Ross
University of Connecticut

  1. Harming the Best: How Schools Affect the Black-White Achievement Gap By Eric A. Hanushek; Steven G. Rivkin
  2. Testing urbanization economies in manufacturing industries: urban diversity or urban size? By Fu, Shihe; Hong, Junjie
  3. How Should Passenger Travel in Mexico City Be Priced? By Parry, Ian W.H.; Timilsina, Govinda R.
  4. Assessing the Economic Impact of Sports Facilities on Residential Property Values: A Spatial Hedonic Approach By Xia Feng; Brad R. Humphreys
  5. Income Tax Provisions Affecting Owner-Occupied Housing: Revenue Costs and Incentive Effects By James M. Poterba; Todd M. Sinai
  6. Residential Property Prices in a Sub-Market of South Africa: Separating Real Growth from Attribute Growth By Michael Els; Dieter von Fintel
  7. Trends in the Black-White Achievement Gap:Clarifying the Meaning of Within- and Between-School Achievement Gaps By Lindsay C. Page; Richard J. Murnane; John B. Willett
  8. Interaction between Housing Prices and Household Borrowing in Finland By Elias Oikarinen
  9. The Greenness of Cities: Carbon Dioxide Emissions and Urban Development By Edward L. Glaeser; Matthew E. Kahn
  10. Award-Winning Architecture and Urban Revitalization: The Case of “Olympic Arenas” in Berlin-Prenzlauer Berg By Gabriel Ahlfeldt; Wolfgang Maennig
  11. Owner-Occupied Housing Costs and Bias in the Irish Consumer Price Index By Colm McCarthy
  12. Externalities in the Classroom: How Children Exposed to Domestic Violence Affect Everyone's Kids By Scott E. Carrell; Mark L. Hoekstra
  13. Externalities in the Classroom: How Children Exposed to Domestic Violence Affect Everyone's Kids By Mark L. Hoekstra; Scott Carrell
  14. Technology's Edge: The Educational Benefits of Computer-Aided Instruction By Lisa Barrow; Lisa Markman; Cecilia E. Rouse
  15. O Programa Comunidade Escola e seus impactos sobre a violência entre Crianças e Jovens By Anna Karolina Selhorst Bezerra; Luciano Nakabashi
  16. The Effect of Classmate Characteristics on Individual Outcomes: Evidence from the Add Health By Robert Bifulco; Jason Fletcher; Stephen Ross
  17. Daily Monetary Policy Shocks and the Delayed Response of New Home Sales By James D. Hamilton
  18. Cost benefit-analysis of a transport improvement in the case of search unemployment By Pilegaard, Ninette; Fosgerau, Mogens
  19. Network Structure and Design in the Deregulated U.S. Airline Industry: an Argument for Re-Regulation? By Sayed Ajaz Hussain; Serkan Bahceci
  20. Hedonic demand for rented house in Kohima, Nagaland By Mishra, SK; Ngullie, ML
  21. Determinants of Residential Space Heating Expenditures in Great Britain By Helena Meier; Katrin Rehdanz
  22. Do Economists Reach a Conclusion on Subsidies for Sports Franchises, Stadiums, and Mega-Events? By Dennis Coates; Brad R. Humphreys
  23. Congestion costs in bottleneck equilibrium with stochastic capacity and demand By Fosgerau, Mogens

  1. By: Eric A. Hanushek; Steven G. Rivkin
    Abstract: Sizeable achievement differences by race appear in early grades, but substantial uncertainty exists about the impact of school quality on the black-white achievement gap and particularly about its evolution across different parts of the achievement distribution. Texas administrative data show that the overall growth in the achievement gap between third and eighth grade is higher for students with higher initial achievement and that specific teacher and peer characteristics including teacher experience and peer racial composition explain a substantial share of the widening. The adverse effect of attending school with a high black enrollment share appears to be an important contributor to the larger growth in the achievement differential in the upper part of the test score distribution. This evidence reaffirms the major role played by peers and school quality, but also presents a policy dilemma. Teacher labor market complications, current housing patterns, legal limits in segregation efforts, and uncertainty about the overall effects of specific desegregation programs indicate that effective policy responses will almost certainly involve a set of school improvements beyond simple changes in peer racial composition and the teacher experience distribution.
