|
on Urban and Real Estate Economics |
| By: | Ashot Tsharakyan |
| Abstract: | This paper explores the link between mortgage origination fees and housing prices. It is argued that sharp decline in mortgage origination fees in US since the late 1980s was caused by mortgage market deregulation and mortgage innovation. Based on this reasoning the sources of exogenous variation in mortgage fees are identified, and the effect of mortgage fees on housing prices is quantified. The results indicate that decline in mortgage fees had robust statistically significant positive effect on housing prices. The lagged effect of mortgage fees on housing prices is also present. |
| Keywords: | Mortgage origination fees, housing price, branching restrictions , mortgage market deregulation. |
| JEL: | R21 R31 C33 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp357&r=ure |
| By: | Diego Puga (IMDEA) |
| Abstract: | This paper deals with the effects of crossborder transport infrastructure in the presence of agglomeration economies. Crossborder infrastructure is more likely to increase than to decrease inequalities between and within regions, and has not helped regional convergence in Europe. Underinvestment due to spillovers, coordination failures, and the inadequacy of networks originally designed for national markets provide a role for supranational institutions. Hubandspoke networks tend to increase urban primacy while crossborder transport connections tend to reduce it. Improvements in transport and communication allow firms to separate innovation, management and production, increasing efficiency and urban interdependence. |
| Keywords: | transport; crossborder infrastructure; agglomeration; urban specialization |
| JEL: | R40 R12 |
| Date: | 2008–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:imd:wpaper:wp2008-06&r=ure |
| By: | David C. Maré (Motu Economic and Public Policy Research) |
| Abstract: | This paper examines labour productivity in Auckland, New Zealand's largest city, using microdata from Statistics New Zealand's Prototype Longitudinal Business Database. It documents a sizeable productivity premium in Auckland, around half of which is due to industry composition. There is a cross sectional correlation between productivity and employment density, reflecting differences in both physical productivity and prices. This correlation is evident both within Auckland, and comparing Auckland with other areas. The relationship between changes in density and changes in productivity is less strong. The relationship between productivity and overall or own-industry employment density varies across industries, suggesting that the nature and extent of agglomeration benefits varies. Overall, localisation effects appear stronger than urbanisation, with productivity being more strongly related to own-industry density than to overall density. |
| Keywords: | Labour productivity, Urban premium, Agglomeration |
| JEL: | L25 R12 R3 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:mtu:wpaper:08_12&r=ure |
| By: | Lee Mobley (RTI International); Ted Frech (University of California, Santa Barbara); Luc Anselin (Arizona State University) |
| Abstract: | The hospital competition literature demonstrates that estimates of the effect of local market structure on competition are sensitive to geographic market definition. Our spatial lag approach effects smoothing of the explanatory variables across the discrete market boundaries. This approach results in robust estimates of the impact of market structure on hospital pricing, which can be used to estimate the full effect of changes in prices inclusive of spillovers that cascade through the neighboring hospital markets. In markets where concentration is relatively high before a proposed merger, we demonstrate that OLS estimates can lead to the wrong antitrust policy conclusion while the more conservative lag estimates do not. |
| Keywords: | spatial econometrics, spatial lag model, spatial multiplier, spatial spillovers, hospital antitrust, hospital competition, strategic pricing, Nash bargaining, |
| Date: | 2008–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsbec:07-08&r=ure |
| By: | Francisco Gallego (Instituto de Economía. Pontificia Universidad Católica de Chile.); Andrés E. Hernando. |
| Abstract: | This paper studies the implications of school choice in the context of the Chilean quasivoucher system. We use information of school choices of about 80,000 students that lived in the Metropolitan Area of Santiago in Chile in 2002 and the results of the discrete choice model estimated in Gallego and Hernando (2008) to perform a number of exercises aimed at quantifying what we call the “value of choice” (i.e. how much do households gain from a school choice system?) against a number of counterfactuals that restrict school choice in several dimensions (geographic choice, the existence of top ups, and the supply of voucher schools). We also (i) analyze the effects on socioeconomic segregation of students and (ii) study the potential effects of introducing a non-flat voucher that is decreasing in students’ SES. Our results suggest that overall, school choice seems to be valuable to households, but there is a lot of heterogeneity in its value. In some simulations, school choice is regressive (as when lotteries are used to allocate students to current schools; or when we consider the effects of the increase in the supply of voucher schools) and in other progressive (when students are allowed to choose outside the county in which they live). Interestingly, policies that restrict the use of top ups to the voucher do not seem to reduce segregation in a significant way. This contrasts with the introduction of a differentiated voucher, which would mostly benefit the poor and even compensate them for loses from some dimensions of school choice observed in particular groups. |
