|
on Urban and Real Estate Economics |
| By: | John Hartwick (Queen's University); Michael Brolley (Queen's University) |
| Abstract: | We set out an open, monocentric city with residential structures and reflect how changes to the amenity index affects the city. On the consumption side an amenity is represented by an exogenous boost to the utility of a resident's current commodity bundle. The cities population, land rent and footprint expand and its density rises. We test for an amenity effect in local wages with household data for the US in 1990 and discover the city density is much stronger in explaining local premia than is the city population. We test for amenity effects in local house prices with the same data set. |
| Keywords: | Climatic amenities, Density, Wages |
| JEL: | R14 J61 |
| Date: | 2008–08 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1190&r=ure |
| 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: | Central and Eastern Europe, house prices, housing market, OECD countries, transition economies. |
| JEL: | E20 E39 P25 R21 R31 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2008/1&r=ure |
| By: | Nathaniel Baum-Snow; Byron Lutz |
| Abstract: | This paper examines the residential location and school choice responses to desegregation of large public school districts. Unique data and variation in the timing of desegregation orders facilitate the analysis. The 16 percent decline in white public enrollment due to desegregation primarily led to migration to suburban districts in the South and increased private enrollment in other regions. Desegregation caused black public enrollment to increase by 20 percent outside the South largely due to population changes. The spatial distributions of responses by race to desegregation orders closely match those predicted by a model of residential location and private school choice. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2008-57&r=ure |
| By: | Steve Bradley; Jim Taylor; Giuseppe Migali |
| Abstract: | This paper estimates the impact of two flagship education policies, the Specialist Schools initiative and the Excellence in Cities programme, on the attainment of secondary school pupils in England. The focus is on their relative impact across gender, ethnic and socio-economic groups. Using pupil-level data, we find, first, that the EiC programme has been substantially more effective than the specialist schools initiative in raising the attainment of ethnic minority pupils, particularly Asians. Second, the Specialist Schools initiative has favoured pupils from economically advantaged families whereas the EiC programme has been more effective in raising the attainment of pupils from poor families. Third, both policies have been more effective for girls than for boys, thereby contributing to the educational gender gap. |
| Keywords: | Ethnicity, Gender, Test scores, Excellence in Cities, Specialist schools |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:lan:wpaper:005801&r=ure |
| By: | Ingrid Ott; Susanne Soretz |
| Abstract: | This paper analyzes, within a regional growth model, the impact of productive governmental policy and integration on the spatial distribution of economic activity. Integration is understood as enhancing territorial cooperation between the regions, and it describes the extent to which one region may benefit from the other region's public input, e.g. the extent to which regional road networks are connected. Both integration and the characteristics of the public input crucially affect whether agglomeration arises and if so to which extent economic activity is concentrated: As a consequence of enhanced integration, agglomeration is less likely to arise and concentration will be lower. Relative congestion reinforces agglomeration, thereby increasing equilibrium concentration. Due to the congestion externalities, the market outcome ends up in suboptimally high concentration |
| Keywords: | public inputs; agglomeration; integration |
| JEL: | O33 Z13 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1465&r=ure |
| By: | Robert F. Martin |
| Abstract: | House prices in the United Kingdom rose rapidly in recent years. The run-up, larger than any other in U.K. history, leveled off early last year. House prices are currently declining at rates faster than those seen in the early 1990's downturn. The housing downturn, however, is far from complete. Using the price-rent ratio as a guide, house prices are likely to fall at least a further 30 percent before leveling off. Given the historic links between housing and real activity, the downturn is likely to be associated with very slow growth. Going forward, we recommend the price-rent ratio as the appropriate measure of housing valuation. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:954&r=ure |
| By: | Grönqvist, Erik (IFAU - Institute for Labour Market Policy Evaluation); Vlachos, Jonas (Department of Economics, Stockholm University) |