    JEL: H4 I2 I28 J18
    Date: 2008–08
  2. By: Fu, Shihe; Hong, Junjie
    Abstract: Whether urbanization economies are caused by urban diversity or urban scale is not clear in regional and urban economics literature. Many empirical studies have used either city population size or urban industrial diversity to measure urbanization economies and have reached different conclusions. This paper argues that city size mainly captures the pure scale economies of urban public goods, and may generate net diseconomies when a city size is too large. Urban industrial diversity can also enhance firm productivity. Using the 2004 China manufacturing census data, we test simultaneously the effects of urban size and industrial diversity on firm productivity, controlling for localization economies and human capital externalities. We found that city size effect does exist, but too large a city size indicates net diseconomies. Firms also benefit from industrial diversity, and the strength of such benefit increases with city size but decreases with firm size. The overall results support Jacobs's idea that small firms benefit more from urban diversity.
    Keywords: Urbanization economies; Industrial diversity; Jacobs externalities; City size
    JEL: R30 R12 L60
    Date: 2008–08
  3. By: Parry, Ian W.H. (Resources for the Future); Timilsina, Govinda R.
    Abstract: This paper uses an analytical-simulation model to examine the optimal extent and welfare effects of pricing reforms for passenger transportation in Mexico City. The model incorporates travel by auto, microbus, public bus, and rail, plus externalities from local and global air pollution, traffic congestion, and road accidents. In our benchmark case, the optimal gasoline tax is $2.72 (29.6 pesos) per gallon, or 16 times the current tax. However, a per-mile toll would reduce traffic congestion, the largest externality, more directly, and we put the optimized auto toll at 20.3 cents per mile. Tolls should also be imposed on microbuses even though the welfare gains are relatively modest, as are those from reforming public transit fares.
    Keywords: gasoline taxes, mileage tolls, transit subsidy, pollution, congestion, Mexico City, welfare effects
    JEL: R48 H21 H23
    Date: 2008–06–15
  4. By: Xia Feng (University of Illinois at Urbana-Champaign); Brad R. Humphreys (University of Alberta)
    Abstract: This paper estimates the intangible benefits of a two sports facilities in Columbus, Ohio on residential property values. We estimate a spatial hedonic model that avoids biased and inconsistent estimates in the presence of uncorrected spatial autocorrelation. The results suggest that the presence of sports facilities in Columbus have a significant positive distance-decaying effect on surrounding house values, supporting the idea that professional sports facilities generate important intangible benefits in the local economy. OLS overestimates the hedonic model parameters compared with Maximum Likelihood and Spatial Two Stage-Least-Squares.
    Keywords: Economic Impact, Residential Property Values, Sports Facilities, Hedonic Model, Spatial Dependence, Spatial Hedonic Model
    JEL: I18 L83
    Date: 2008–08
  5. By: James M. Poterba; Todd M. Sinai
    Abstract: The mortgage interest deduction, the property tax deduction, the unique treatment of capital gains on owner-occupied homes, and the absence of taxation on imputed rent from owner-occupied homes all influence the effective cost of housing services. They also affect federal income tax revenues and the distribution of income tax liabilities. We draw on household-level data from the 2004 Survey of Consumer Finances to analyze how several potential reforms would affect incentives for housing consumption as well as the distribution of income tax burdens. Our analysis recognizes that changing the mortgage interest deduction would induce changes in household financial behavior. We estimate that repealing the mortgage interest deduction in 2003 would have raised income tax revenues by $72.4 billion in the absence of any portfolio adjustments, but by only $61.9 billion if homeowners responded by drawing down a limited set of financial assets to partially replace their mortgage debt. The revenue effects of changing the property tax deduction similarly depend on how state and local governments alter their mix of revenue instruments in response to federal tax reform. Our results underscore the importance of recognizing behavioral responses when calculating the revenue costs of income tax provisions relating to owner-occupied housing.