| Keywords: | School choice, Chile, Vouchers, Segregation, Structural estimates, Parents preferences |
| JEL: | I20 I21 I22 I28 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:343&r=ure |
| By: | Bruce Sacerdote |
| Abstract: | I examine academic performance and college going for public school students affected by Hurricanes Katrina and Rita. Students who are forced to switch schools due to the hurricanes experience sharp declines in test scores in the first year following the hurricane. However, by the second and third years after the disaster, Katrina evacuees displaced from Orleans Parish appear to benefit from the displacement, experiencing a .15 standard deviation improvement in scores. The test score gains are concentrated among students whose initial schools were in the lowest quintile of the test score distribution and among students who leave the New Orleans MSA. Katrina evacuees from suburban areas and Rita evacuees (from the Lake Charles area) eventually recover most of the ground lost during 05-06 but do not experience long term gains relative to their pre-Katrina test scores. High school age Orleans evacuees have higher college enrollment rates than their predecessors from the same high schools. Meanwhile, Katrina evacuees from the suburbs experience a 3.5 percentage point drop in their rate of enrollment in four year colleges. Those evacuees do not to make up for the decline in the subsequent two years. Later cohorts of suburban New Orleans evacuees are unaffected. The results suggest that for students in the lowest performing schools, the long term gains to achievement from switching schools can more than offset even substantial costs of disruption. |
| JEL: | I2 J01 J24 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14385&r=ure |
| By: | Pfluger, Michael (Faculty of Economics, University of Passau, DIW Berlin and IZA); Takatoshi Tabuchi (Faculty of Economics, University of Tokyo) |
| Abstract: | This paper is motivated by the fact that, contrary to its importance in practice, the role of land for production has received no attention in the new trade theory and the new economic geography. We set up a simple monopolistic competition model and we show that, due to the factor proportions effect which emerges when land is used as a productive factor besides labor, a number of tenets of the new trade and geography literature no longer hold. We also show that in order to explain the stylised facts, notably that wages are higher in larger locations, land-use for production and housing has to be taken into account. Our analysis furthermore implies that market-size based agglomeration forces are too weak to overcome the very strong congestion force associated with competition for land, unless the consumers desire of variety (as expressed by a low elasticity of substitution) is very strong. This suggests that further agglomeration forces have to be invoked to explain the agglomeration of economic activity observed in the real world. |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2008cf591&r=ure |
| By: | Angana Banerji; Haiyan Shi; Paul Louis Ceriel Hilbers; Alexander W. Hoffmaister |
| Abstract: | House prices in Europe have shown diverging trends, and this paper seeks to explain these differences by analyzing three groups of countries: the "fast lane", the average performers, and the slow movers. Price movements in the first two groups are found to be driven mostly by income and trends in user costs, and housing markets in these countries seem relatively more susceptible to adverse developments in fundamentals. Real house price declines among the slow movers are harder to explain, although ample supply, low home ownership, and less complete mortgage markets are likely factors. The impact of macroeconomic, prudential and structural policies on housing markets can be large and should be a factor in policy decisions. |
| Keywords: | Housing prices , Europe , Economic indicators , Taxation , Interest rates , Monetary policy , Fiscal policy , Population , Demand , Supply , Economic models , Working Paper , |
| Date: | 2008–09–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:08/211&r=ure |
| By: | Anna Piil Damm; Marie Louise Schultz-Nielsen (Department of Economics, Aarhus School of Business, University of Aarhus; The Rockwool Foundation Research Unit) |
| Abstract: | In this paper we propose a model for constructing neighbourhoods based on georeferenced data and administrative data. The 431,233 inhabited hectare cells in Denmark are clustered into 9,404 small and 2,296 large neighbourhoods, inhabited on average in 2004 by 572 and 2,343 persons respectively. The priorities in the clustering process are to obtain neighbourhoods that are unaltered over time, delineated by physical barriers, compact, homogeneous in terms of type of housing and ownership, relatively small, homogeneous in terms of number of inhabitants,and comprised of a contiguous cluster of cells. To illustrate the importance of detailed neighbourhood information we compare social and ethnic segregation measured by Isolation and Dissimilation indices on the levels of municipalities and of small neighbourhoods. Our findings demonstrate substantial variation in the residential mix in neighbourhoods within a given municipality, and thus show the importance of having information on a more detailed geographical level than that of the municipality. |