| Abstract: | Teachers are increasingly being drawn from the lower parts of the general ability distribution, but it is not clear how this affects student achievement. We track the position of entering teachers in population-wide cognitive and non-cognitive ability distributions using school grades and draft records from Swedish registers. The impact on student achievement caused by the position of teachers in these ability distributions is estimated using matched student-teacher data. On average, teachers’ cognitive and non-cognitive social interactive abilities do not have a positive effect on student performance. However, social interactive ability turns out to be important for low aptitude students, whilst the reverse holds for cognitive abilities. In fact, while high performing students benefit from high cognitive teachers, being matched to such a teacher can even be detrimental to their lower performing peers. Hence, the lower abilities among teachers may hurt some students, whereas others may even benefit. High cognitive and non-cognitive abilities thus need not necessarily translate into teacher quality. Instead, these heterogeneities highlight the importance of the student-teacher matching process. |
| Keywords: | Cognitive and non-cognitive ability; teacher quality; student achievement |
| JEL: | I21 |
| Date: | 2008–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2008_025&r=ure |
| By: | Hui Shan |
| Abstract: | The Taxpayer Relief Act of 1997 (TRA97) significantly changed the tax treatment of housing capital gains in the United States. Before 1997, homeowners were subject to capital gains taxation when they sold their houses unless they purchased replacement homes of equal or greater value. Since 1997, homeowners can exclude $500,000 of capital gains when they sell their houses. Such drastic changes provide a good opportunity to study the lock-in effect of capital gains taxation on home sales. Using ZIP-code level housing price indexes and sales on single-family houses data from 1982 to 2006 in 16 affluent towns within the Boston metropolitan area, this paper finds that TRA97 reversed the lock-in effect of capital gains taxes on houses with low and moderate capital gains. However, TRA97 may have generated an unintended lock-in effect on houses with capital gains over the maximum exclusion amount. In addition, this paper exploits legislative changes in capital gains tax rate to estimate the tax elasticity of home sales during the post-TRA97 period. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2008-53&r=ure |
| By: | Steve Bradley; Jim Taylor |
| Abstract: | This paper investigates the extent to which exam performance at the end of compulsory education has been affected by three major education reforms: the introduction of a quasimarket following the Education Reform Act (1988); the specialist schools initiative introduced in 1994; and the Excellence in Cities programme introduced in 1999. We use panel data for all state-funded secondary schools in England over 1992-2006. Using a panel of schools for all state-funded secondary schools in England (1992-2006), we find that about one-third of the improvement in school exam scores is directly attributable to the combined effect of the education reforms. The distributional consequences of the policy, however, are estimated to have been favourable, with the greatest gains being achieved by schools with the highest proportion of pupils from poor families. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:lan:wpaper:005802&r=ure |
| By: | Parry, Ian W.H. (Resources for the Future) |
| Abstract: | This paper reviews literature on the optimal design of pricing policies to reduce urban automobile congestion. The implications of a range of complicating factors are considered, such as traffic bottlenecks, constraints on which roads and freeway lanes in the road network can be priced, driver heterogeneity, private toll operators, other externalities besides congestion, and interactions between congestion taxes and the broader fiscal system. We also briefly discuss the incidence of congestion taxes and experience with this policy in the United States and elsewhere. Although the economics literature on congestion pricing has advanced considerably over the last 20 years, research is still needed on the empirical measurement of second-best efficient tolls for urban centers and whether alternative design features have substantial implications for efficiency. More research is also needed on the design of schemes to promote feasibility by compensating adversely affected groups with minimal loss in economic efficiency. |
| Keywords: | traffic congestion, externality, peak-period fee, congestion toll incidence |
| JEL: | R41 R48 H21 |
| Date: | 2008–11–24 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-08-35&r=ure |
| By: | Matthieu Darracq Pariès (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Alessandro Notarpietro (Università Bocconi, Via Sarfatti 25, I-20136 Milano, Italy.) |
| Abstract: | We estimate a two-country Dynamic Stochastic General Equilibrium model for the US and the euro area including relevant housing market features and examine the monetary policy implications of housing-related disturbances. In particular, we derive the optimal monetary policy cooperation consistent with the structural specification of the model. Our estimation results reinforce the existing evidence on the role of housing and mortgage markets for the US and provide new evidence on the importance of the collateral channel in the euro area. Moreover, we document the various implications of credit frictions for the propagation of macroeconomic disturbances and the conduct of monetary policy. We find that allowing for some degree of monetary policy response to fluctuations in the price of residential goods improves the empirical fit of the model and is consistent with the main features of optimal monetary policy response to housing-related shocks. JEL Classification: E4, E5, F4. |