    JEL: H2 H24 H71 R21
    Date: 2008–08
  6. By: Michael Els (Department of Economics, University of Stellenbosch and Duke University); Dieter von Fintel (Department of Economics, University of Stellenbosch)
    Abstract: This paper analyses the South African residential housing market using hedonic price theory. It builds and tests pooled OLS, fixed effects OLS, pseudo-panel and quantile regression models. The main findings are in agreement with most modern related literature. This paper highlights how house price growth rates have been calculated incorrectly due to the changing aggregate house sold every year. It calculates more accurate growth rates for the property market, yielding surprisingly different growth patterns from those originally thought. It illustrates that much of the recent house price growth was caused by attribute inflation rather than pure price inflation. It also shows that most of the pure inflation occurred at the bottom end of the market while most of the attribute inflation occurred at the top end of the market. Furthermore, it shows that house price determinants change across the house price distribution The data used was sourced from the Residential Property Price Ranger and covers 1930 house sales measured half yearly over three years; from 1 September 2004 to 31 August 2007. These sales were recorded in the towns of Stellenbosch, Somerset West, Strand and Gordon’s Bay.
    Keywords: Hedonic pricing, Housing market, Growth rates
    JEL: C21 C23 R31
    Date: 2008
  7. By: Lindsay C. Page; Richard J. Murnane; John B. Willett
    Abstract: We decompose black-white achievement gap trends between 1971 and 2004 into trends in within- and between-school differences. We show that the previous finding that narrowing within-school inequality explains most of the decline in the black-white achievement gap between 1971 and 1988 is sensitive to methodology. Employing a more detailed partition of achievement differences, we estimate that 40 percent of the narrowing of the gap through the 1970s and 1980s is attributable to the narrowing of within-school differences between black and white students. Further, the consequences for achievement of attending a high minority school became increasingly deleterious between 1971 and 1999.
    JEL: I2 I21
    Date: 2008–08
  8. By: Elias Oikarinen
    Abstract: ABSTRACT : Housing prices and household borrowing are expected to be tightly connected to each other. Better availability of credit eases liquidity constraints of households, which is likely to lead to higher demand for housing. On the other hand, housing prices may significantly influence household borrowing through various wealth effects. Employing time series econometrics this study shows that since the financial liberalization in the late 1980s there has been a significant two-way interaction between housing prices and housing loan stock in Finland. Before the financial deregulation the interaction was substantially weaker. Furthermore, housing appreciation has a notable positive impact on the amount of consumption loans withdrawn by households. It appears that there is no similar relationship between stock price movements and household borrowing. Understanding the two-way interaction between housing prices and credit is of importance, since the interdependence is likely to augment boom-bust cycles in the economy and increase the fragility of the financial sector.
    Keywords: lending, borrowing, housing, stocks, dynamics
    JEL: E41 E51 R21
    Date: 2008–08–13
  9. By: Edward L. Glaeser; Matthew E. Kahn
    Abstract: Carbon dioxide emissions may create significant social harm because of global warming, yet American urban development tends to be in low density areas with very hot summers. In this paper, we attempt to quantify the carbon dioxide emissions associated with new construction in different locations across the country. We look at emissions from driving, public transit, home heating, and household electricity usage. We find that the lowest emissions areas are generally in California and that the highest emissions areas are in Texas and Oklahoma. There is a strong negative association between emissions and land use regulations. By restricting new development, the cleanest areas of the country would seem to be pushing new development towards places with higher emissions. Cities generally have significantly lower emissions than suburban areas, and the city-suburb gap is particularly large in older areas, like New York.
    JEL: Q5
    Date: 2008–08
  10. By: Gabriel Ahlfeldt (University of Hamburg); Wolfgang Maennig (University of Hamburg)
    Abstract: This paper investigates socioeconomic impacts of three multifunctional sports arenas situated in Berlin-Prenzlauer Berg, Germany. The three arenas are chosen with respect to their potential to contribute to a process of revitalization of their economically deprived neighbourhood. Impact is assessed by conducting hedonic analyses of standard land values under consideration of spatial spill-over effects. To confirm results and to provide a more comprehensive interpretation we employ a differences-in-differences approach to check for structural breaks in development of rents and selected socioeconomic variables within determined areas of potential impact. Our results suggest that arenas emanate positive externalities and apparently have accelerated the process of gentrification going on in Prenzlauer Berg. However, evidence also supports neighbourhood activists´ concerns that congestion problems may adversely affect property values, at least when not addressed appropriately during the period of planning.