| Keywords: | I3, J61, R2 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:0810&r=ure |
| By: | Jacques MAIRESSE (CREST-ENSAE, UNU-MERIT & NBER); Benoît MULKAY (LEREPS-GRES) |
| Abstract: | This paper is an attempt to assess the existence and magnitude of local research spillovers in France. We rely on the model of an extended production function (Cobb-Douglas and Translog) with both local and neighborhood R&D capital stocks. We estimate this model on 312 employment areas as of 1999, first for the whole economy, then separately for five large manufacturing industries. We find estimates of R&D capital elasticities with respect to productivity which are significant and plausible both within own-area and across neighboring areas, as well as within own-industry but not across different industries. |
| Keywords: | Productivity, R&D, Local R&D Spillovers, Spatial Econometrics |
| JEL: | O30 O32 O47 C21 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:grs:wpegrs:2008-15&r=ure |
| By: | Edward L. Glaeser; Joshua D. Gottlieb |
| Abstract: | Should the national government undertake policies aimed at strengthening the economies of particular localities or regions? Agglomeration economies and human capital spillovers suggest that such policies could enhance welfare. However, the mere existence of agglomeration externalities does not indicate which places should be subsidized. Without a better understanding of nonlinearities in these externalities, any government spatial policy is as likely to reduce as to increase welfare. Transportation spending has historically done much to make or break particular places, but current transportation spending subsidizes low-income, low-density places where agglomeration effects are likely to be weakest. Most large-scale place-oriented policies have had little discernable impact. Some targeted policies such as Empowerment Zones seem to have an effect but are expensive relative to their achievements. The greatest promise for a national place-based policy lies in impeding the tendency of highly productive areas to restrict their own growth through restrictions on land use. |
| JEL: | D0 H0 R0 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14373&r=ure |
| By: | Rafael Boix Domenech (Departament d'Economia Aplicada, Universitat Autonoma de) |
| Abstract: | The I-district effect hypothesis establishes the existence of highly intense innovation in Marshallian industrial districts due to the presence of external localization economies. However, industrial districts are characterized by specific manufacturing specializations in such a way that this effect could be due to these dominant specializations. The objective of this research is to test whether the effect is explained by the conditions of the territory or by the industrial specialization and to provide additional evidence of the existence and causes of the highly intense innovation in industrial districts (I-district effect). The estimates for Spain of a fixed effects model interacting territory and industry suggest that the high innovative performance of industrial districts is maintained across sectors whereas the industrial specialization behaves differently depending on the type of local production system in which it is placed. The I-district effect is related to the conditions of the territory more than to the industrial specialization. The territory is a key variable in explaining the processes of innovation and should be considered a basic dimension in the design of innovation and industrial policies. |
| Keywords: | industrial districts, innovation, external economies, district effect |
| JEL: | O14 O31 R12 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:uab:wprdea:wpdea0807&r=ure |
| By: | Gwinner, William B.; Sanders, Anthony |
| Abstract: | This paper discusses some of the key characteristics of the U.S. subprime mortgage boom and bust, contrasts them with characteristics of emerging mortgage markets, and makes recommendations for emerging market policy makers. The crisis has raised questions in the minds of many as to the wisdom of extending mortgage lending to low and moderate income households. It is important to note, however, that prior to the growth of subprime lending in the 1990s, U.S. mortgage markets already reached low and moderate-income households without taking large risks or suffering large losses. In contrast, in most emerging markets, mortgage finance is a luxury good, restricted to upper income households. As policy makers in emerging market seek to move lenders down market, they should adopt policies that include a variety of financing methods and should allow for rental or purchase as a function of the financial capacity of the household. Securitization remains a useful tool when developed in the context of well-aligned incentives and oversight. It is possible to extend mortgage lending down market without repeating the mistakes of the subprime boom and bust. |