| Keywords: | Housing, credit frictions, optimal monetary policy, new open economy macroeconomics, Bayesian estimation. |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20080972&r=ure |
| By: | Zhao Chen; Shiqing Jiang; Ming Lu; Hiroshi Sato |
| Abstract: | In this paper, we use the “2002 Chinese Household Income Project Survey” (CHIPS2002) data to examine how heterogeneous social interactions affect the peer effect in the rural–urban migration decision in China. We find that the peer effect, measured by the village migration ratio, significantly increases the individual probability of outward migration. We also find that the magnitude of the peer effect is nonlinear, depending on the strength and type of social interactions with other villagers. Interactions in information sharing can increase the magnitude of the peer effect, while interactions in mutual help in labor activities, such as help in housing construction, nursing and farm work in busy seasons, will impede the positive role of the peer effect. Being aware of the simultaneity bias caused by the two-way causality between social interaction strengths and migration, we utilize “historical family political identity in land reform” as an instrumental variable for social interactions. However, the hypothesis that probit and instrumental-variable probit results are not significantly different is not rejected. The existence of a nonlinear peer effect has rich policy implications. For policy makers to encourage rural–urban migration, it is feasible to increase education investment in rural areas or increase information sharing among rural residents. However, only an increase in the constant term in the regression, i.e. a “big push” in improving institutions for migration, can help rural Chinese residents escape the low equilibrium in migration. |
| Keywords: | labor migration, urbanization, peer effect, social integration, social multiplier |
| JEL: | J61 O15 R23 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:lic:licosd:22408&r=ure |
| By: | Luisa Fernandez |
| Abstract: | The paper uses Minsky’s financial instability hypothesis as an analytical framework for understanding the subprime mortgage crisis and for introducing adequate reforms to restore economic stability. We argue that the subprime crisis has structural origins that extend far beyond the housing and financial markets. We further argue that rising inequality since the 1980s formed the breeding ground for the current financial markets meltdown. What we observe today is only the manifestation of the ingenuity of the market in taking advantage of moneymaking opportunities, regardless of the consequences. The so-called "democratization of homeownership" rapidly turned into record-high delinquencies and foreclosures. The sudden turn in market expectations led investors and banks to reevaluate their portfolios, which brought about a credit crunch and widespread economic instability. The Federal Reserve Bank's intervention came too late and failed to usher in adequate regulation. Finally, the paper argues that a true democratization of homeownership is only possible through job creation and income-generation programs, rather than through exotic mortgage schemes. |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_548&r=ure |
| By: | Calvó-Armengol, Antoni (Universitat Autònoma de Barcelona); Patacchini, Eleonora (University of Rome La Sapienza); Zenou, Yves (Stockholm University) |
| Abstract: | This paper studies whether structural properties of friendship networks affect individual outcomes in education. We first develop a model that shows that, at the Nash equilibrium, the outcome of each individual embedded in a network is proportional to her Katz-Bonacich centrality measure. This measure takes into account both direct and indirect friends of each individual but puts less weight to her distant friends. We then bring the model to the data by using a very detailed dataset of adolescent friendship networks. We show that, after controlling for observable individual characteristics and unobservable network specific factors, the individual's position in a network (as measured by her Katz-Bonacich centrality) is a key determinant of her level of activity. A standard deviation increase in the Katz-Bonacich centrality increases the pupil school performance by more than 7 percent of one standard deviation. |
| Keywords: | centrality measure, peer influence, network structure, school performance |
| JEL: | A14 C31 C72 I21 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3859&r=ure |
| By: | Marte Rønning (Statistics Norway) |
| Abstract: | Using Dutch data on pupils in elementary school this paper is the first empirical study that analyzes whether assigning homework has an heterogeneous impact on pupil achievement. Addressing potential biases that arise from unobserved school quality, pupil selection by exploiting different methods, I find that the test score gap is larger in classes where everybody gets homework than in classes where nobody gets homework. More precisely pupils belonging to the upper part of the socioeconomic status scale perform better when homework is given, whereas pupils from the lowest part are unaffected. At the same time more disadvantaged children get less help from their parents with their homework. Homework can therefore amplify existing inequalities through complementarities with home inputs. |