    Keywords: Stadium Impact, Stadium Architecture, Gentrification, Hedonic Regression, Spatial Autocorrelation
    JEL: R31 R53 R58 L83
    Date: 2008–08
  11. By: Colm McCarthy (University College of Dublin)
    Abstract: The treatment of owner-occupied housing costs is a recurring problem in the construction of consumer price indices, and there are competing methodologies. In the most widely-used Irish index, the Payments Approach, which attaches a weight to a term involving historical house prices and an interest rate, is used to measure these costs. It is argued that this has resulted in a substantial over-statement of inflation in recent quarters, and that the over-statement will continue for some time. The Irish version of Eurostat’s Harmonised Index of Consumer Prices, recently running well below the CPI, is a more reliable guide. Few national statistical offices use the Payments Approach, and it is argued that the procedure used in Ireland should be reviewed.
    Keywords: Consumer Price Index; Cost of Living Index; Payments Approach; Owner-Occupied Housing
    JEL: C43 C82 D12 E31
    Date: 2007–06–20
  12. By: Scott E. Carrell; Mark L. Hoekstra
    Abstract: It is estimated that between ten and twenty percent of children in the United States are exposed to domestic violence annually. While much is known about the impact of domestic violence and other family problems on children within the home, little is known regarding the extent to which these problems spill over to children outside the family. The widespread perception among parents and school officials is that these externalities are significant, though measuring them is difficult due to data and methodological limitations. We estimate the negative spillovers caused by children from troubled families by exploiting a unique data set in which children's school records are matched to domestic violence cases filed by their parent. To overcome selection bias, we identify the effects using the idiosyncratic variation in peers from troubled families within the same school and grade over time. We find that children from troubled families significantly decrease their peers' reading and math test scores and significantly increase misbehavior of others in the classroom. The effects are heterogeneous across income, race, and gender and appear to work primarily through troubled boys. The results are robust to within-sibling differences and we find no evidence that non-random selection is driving the results.
    JEL: I2 J24
    Date: 2008–08
  13. By: Mark L. Hoekstra; Scott Carrell
    Abstract: It is estimated that between ten and twenty percent of children in the United States are exposed to domestic violence annually. While much is known about the impact of domestic violence and other family problems on children within the home, little is known regarding the extent to which these problems spill over to other children. The widespread perception among parents and school officials is that these externalities are significant, though measuring them is difficult due to data and methodological limitations. We estimate the negative spillovers caused by children from troubled families by exploiting a unique data set in which children’s school records are matched to domestic violence cases filed by their parent. To overcome selection bias, we identify the effects using the idiosyncratic variation in peers from troubled families within the same school and grade over time. We find that children from troubled families significantly decrease their peers’ reading and math test scores and significantly increase misbehavior by others in the classroom. The effects are heterogeneous across income, race, and gender and appear to work primarily through troubled boys. The results are robust to within sibling differences and we find no evidence that non-random selection is driving the results. The presence of these externalities suggests that to the extent that education policy increases a group’s exposure to children from troubled families, student performance will be affected in a negative way. Furthermore, the results are also relevant for social policy in that they provide for a more complete accounting of the social costs of family conflict.
    JEL: J12 D62 I21
    Date: 2008–04
  14. By: Lisa Barrow; Lisa Markman; Cecilia E. Rouse
    Abstract: We present results from a randomized study of a well-defined use of computers in schools: a popular instructional computer program for pre-algebra and algebra. We assess the program using a test designed to target pre-algebra and algebra skills. Students randomly assigned to computer-aided instruction score 0.17 of a standard deviation higher on pre-algebra/algebra tests than students randomly assigned to traditional instruction. We hypothesize that the effectiveness arises from increased individualized instruction as the effects appear larger for students in larger classes and in classes with high student absentee rates.
    JEL: I2 J0
    Date: 2008–08
  15. By: Anna Karolina Selhorst Bezerra; Luciano Nakabashi (Department of Economics, Universidade Federal do Paraná)
    Abstract: The present study’s objective is to analyze the violence reduction impacts of the Program Community School (Programa Comunidade Escola) on the participant and not participant schools and on their respective communities. First of all, a classification of different forms of violence is carried out. Additionally, there is a discussion about the violence causes on the basis of different theories. Subsequently, it is presented a relation between violence and school based on an exposition of different forms of violence into the school environment. Finally, the empirical analysis is carried out by means of data collect from questionnaires application. The results indicate that the Program Community School has a relevant impact on violence reduction.