| Keywords: | Debt Markets,,Access to Finance,Bankruptcy and Resolution of Financial Distress,Emerging Markets |
| Date: | 2008–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4726&r=ure |
| By: | ANDERSSON Henrik; JONSSON Lina; OGREN Mikael |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:ler:wpaper:08.25.269&r=ure |
| By: | Edward Calthrop; Bruno De Borger; Stef Proost |
| Abstract: | This paper deals with costs-benefit analysis of investment in transport infrastructure. Its contribution is twofold. Firstly, we develop a general equilibrium model to explore the impact of a small budgetary-neutral investment in transport infrastructure in a second-best setting, where other markets in the economy are distorted by taxes or external costs. The model incorporates different transport modes that are used both for intermediate inputs (freight) and for final consumption (passenger travel). An intuitive operational expression for the net economic benefit of an investment is derived that depends on the way the investment is financed. This expression generalizes recent findings in the literature. Secondly, we illustrate the results numerically using a small example. Our findings show that both the specific financing instrument used and the labour market consequences may have large implications for the net benefits of transport investments. Significant errors may be made in limiting cost-benefit analysis to transport markets only. |
| Keywords: | cost-benefit analysis, transport investments, marginal cost of funds.. |
| JEL: | H23 H43 H54 R13 R42 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces0818&r=ure |
| By: | Shun-ichiro Bessho (Department of Economics, Hitotsubashi University); Kimiko Terai (Hosei University) |
| Abstract: | We construct a simple model of fiscal competition taking `rent-seeking' behavior of local governments into account and estimate a policy reaction function based on the model. We consider the scale of public input as each local government's policy tool. Local autonomies' method of seeking central grants often takes the form of personnel exchange with central government. Our estimation of the policy reaction function suggests that such personnel exchange has an effect on the development of industrial parks. |
| Keywords: | Business area development; Policy competition; Rent-seeking, Spatial model |
| JEL: | H11 H54 H76 H77 R53 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:irv:wpaper:080909&r=ure |
| By: | Fafchamps, Marcel; Shilpi, Forhad |
| Abstract: | Internal migration plays an important role in moderating regional differences in well-being. This paper analyzes migrants'choice of destination, using Census and Living Standard Surveys data from Nepal. The paper examines how the choice of a migration destination is influenced by income differentials, distance, population density, social proximity, and amenities. The study finds population density and social proximity to have a strong significant effect: migrants move primarily to high population density areas where many people share their language and ethnic background. Better access to amenities is significant as well. Differentials in expected income and consumption expenditures across districts are found to be relatively less important in determining migration destination choice as their effects are smaller in magnitude than those of other determinants. The results of the study suggest that an improvement in amenities (such as the availability of paved roads) at the origin could slow down out-migration substantially. |
| Keywords: | Population Policies,Economic Theory&Research,Transport Economics Policy&Planning,,Inequality |
| Date: | 2008–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4728&r=ure |
| By: | Reinhold Kosfeld (University of Kassel, Institut of Economics, 34127 Kassel, Germany); Hans-Friedrich Eckey (University of Kassel, Department of Economics, 34127 Kassel, Germany) |
| Abstract: | In this paper we use the NEG framework of the Helpman model to investigate the spatial distribution of wages across German labour market regions under different assumptions. As the assumptions of equal regional price level and equal real wages are strongly rejected for the German economy, standard approaches may fail to reveal the role of market access in explaining regional wage disparities. In part substantial changes occur when market potential is measured with the aid of regional price levels. With the so-called price index approach, the importance of market access in explaining regional wage differentials is clearly revealed. When controlling for heterogeneity of labour force and spatial dependence, the relationship still remains highly significant. From the price index approach, limited demand linkages of reasonable reach are inferred. |
| Keywords: | New Economic Geography, market access, wage disparities, regional price levels |
| JEL: | R11 R12 R15 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:200814&r=ure |
| By: | Quatraro Francesco (University of Turin) |