| Keywords: | pupil performance; school inputs; home-environment |
| JEL: | I20 I21 I29 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:566&r=ure |
| By: | Jarno Hoekman (Urban & Regional research centre Utrecht (URU), Utrecht University - The Netherlands); Koen Frenken (Urban & Regional research centre Utrecht (URU), Utrecht University - The Netherlands); Frank van Oort (Netherlands Institute for Spatial Research (RPB)- The Netherlands) |
| Abstract: | The geography of innovation traditionally concentrates on localised knowledge spillovers, yet neglects collaboration networks as a means to access knowledge outside the region. Using publication and patent data for 1316 regions in the EU27 plus Norway and Switzerland, we find that both localised knowledge spillovers and the knowledge spillovers stemming from collaboration affect the innovative performance of regions. The results provide support for EU policies aimed at creating European collaboration networks. |
| Keywords: | Knowledge Production Function, Spillovers, Collaboration, Networks, European Research Area, Publication, Patent, Public Good |
| JEL: | C21 O30 O33 O52 R11 |
| Date: | 2008–09 |
| URL: | http://d.repec.org/n?u=RePEc:cri:cespri:wp222&r=ure |
| By: | Daniel O. Beltran; Kuntal K. Das; Robert W. Fairlie |
| Abstract: | Although computers are universal in the classroom, nearly twenty million children in the United States do not have computers in their homes. Surprisingly, only a few previous studies explore the role of home computers in the educational process. Home computers might be very useful for completing school assignments, but they might also represent a distraction for teenagers. We use several identification strategies and panel data from the two main U.S. datasets that include recent information on computer ownership among children--the 2000-2003 CPS Computer and Internet Use Supplements (CIUS) matched to the CPS Basic Monthly Files and the National Longitudinal Survey of Youth 1997--to explore the causal relationship between computer ownership and high school graduation and other educational outcomes. Teenagers who have access to home computers are 6 to 8 percentage points more likely to graduate from high school than teenagers who do not have home computers after controlling for individual, parental, and family characteristics. We generally find evidence of positive relationships between home computers and educational outcomes using several identification strategies, including controlling for typically unobservable home environment and extracurricular activities in the NLSY97, fixed effects models, instrumental variables, and including future computer ownership and falsification tests. Home computers may increase high school graduation by reducing non-productive activities, such as truancy and crime, among children in addition to making it easier to complete school assignments. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:958&r=ure |
| By: | Anil Nathan (Department of Economics, College of the Holy Cross) |
| Abstract: | This paper finds the effect of having friends of a similar race and who are involved in similar activities. It explores data which allows a peer group to be defined openly through self nominations. Using a strategy that corrects for the endogeneity of peer effects by instrumenting using variables at the "grade within school" level, it is shown that friendship diversity can help whites increase achievement. Although not much significance was found with other races, most of the strategies pushed towards the direction of racial diversity aiding achievement. Regarding extracurricular activities, it is found that there is a benefit in having friends in common individual academic activities, conditional on the respondent only belonging to academic or scholastic clubs. There are insignificant effects in havingfriends in common sports, conditional on the respondent only participating in sports. |
| Keywords: | National Longitudinal Study of Adolescent Health, Add Health, friendship formation, returns to diversity, scholastic achievement, school redistribution |
| JEL: | J15 I2 |
| Date: | 2008–12 |
| URL: | http://d.repec.org/n?u=RePEc:hcx:wpaper:0816&r=ure |
| By: | Machin, Stephen (University College London); Pelkonen, Panu (London School of Economics); Salvanes, Kjell G. (Norwegian School of Economics and Business Administration) |
| Abstract: | We show that the length of compulsory education has a causal impact on regional labour mobility. The analysis is based on a quasi-exogenous staged Norwegian school reform, and register data on the whole population. Based on the results, we conclude that part of the US-Europe difference, as well as the European North-South difference in labour mobility, is likely to be due to differences in levels of education in the respective regions. |
| Keywords: | labour market, mobility, education |
| JEL: | I28 J24 J61 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3845&r=ure |
| By: | Christopher J. Mayer; Karen M. Pence; Shane M. Sherlund |