    Keywords: Program Community School; Violence; Education
    Date: 2008
  16. By: Robert Bifulco (Syracuse University); Jason Fletcher (Yale University); Stephen Ross (University of Connecticut)
    Abstract: We use data from the National Longitudinal Study of Adolescent Health (Add Health) to examine the effects of classmate characteristics on economic and social outcomes of students. The unique structure of the Add Health allows us to estimate these effects using comparisons across cohorts within schools, and to examine a wider range of outcomes than other studies that have used this identification strategy. We find that increases in the percent of classmates whose mother is college educated has significant, desirable effects on educational attainment and substance use. We do not find much evidence that the percent of classmates who are black or Hispanic has negative effects on individual outcomes, on average, but increases in the percent black or Hispanic does increase drop out rates among black students.
    Keywords: Education, Peer Effects, Cohort Study, Substance Abuse
    JEL: I21 I19 J13 J15
    Date: 2008–08
  17. By: James D. Hamilton
    Abstract: This paper offers an explication of the hump-shaped response of real economic activity to changes in monetary policy, focusing on the particular channel operating through new home sales. I suggest that the conventional notion of a monetary policy shock as a surprise change in the fed funds rate is misspecified. The primary news for market participants is not what the Fed just did, but is instead new information about what the Fed is going to do in the near future. Revisions in these anticipations show up instantaneously in long-term mortgage rates. Although mortgage rates respond well before the Fed actually changes its target rate, home sales do not respond until much later. The paper attributes this delay to cross-sectional heterogeneity in search times. This framework offers a description of the lags in the effects of monetary policy that is both more detailed, allowing us in principle to measure the consequences at the daily frequency, and more believable than traditional measures.
    JEL: E44 E52
    Date: 2008–08
  18. By: Pilegaard, Ninette; Fosgerau, Mogens
    Abstract: We examine the implications of search unemployment for the evaluation of a transport in-vestment in a conventional cost benefit analysis (CBA) assuming perfect competition. Lower transport costs induces search over a larger area and longer commuting distances. The ex-pected duration of vacancies is reduced with ensuing benefits outweighing the loss to in-creased transport. The search imperfection drives a wedge between the marginal product of labour and the wage, such that the final benefits of a transport improvement exceed those of a conventional CBA. Using a simulation model we find these additional benefits may be sub-stantial.
    Keywords: Cost-benefit; transport; search unemployment; welfare
    JEL: R42
    Date: 2008
  19. By: Sayed Ajaz Hussain; Serkan Bahceci
    Abstract: This paper develops a model to explain and analyze the evolution of network structure (connectivity)and design (flight frequency, aircraft size, prices) in the post-deregulation U.S. airline industry. We show that legacy carriers choice of Hub-and-Spoke networks and the emergence of low cost carriers (LCCs) operating Point-to-Point networks were optimal choices. We demonstrate that LCCs need not necessarily charge lower prices, and their entry impacted legacy carriers’ prices in all markets, even those where there is no direct competition. We show that in response to entry, legacy carriers optimally lower flight frequency, leading to longer wait times between flights for which passengers are compensated by lower prices; conversely, if the entrant later exits, legacy carriers raise flight frequency and therefore prices, which may erroneously appear to be predatory pricing when in fact it is the consequence of optimal network redesign. Finally, we demonstrate that even though low cost carriers lower prices, total social welfare with competing network structures can also be lowered. In other words, the poor financial performance of legacy carriers is not due to their inefficiency per se but due to an efficient Hub-and-Spoke network undermined by competition from inefficient Point-to-Point networks. We argue that social welfare may have been, and still can be, higher if entry and exit in air passenger travel industry is regulated.