| Abstract: | This paper empirically analyzes the effects of regional knowledge base on differential growth rates. Beyond the traditional view of knowledge as an homogenous asset, it considers further characteristics that qualify its heterogeneous features. The results of the empirical estimations provide support to the idea that knowledge characteristics are fare more important than knowledge capital. The check for spatial dependence suggests that crossregional externalities exert additional triggering effects on productivity growth, but without debasing the effects of knowledge. Important policy implications stem from the analysis, in that regional innovation strategies ought to be carefully coordinated so as to reach a higher degree of internal coherence and exert positive effects on productivity. |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:uto:labeco:200810&r=ure |
| By: | de la Garza, Adrián G. |
| Abstract: | Previous studies have found a strong positive correlation between human capital, measured as the share of the adult population with a college degree, and population growth in metropolitan statistical areas (MSA) in the U.S. In this paper, I corroborate that the human capital-growth connection is indeed statistically significant, although much weaker than previously thought. The evidence suggests that the main reason behind this bias lies on endogeneity issues that have not been thoroughly addressed in the literature. In particular, omitting lagged MSA growth in regressions of current MSA growth on human capital overestimates the impact of skills by 100 per cent. Given that past growth has been shown to be one of the main drivers of current MSA growth (Glaeser 1994a), omitting the former variable in growth-education regressions would bias our human capital estimates upwards. Upon further examination, however, I show that MSA-specific fixed effects explain away the alleged impact of past on current growth. This suggests that the individual characteristics of the city that made it grew in the first place, and not lagged MSA growth per se, are what drives future MSA growth. Yet, even after accounting for these MSA-specific fixed effects, the impact of human capital on MSA growth does not disappear: my estimates suggest that a decadal increase of 10 per cent in the share of the adult population with a college degree translates into a rise of between 3 and up to 5 per cent in the MSA population growth rate during the same period. Finally, instrumental variable regressions strongly support the direction from skills to growth, abating potential reverse causality concerns. |
| Keywords: | human capital; urban growth; skills; education; population changes |
| JEL: | J24 N34 R11 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10881&r=ure |
| By: | Lucjan T. Orlowski |
| Abstract: | This study argues that the severity of the current global financial crisis is strongly influenced by changeable allocations of the global savings. This process is named a “wandering asset bubble”. Since its original outbreak induced by the demise of the subprime mortgage market and the mortgage-backed securities in the U.S., this crisis has reverberated across other credit areas, structured financial products and global financial institutions. Four distinctive stages of the crisis are identified: the meltdown of the subprime mortgage market, spillovers into broader credit market, the liquidity crisis epitomized by the fallout of Bear Sterns with some contagion effects on other financial institutions, and the commodity price bubble. Monetary policy responses aimed at stabilizing financial markets are proposed. |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:11-08&r=ure |
| By: | Jean-Bernard LAYAN (GREThA-GRES); Yannick LUNG (GREThA-GRES) |
| Abstract: | The paper proposes a comparative analysis of the development of the automotive industry in Morocco and Tunisia. In its first part, it analyses the convergence in the forms of international integration, oriented towards a subcontracting towards European Union, which leads to competition and also complementarities between these two countries. The role of multinational firms and governmental policies is discussed. Location of these automotive activities is analyzed in Part 2 to evaluate the agglomeration factors and the limits of spatial concentration. |
| Keywords: | Automotive industry - European Union - Regional integration - Mediterranean Area - Multinational Firms - Morocco - Tunisia |
| JEL: | L62 F14 F23 N67 N87 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:grs:wpegrs:2008-14&r=ure |
| By: | Jeremiah Hurley (Department of Economics, Centre for Health Economics and Policy Analysis, Department of Clinical Epidemiology and Biostatistics, McMaster University); Michel Grignon (Department of Economics, Centre for Health Economics and Policy Analysis, Department of Health, Aging and Society, McMaster University); Li Wang (Centre for Health Economics and Policy Analysis, Department of Clinical Epidemiology and Biostatistics, McMaster University); Tara McGrath (Accelerated Economics Training Program, Government of Canada) |