| Abstract: | The main factors underlying the rise in mortgage defaults appear to be declines in house prices and deteriorated underwriting standards, in particular an increase in loan-to-value ratios and in the share of mortgages with little or no documentation of income. Contrary to popular perception, the growth in unconventional mortgages products, such as those with prepayment penalties, interest-only periods, and teaser interest rates, does not appear to be a significant factor in defaults through mid-2008 because borrowers who had problems with these products could refinance into different mortgages. However, as markets realized the extent of the poor underwriting, underwriting standards tightened and borrowers began to face difficulties refinancing; this dynamic suggests that these unconventional products could pose problems going forward. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2008-59&r=ure |
| By: | Gebremeskel H. Gebremariam; Tesfa G. Gebremedhin; Peter V. Schaeffer; Randall W. Jackson |
| Abstract: | In this paper, a spatial simultaneous growth equilibrium model of employment growth, migration behavior, median household income and local public expenditures is developed. The model is empirically estimated by Generalized Spatial Three-Stage Least Squares estimator using count- level data from Appalachia for 1990-2000. The results suggest the existence of interdependence among the growth rates of employment, gross in- and out-migration, median household income and local public services in the form of feedback simultaneities, spatial autoregressive lag and spatial cross-regressive lag simultaneities. The findings also suggest the existence of conditional convergence with respect to endogenous variables of the model. The speed of adjustment for the growth rate of median household income is the fastest and for the growth rate of gross in- migration is the slowest. The findings also indicate the clustering of counties on the basis of their growth rates of median household incomes which would require the need for development policy coordination at the regional level, or the whole of Appalachia. Another key finding of the study is that Appalachian counties with higher initial population sizes were both destinations and sources of migrants during the study period. |
| Keywords: | Growth Spillovers, Spatial lag, GS3SLS, Employment, Income, and Migration |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:vpi:wpaper:e07-13&r=ure |
| By: | Atila Abdulkadiroglu (Duke University - Department of Economics); Yeon-Koo Che (Columbia University - Department of Economics); Yosuke Yasuda (Columbia University - Department of Economics) |
| Abstract: | Truthful revelation of preferences has emerged as a desideratum in the design of school choice programs. Gale-Shapley's deferred acceptance mechanism is strategy-proof for students but limits their ability to communicate their preference intensities. This results in ex-ante inefficiency when ties at school preferences are broken randomly. We propose a variant of deferred acceptance mechanism which allows students to influence how they are treated in ties. It maintains truthful revelation of ordinal preferences and supports a greater scope of efficiency. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:clu:wpaper:0809-09&r=ure |
| By: | Carlo Ciccarelli (Faculty of Economics, University of Rome "Tor Vergata"); Stefano Fenoaltea (Faculty of Economics, University of Rome "Tor Vergata") |
| Abstract: | This paper presents time-series estimates of construction activity in the regions of post-Unification Italy. Total construction followed very different time paths, reflecting the sharply local cycles in railway construction. Other public works were less idiosyncratic; the boom of the Giolitti years was widely diffused, but that of the 1880s was much more concentrated in Latium and Liguria. In the construction of buildings, the Giolittian boom was marked in the North and Center, but spotty in the South and major islands; earlier swings were comparatively minor, save of course for the 1880s bubble in Latium. Over the long term, railway construction was, per-capita, relatively evenly spread. Other social-overhead construction displays a similar pattern, but with exceptionally high levels in Latium and Liguria. Building construction seems instead to have declined somewhat from North to South; Liguria was again the overall leader, with Latium second. |
| Date: | 2008–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:136&r=ure |
| By: | Constantina Kottaridi |
| Abstract: | Globalization, far from eliminating the relevance of geography, brings to the surface the importance of location as a collector and repository of specialized knowledge. In this “new age of capitalism”, regions are emerging as important catalysts for innovation and production development. This paper investigates the location patterns of R&D-intensive MNEs at the geographical micro-level. Analysis refers to the pharmaceutical industry, as one of the most active industries in FDI in R&D, and their foreign activities established in British regions. In this route, the present study develops a hierarchy of UK regions both on a technological and skills basis but also on a broader basis covering the overall macroeconomic environment. Results point towards a combination of corporate location strategies. High-technology firms are more likely to operate abroad in technology specialised large regions in accordance with regional hierarchical ordering. This pattern is consistent with MNEs’ commitment to access and tap into the specific technological assets embedded in the local knowledge systems and at the same time exploit their corporate-specific advantages in large markets. |