    Keywords: Networks, Airlines, Regulation
    JEL: L4 L5 L9 C6 M2
    Date: 2008–08–08
  20. By: Mishra, SK; Ngullie, ML
    Abstract: Kelvin Lancaster considered a commodity as a bundle of characteristics or a bunch of vectors. The demand for a commodity is therefore a demand for its characteristics. Those characteristics may include time (whether a commodity is old or new), place (its location), positional value (whether it is owned or used by many or only a few), brand name (whether produced by this or that manufacturer), and so on. This view of considering a commodity as a bundle of characteristics opens an immensely wide scope for properly dealing with the demand for a commodity not only as a substitute of but also as a complement to other commodity or commodities. In this paper we have shown how the demand for a multi-characteristics commodity such as house can be estimated by a method suggested by Heinrich von Stackelberg that transforms the measures of various characteristics into polar coordinates, and how this method may be useful in identifying the complementary and substitutive characteristics of the commodity concerned. We have not gone in for identification of the demand equation. We apply this method on the primary data collected from 109 households inhabiting Kohima, the capital city of Nagaland (India). An analysis of the data suggests that consumers of rented house consider floor area, water supply and power supply complementary to each other and other characteristics of house as substitutes of the floor area. It has also been found that in Kohima a rented house is possibly an inferior commodity and its income elasticity for the overall sample is negative, although statistically insignificant.
    Keywords: Hedonic demand; Kelvin Lancaster; Heinrich von Stackelberg; Characteristics; polar coordinates; direction vectors; rent; demand for house; income; family size; primary data; household; Kohima; Nagaland; India
    JEL: C13 D12 P25 R21
    Date: 2008–08–17
  21. By: Helena Meier; Katrin Rehdanz (Institute for World Economics)
    Abstract: In Great Britain several policy measures have been implemented in order to increase energy efficiency and to reduce carbon emissions. In the domestic sector, these targets can be achieved by improving space heating efficiency and, hence, decrease heating expenditures. However, before implementing policy measures it is necessary to better understand determinants of heating expenditures. In this paper, we examine determinants of heating expenditures which include socio-economic and building characteristics as well as heating technologies and meteorological observations. In contrast to most other studies, we use Panel data for investigating household’s demand for heating in Great Britain. Our analysis covers 15 years, starting in 1991, and more than 5,000 households that have been re-interviewed annually; altogether our sample covers more than 64,000 households. Our empirical findings suggest that in Great Britain owners generally have higher heating expenditures than renters. These differences in expenditures can be explained by building characteristics. Renters mainly live in flats and most of the owners live in detached/semi-detached houses. Generally, flats are more energy efficient than houses. Our results also imply that a number of socio-economic criteria have a significant influence on heating expenditures, independent from the central heating fuel type. Policy measures should not only focus on insulation standards but also on different household types. Especially elderly people and households with children should be target groups.
    Keywords: Great Britain, Space Heating, Income elasticity, Price Elasticity
    JEL: Q54
    Date: 2008–07
  22. By: Dennis Coates (Department of Economics, University of Maryland, Baltimore County); Brad R. Humphreys (Department of Economics, University of Alberta)
    Abstract: This paper reviews the empirical literature assessing the effects of subsidies for professional sports franchises and facilities. The evidence reveals a great deal of consistency among economists doing research in this area. That evidence is that sports subsidies cannot be justified on the grounds of local economic development, income growth or job creation, those arguments most frequently used by subsidy advocates. The paper also relates survey evidence showing that economists in general oppose sports subsidies. In addition to reviewing the empirical literature, we describe the economic intuition that probably underlies the strong consensus among economists against sports subsidies.
    Keywords: sports, subsidies, stadiums, arenas
    JEL: L83 H2 H4
    Date: 2008–08
  23. By: Fosgerau, Mogens
    Abstract: I analyse congestion costs in the Vickrey bottleneck model of a congestible facility with a peak load in demand. The shape of the peak is endogenous, being the sum of individual scheduling decisions. Capacity and demand are random, which introduces uncertainty into the individual scheduling choices. These are essential features of actual peak loads. Based on work by Arnott, de Palma and Lindsey, I derive the expected marginal and total congestion costs and compare to the case with fixed capacity and demand. Using stylised values for scheduling costs relative to the value of time, I find that randomness of capacity and demand increases congestions cost by up to 50 percent relative to the deterministic case. The bound is general for any distribution of random capacity and demand.
    Keywords: Bottleneck model; Scheduling; Reliability; Congestion
    JEL: R40
    Date: 2008

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