| Abstract: | Distance-related geographic barriers challenge the ability of health systems to allocate health care resources equitably according to need. The paper adapts the concentration-index approach, commonly used for measuring income-related equity, to assess distance-related equity in hospital utilization in the province of Ontario, Canada. The analysis is based on individual-level data from the Canadian Community Health Survey, which provides information on respondents’ hospital utilization, health status, demographic, socio-economic status and location, merged with data on Ontario hospitals, and a geo-coded measure of each respondent’s distance to the nearest general acute-care hospital. We find no evidence of a relationship between distance to the nearest hospital and either the probability of hospitalization or the annual number of hospital nights. Supplementary analyses provide insight into hypothesized pathways between distance and hospitalization. Although having a regular medical doctor is positively associated with distance to the nearest hospital, controlling for this does not affect the estimated distance-hospitalization relationship. Both the size and occupancy rate of the nearest hospital are correlated with distance and are strongly related to the probability of hospitalization, but again controlling for these factors did not affect the estimated relationship between hospital use and distance to the nearest hospital. We do, however, find a strong positive gradient between the probability of hospitalization and distance to the nearest large hospital. This gradient is driven by the fact that, for most of those far from a large hospital, the nearest hospital is small with a low occupancy rate. Calculation of the distance-related horizontal inequity index confirms no distance-related inequity in hospital utilization when distance is measured to the nearest hospital of any size; however, when distance is instead measured to the nearest large hospital, we observe large, pro-distance inequity. These distance-use relationships are not captured by traditional geographic measures based on measures of urbanization/ruralness. |
| Keywords: | hospital utilization, equity, geography |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:hpa:wpaper:200803&r=ure |
| By: | Jean-Bernard LAYAN (GREThA UMR CNRS 5113); Yannick LUNG (GREThA UMR CNRS 5113) |
| Abstract: | The paper proposes a comparative analysis of the development of the automotive industry in Morocco and Tunisia. In its first part, it analyses the convergence in the forms of international integration, oriented towards a subcontracting towards European Union, which leads to competition and also complementarities between these two countries. The role of multinational firms and governmental policies is discussed. Location of these automotive activities is analyzed in Part 2 to evaluate the agglomeration factors and the limits of spatial concentration. |
| Keywords: | Automotive industry - European Union - Regional integration - Mediterranean Area - Multinational Firms - Morocco - Tunisia |
| JEL: | L62 F14 F23 N67 N87 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:grt:wpegrt:2008-20&r=ure |
| By: | Victor Aguirregabiria; Chun-Yu Ho |
| Abstract: | This paper studies the contribution of demand, costs, and strategic factors to the adoption of hub-and-spoke networks in the US airline industry. Our results are based on the estimation of a dynamic oligopoly game of network competition that incorporates three groups of factors which may explain the adoption of hub-and-spoke networks: (1) travelers value the services associated with the scale of operation of an airline in the hub airport (e.g., more convenient check-in and landing facilities); (2) operating costs and entry costs in a route may decline with an airline's scale operation in origin and destination airports (e.g., economies of scale and scope); and (3) a hub-and-spoke network may be an effective strategy to deter the entry of other carriers. We estimate the model using data from the Airline Origin and Destination Survey with information on quantities, prices, and entry and exit decisions for every airline company in the routes between the 55 largest US cities. As a methodological contribution, we propose and apply a simple method to deal with the problem of multiple equilibria when using the estimated model to predict the effects of changes in structural parameters. We find that the most important factor to explain the adoption of hub-and-spoke networks is that the cost of entry in a route declines very importantly with the scale of operation of the airline in the airports of the route. For some of the larger carriers, strategic entry deterrence is the second most important factor to explain hub-and-spoke networks. |
| Keywords: | Airline industry; Hub-and-spoke networks; Entry costs; Industry dynamics; Estimation of dynamic games; Counterfactuals with multiple equilibria |
| JEL: | C10 C35 C63 C73 L10 L13 L93 |
| Date: | 2008–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-337&r=ure |
| By: | Peter Kuhn (University of California, Santa Barbara); Peter Kooreman (Tilburg University); Adriaan Soetevent (University of Amsterdam); Arie Kapteyn (RAND and Tilburg University) |
| 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. |
| Keywords: | social interactions, quasi-experiments, |
| Date: | 2008–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsbec:06-08&r=ure |
| By: | Jürgen Maurer; André Meier (Mannheim Research Institute for the Economics of Aging (MEA)) |
| Abstract: | Recent theoretical contributions have suggested peer-group effects as a potential explanation for several puzzles in macroeconomics, but their empirical relevance for intertemporal consumption choice is an open question. We derive an extension of the standard life-cycle model that allows for consumption externalities. In this framework, we propose a social multiplier approach to distinguish true externalities from merely correlated effects. Estimating our model using US panel data, we find strong predictable co-movement of household consumption within peer groups. Although much of this co-movement reflects correlated effects only, there is statistically significant evidence for moderate consumption externalities across several plausible peer-group specifications. |