| Keywords: | regions, hierarchies, location, pharmaceuticals |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:uop:wpaper:031&r=ure |
| By: | Donald P. Morgan; Benjamin Iverson; Matthew Botsch |
| Abstract: | We argue that the 2005 bankruptcy abuse reform (BAR) contributed to the surge in subprime foreclosures that followed its passage. Before BAR, distressed mortgagors could free up income by filing bankruptcy and having their unsecured debts discharged. BAR blocks that maneuver for better-off filers by way of a means test. We identify the effects of BAR using state home equity bankruptcy exemptions; filers in low-exemption states were not very protected before BAR, so they would be less affected by the reform. Difference-in-difference regressions confirm four predictions implied by that identification strategy. Our findings add to research trying to explain the surge in subprime foreclosures and to a broader literature on household bankruptcy demand and credit supply. |
| Keywords: | Bankruptcy ; Banking law ; Subprime mortgage ; Foreclosure ; Financial crises |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:358&r=ure |
| By: | Thomas J. Fitzpatrick IV; Mark B. Greenlee |
| Abstract: | In this paper we investigate the history of negotiable instruments and the holder in due course rule and contrast their function and consequences in the 1700s with their function and consequences today. We explain how the holder in due course rule works and identify ways in which the rule’s application is limited in some consumer transactions. In particular, we focus on laws limiting application of the rule to some home mortgage loans. We investigate Lord Mansfield’s original justification for the rule as a money substitute, the lack of explicit justification of the rule by the drafters of the Uniform Commercial Code in the 1950s, the contemporary justification of the rule as a means of increasing the availability and decreasing the cost of credit, and the concerns of legislators and regulators about lack of consumer knowledge, bargaining power, and financial resources which caused them to limit the application of the holder in due course rule to some consumer transactions. We conclude that changes in policy justification, parties to negotiable instruments and the structure of the home mortgage market call for a reconsideration of the continuing appropriateness of holder in due course protection for assignees of home mortgage notes. We suggest further analysis based on economic theory and review of empirical research in order to formulate policy recommendations. |
| Keywords: | Mortgage loans |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:0808&r=ure |
| By: | Gebremeskel H. Gebremariam; Tesfa G. Gebremedhin; Peter V. Schaeffer; Randall W. Jackson |
| Abstract: | In this paper we develop a spatial panel simultaneous-equations model of employment growth, migration behavior, local public services and median household income in a partial lag-adjustment growth-equilibrium framework and utilizing a one-way error component model for the disturbances. To estimate the model, we developed a five-step new estimation strategy by generalizing the Generalized Spatial Three-Stage Least Squares (GS3SLS) approach outlined in Kelejian and Prucha (2004) into a panel data setting. The empirical implementation of the model uses county-level data from the 418 Appalachian counties for 1980-2000. The estimates show the existence of feedback simultaneities among the endogenous variables of the model, the existence of conditional convergence with respect to the respective endogenous variable of each equation of the model, and the existence of spatial autoregressive lag effects and spatial cross-regressive lag effects with respect to the endogenous variables of the model. Moreover, the speed of adjustment parameters is generally comparable to those in literature. One of the key conclusions is that sector-specific policies should be integrated and harmonized in order to give the desirable outcome. In addition, regionally focusing resources for development policy may yield greater returns than treating all locations the same. |
| Keywords: | Simultaneous spatial panel data model, Regional growth variation, Spatial autoregressive and cross-regressive lags, FGS3SLS |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:vpi:wpaper:e07-12&r=ure |
| By: | Reinhart, Carmen |
| Abstract: | The financial press has often characterized the 2007-2008 United States subprime mess as a new breed of crisis. Indeed, this view often points to the international repercussions of the U.S.-based crisis as evidence that the globalization of financial portfolios has introduced new channels for spillovers that were never present before. At present, there is also considerable confusion in academic and policy circles as to whether the shaky predicament of the global economy owes to contagion or to shared (common) economic fundamentals. I address these issues, in turn, and discuss some of the questions, as regards regulation of financial institutions, that the current crisis has raised. |
| Keywords: | financial crisis;subprime;international |
| JEL: | N1 N2 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11863&r=ure |
| By: | Elisa Giuliani (DEA Facoltà di Economia, University of Pisa & SPRU, University of Sussex) |
| Keywords: | Industrial clusters, innovative output, firm knowledge base, network closure, structural holes, external openness, wine |
| JEL: | M0 O32 O33 Z13 |
| Date: | 2008–07–17 |
| URL: | http://d.repec.org/n?u=RePEc:sru:ssewps:169&r=ure |
| By: | Andersson, Martin (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Noseleit, Florian (Friedrich-Schiller-University Jena) |
| Abstract: | We use longitudinal data over a decade on start-ups and employment in Swedish regions and analyze the effect of start-ups on subsequent employment growth. We extend previous analyses by examining the influence of regional start-ups in a sector on regional employment growth in the same sector and on other sectors. We find differences between different types of start-ups. Knowledge-intensive start-ups seem to have larger effects on the regional economy. In particular, start-ups in high-end services have significant negative impacts on employment in other sectors but a positive long-run impact. This is consistent with the idea that start-ups are a vehicle for changes in the composition of regional industry. Moreover, our results illustrate that the known S-shaped pattern can be attributed to different effects that start-ups in a sector have on employment change in the same sector and in others. |
| Keywords: | Entrepreneurship; Employment Growth; Regional; Development; Start-ups |
| JEL: | J23 M13 O52 |
| Date: | 2008–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0155&r=ure |
| By: | Dahlberg, Matz (Department of Economics); Lundqvist, Heléne (Department of Economics); Mörk, Eva (IFAU) |
| Abstract: | In their role as agenda setters and implementers of political decisions, bureaucrats potentially have the power to influence decisions in their own favor. It is however difficult to empirically test whether bureaucrats actually are involved in such actions. In this paper we suggest and apply a new way of testing the hypothesis that bureaucrats can and do in fact affect policy to their own benefit. Making use of a discontinuity in the Swedish grant system, we estimate causal effects of intergovernmental grants on different types of personnel employed by the local governments. On the margin, we find a large, positive effect of grants on the number of bureaucrats in the central administration, but no effects on the number of personnel in other important sectors run by the local government (child care, schools and elderly care). These results support the view that bureaucrats are able to, and do indeed, affect the allocation of grants within municipalities to support own goals. |
| Keywords: | Fiscal federalism; grants; bureaucrats; rent seeking; discontinuity analysis |
| JEL: | C33 H11 H70 H83 J45 |
| Date: | 2008–10–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uunewp:2008_012&r=ure |
| By: | Tatom, John |
| Abstract: | There are numerous myths that surround the financial crisis that began in August 2007. Some of these myths are about the role of bank credit in the crisis, while others concern the weakness of the U.S. banking system and supposed excess leverage—the ratio of assets to equity in banks-- in contributing to the crisis. This paper provides evidence that net new commercial and industrial loans at banks did not slow before the financial crisis began in August 2007, nor was there any slowing in the early months. A subsequent slowing did reach its lowest pace in June-August 2008, but even at its worst, it was not particularly severe. The paper also looks at the safety and soundness of banks as indicated by their equity-assets ratio. The concern is that bank assets are troubled and excessively leveraged, with very low equity-asset ratios so that banks could have to “deleverage” or reduce lending as their equity declines. The shrinkage of bank equity and assets due to deleveraging could deepen the recession. But banks have not suffered significant declines in their equity ratios and they have been holding near record equity ratios. Moreover bank assets are growing rapidly, with equity nearly keeping pace. Ironically the Treasury’s Troubled Asset Relief Program will add $270 beginning in the fourth quarter. The TARP’s injections of bank capital have dried up private sector injections that had appeared on the horizon from sovereign wealth funds and private equity. Equity ratios of banks could become strained in future as total loans and assets continue to expand. The financial crisis has not undermined the safety and soundness of the commercial banking system. It is not likely to do so because most of the expected losses from the foreclosure crisis have already been taken into provisions. Nonetheless, many banks heavily exposed to mortgage losses have failed and more will fail. |
| Keywords: | foreclosure crisis; deleverage; bank credit; |
| JEL: | G28 G21 |
| Date: | 2008–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11804&r=ure |
| By: | Marco Pagano (Università di Napoli Federico II, CSEF, EIEF and CEPR); Paolo Volpin (London Business School and CEPR) |