| JEL: | C23 D12 D91 Z13 |
| Date: | 2008–09–23 |
| URL: | http://d.repec.org/n?u=RePEc:mea:meawpa:08167&r=ure |
| By: | yamamura, eiji |
| Abstract: | This paper explores, using Japanese panel data for the years 1988-2002, how externalities from congestion and human capital influence deaths caused by chronic illnesses. Major findings through fixed effects 2SLS estimation were as follows: (1) the number of deaths were smaller in more densely-populated areas, and this tendency was more distinct for males; (2) higher human capital correlated with a decreased number of deaths, with the effect being greater in females than in males. These findings suggest that human capital and positive externalities stemming from congestion make a contribution to improving lifestyle, which is affected differently by socio-economic circumstance in males and females. |
| Keywords: | population density; education; chronic illness |
| JEL: | R58 I19 |
| Date: | 2008–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10833&r=ure |
| By: | Pipergias Analytis, Pantelis; Ramachandran , Rajesh; Rauh , Chris; Willis, Jack |
| Abstract: | The most common method of education remains that of the student teacher relationship in the classroom. Within this framework, although the student has the final choice on attendance, the educational institution can affect his relevant incentives. At the two extremes, full attendance can be mandatory for completion of the course, or attendance can be entirely optional. This article begins with a theoretical model showing that under the assumptions of rational individuals, no externalities, and “perfect evaluation methods”, optional attendance is optimal. The three central assumptions of the model are then relaxed to show that under certain conditions, assuming a high social value of education, institutional intervention can be justified economically. The approach is enriched with many practical examples, and the efficiency of numerous attendance rules is discussed. The article concludes with the deduction of policy recommendations for educational institutions |
| Keywords: | attendance laws; time allocation;educational production funtions; screening; mandatory attendance |
| JEL: | A20 I21 D82 |
| Date: | 2008–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:10848&r=ure |
| By: | Rocco Huang |
| Abstract: | This study shows that during Paul Volcker’s drastic monetary tightening in the early 1980s, local banks operating in only one county reduced loan supply much more sharply than local subsidiaries of multi-county bank holding companies in similar markets, after controlling for bank (and holding company) size, liquidity, capital conditions, and, most important, local credit demand. The study allows cleaner identification by examining 18 U.S. “county-banking states” where a bank’s local lending volume at the county level was observable because no one was allowed to branch across county borders. The local nature of lending allows us to approximate and control for the exogenous component of local loan demand using the prediction that counties with a higher share of manufacturing employment exhibit weaker loan demand during tightening (which is consistent with the interest rate channel and the balance-sheet channel of monetary policy transmission).The study sheds light on the working of the bank lending channel of monetary policy transmission. |
| Keywords: | Monetary policy |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:08-20&r=ure |
| By: | Scott Carrell; Jonathan Zinman |
| Abstract: | Does borrowing at 400 percent APR do more harm than good? The Pentagon asserts that payday loans harm military readiness and successfully lobbied for a binding 36 percent APR cap on loans to military members and their families (effective October 1, 2007). But existing evidence on how access to high-interest debt affects borrower behavior is inconclusive. We use within-state variation in state lending laws and exogenous variation in the assignment of Air Force personnel to bases in different states to estimate the effect of payday loan access on personnel outcomes. We find significant average declines in overall job performance and retention and significant increases in severely poor readiness. These results provide some ammunition for the private optimality of the Pentagon’s position. The welfare implications for military members are less clear-cut, but our results are consistent with the interpretation that payday loan access causes financial distress and severe misbehavior for relatively young, inexperienced, and financially unsophisticated airmen. Overall job performance declines are also concentrated in these groups, and several pieces of evidence suggest that these declines are welfare-reducing (and not the result of airmen optimally reducing effort given an expanded opportunity set); e.g., performance declines are larger in high unemployment areas with payday lending. |
| Keywords: | Loans |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:08-18&r=ure |