| Abstract: | We present a model in which issuers of structured bonds choose coarse and opaque ratings to enhance the liquidity of their primary market, at the cost of reducing secondary market liquidity or even causing it to freeze. The degree of transparency is inefficiently low if the social value of secondary market liquidity exceeds its private value. We analyze various types of public intervention – requiring transparency for rating agencies, providing liquidity to distressed banks or supporting secondary market prices – and find that their welfare implications are quite different. Finally, transparency is greater if issuers restrain the issue size, or tranche it so as to sell the more information-sensitive tranche to sophisticated investors only. |
| Keywords: | securitization, rating, liquidity, subprime lending crisis, default |
| JEL: | D82 G21 G18 |
| Date: | 2008–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:210&r=ure |
| By: | Bystöm, Hans (Department of Economics, Lund University) |
| Abstract: | Abstract. This paper focuses on the many extreme credit default swap spread movements observed during the credit crisis 2007-08 and on how the tails of the spread change distribution significantly differ from those of the normal distribution. As a result, Value at Risk (VaR) estimates based on extreme value theory are found to be more accurate than those based on normal or historical distributions, particularly at more conservative VaR levels. However, not even extreme value theory methods are able to satisfactorily capture the extreme behavior of the credit derivatives market at the peak of the credit crisis. We find the extreme turbulence in the credit derivatives market in July 2007 to be comparable only to that of the US equity market in October 1987. |
| Keywords: | credit default swap index; extreme value theory; financial crisis |
| JEL: | C20 G33 |
| Date: | 2008–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2008_016&r=ure |
| By: | Sumit Agarwal; Brent W. Ambrose |
| Abstract: | We examine the effect of direct mail (commonly referred to as junk mail) advertising on individual financial decisions by studying consumer choice of home equity debt contracts. Consistent with the theoretical predictions, we find that financial variables underlying the relative pricing of debt contracts are the leading factors explaining consumers home equity debt choice. Furthermore, we also find that the intended use of debt proceeds significantly impacts consumer choice. However, when we study a subset of consumers who received a direct mail solicitation for a particular debt contract (fixed versus adjustable-rate), we find evidence that the relative pricing variables are less revelent in explaining consumer contract choice, even though they were presented with a full menu of debt contracts. Thus, our results are consistent with the persuasive view of advertising. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-08-09&r=ure |
| By: | Tatom, John |
| Abstract: | The continuing foreclosure crisis worsened in October 2008. The Federal Reserve (Fed) continued the aggressive expansion of new private credit that it began in mid-September and it created three new credit facilities to add to the plethora of other facilities created since the financial crisis component of the foreclosure crisis began in August 2007. These new facilities are aimed at stabilizing the commercial paper (CP) market, most recently adversely affected by the failure of Lehman Brothers and the failures of several money market mutual funds (MMMF). From mid-September to the end of October, the Fed more than doubled its total assets, largely by expanding its private sector lending. Perhaps the most significant question to emerge over the past two months is whether the Fed has an exit strategy to pull all of this new financial asset creation out after it succeeds in stemming deflation and before it kick starts the economy into a major inflation problem. |
| Keywords: | commercial paper; monetary policy; financial crisis |
| JEL: | E58 G28 G21 |
| Date: | 2008–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:11803&r=ure |
| By: | V.V. Chari; Lawrence J. Christiano; Patrick J. Kehoe |
| Abstract: | The United States is indisputably undergoing a financial crisis. Here we examine four claims about the way the financial crisis is affecting the economy as a whole and argue that all four claims are myths. Conventional analyses of the financial crisis focus on interest rate spreads. We argue that such analyses may lead to mistaken inferences about the real costs of borrowing and argue that, during financial crises, variations in the levels of nominal interest rates might lead to better inferences about variations in the real costs of borrowing. |
| Keywords: | Financial crises |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:666&r=ure |
| By: | Tara Rice; Philip E. Strahan |
| Abstract: | States were granted authority to limit interstate branching following passage of Federal legislation in 1994, relaxing restrictions on geographical expansion by banks. We show that differences in state’s branching restrictions affect credit supply. In states more open to branching, small firms borrow at interest rates 25 to 45 basis points lower than firms operating in less open states. Firms in open states also are more likely to borrow from banks. Despite this evidence that interstate branch openness expands credit supply, we find no effect of variation in state restrictions on branching on small-firm borrowing or other indicators of credit constraints. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2008-54&r=ure |