nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2009‒04‒05
29 papers chosen by
Steve Ross
University of Connecticut

  1. Subprime mortgages, foreclosures, and urban neighborhoods By Kristopher S. Gerardi; Paul S. Willen
  2. Fifty Years of Urban Accessibility: The Impact of Urban Railway Network on the Land Gradient in Industrializing Berlin By Gabriel Ahlfeldt; Nicolai Wendland
  3. Does public housing occupancy increase unemployment? By Dujardin, Claire; Goffette-Nagot, Florence
  4. Agglomeration and Productivity - evidence from firm-level data By Andersson, Martin; Lööf, Hans
  5. Introduction to price and productivity measurement for housing By Bert M. Balk; W. Erwin Diewert; Alice O. Nakamura
  6. Urban Trends and Policy in China By Lamia Kamal-Chaoui; Edward Leeman; Zhang Rufei
  7. Exploring Determinants of Urban Motorcycle Accident Severity: The Case of Barcelona By Daniel Albalate; Laura Fernández-Villadangos
  8. Why has home ownership fallen among the young? By Jonas D. M. Fisher; Martin Gervais
  9. Making sense of the subprime crisis By Kristopher S. Gerardi; Andreas Lehnert; Shane M. Sherland; Paul S. Willen
  10. Monetary Policy Transmission and House Prices : European Cross Country Evidence By Kai Carstensen; Oliver Hülsewig; Timo Wollmershäuser
  11. The pricing of subprime mortgage risk in good times and bad: evidence from the ABX.HE indices By Ingo Fender; Martin Scheicher
  12. FirmsÕ location Under taste and demand heterogeneity By Okubo, Toshihiro; Picard, Pierre M.
  13. Geographic proximity and firm-university innovation linkages: evidence from Great Britain By Laura Abramovsky; Helen Simpson
  14. Accounting for housing in a CPI By W. Erwin Diewert; Alice O. Nakamura
  15. Measures of the Geographic Concentration of Industries: Improving Distance-Based Methods By Eric Marcon; Florence Puech
  16. Are your firmÕs taxes set in Warsaw? Spatial tax competition in Europe By CrabbŽ, Karen; VANDENBUSSCHE, Hylke
  17. Contract renewal as an incentive device. An application to the French urban public transport sector By GAUTIER, Axel; YVRANDE-BILLON, Anne
  18. The performance of decentralized school systems : evidence from Fe y Alegría in Venezuela By Allcott, Hunt; Ortega, Daniel E.
  19. Initial infrastructure development strategies for the transition to sustainable mobility By Floris J. Huétink; Alexander van der Vooren; Floortje Alkemade
  20. Ethnicity and Human Capital Accumulation in Urban Mexico By Hugo Nopo; Natalia Winder
  21. A Median Voter Model of the Vertical Fiscal Gap By Dahlby, Bev; Rodden, Jonathan; Wilson, Sam
  22. Evaluation of Teacher Preparation Programs: A Reality Show in Kentucky By Sharon Kukla-Acevedo; Megan Streams; Eugenia F. Toma
  23. More Tickets, Fewer Accidents: How Cash-Strapped Towns Make for Safer Roads By Makowsky, Michael; Thomas, Stratmann
  24. Spatial Convergence of Regions Revisited: A Spatial Maximum Likelihood Systems Approach By Michael Paffermayr
  25. Large-sample inference on spatial dependence By Peter Robinson
  26. Too Many Municipalities? By Dahlby, Bev
  27. Regional convergence and public spending in Italy. Is there a correlation? By Daniele, Vittorio
  28. The Marginal Cost of Public Funds and the Flypaper Effect By Dahlby, Bev
  29. Fee Setting Intermediaries: On Real Estate Agents, Stock Brokers, and Auction Houses By Simon Loertscher; Andras Niedermayer

  1. By: Kristopher S. Gerardi; Paul S. Willen
    Abstract: This paper analyzes the impact of the subprime mortgage crisis on urban neighborhoods in Massachusetts. We explore the topic using a data set that matches race and income information from Home Mortgage Disclosure Act data with property-level, transaction data from Massachusetts Registry of Deeds offices. With these data, we show that much of the subprime lending in the state was concentrated in urban neighborhoods and that minority homeownerships created with subprime mortgages have proved exceptionally unstable in the face of rapid price declines. The evidence in Massachusetts suggests that subprime lending did not, as commonly believed, lead to a substantial increase in homeownership by minorities but instead generated turnover in properties owned by minority residents. Furthermore, we argue that the particularly dire foreclosure situation in urban neighborhoods actually makes it somewhat easier for policymakers to provide remedies. incompl s
    Keywords: subprime, foreclosure, minority, homeownership CL HG2567 A4A5
    Date: 2009
  2. By: Gabriel Ahlfeldt (Chair for Economic Policy, University of Hamburg); Nicolai Wendland (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: As the first to use an archival data set on historical land values of Berlin, Germany, from 1890 to 1936, we exploit exogenous variation in transport technology in order to test the validity of the monocentric city model. Endogenously determining the CBD, we conduct cross-section and timedifference analysis and model the land gradient in terms of straight-line distance and travel times. A counterfactual scenario indicates that a large proportion of urban decentralization is attributable to improvements in transport infrastructure. Controlling for spatial dependency, results suggest that the monocentric model fitted the city structure until the mid 20th century.
    Keywords: Transport Innovations; Land Values; Location Productivity; Economic History
    JEL: N7 N9 R33 O12
    Date: 2008–10
  3. By: Dujardin, Claire (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); Goffette-Nagot, Florence (---)
    Abstract: In order to test for the effect of public housing occupancy on unemployment, we estimate a simultaneous probit model of unemployment and public housing. On a Þrst sample, we instrument public housing with the gender composition of children. On a second sample, the instrument is the share of public housing at the city level. We also perform a robustness check that consists in measuring the correlation between unobservables that could explain the effect of public housing on unemployment. As the corresponding level of correlation is low, this check reinforces our result of no effect of public housing on unemployment.
    Keywords: public housing, unemployment, simultaneous probit models, instrumental variables.
    JEL: R2 J64
    Date: 2008–12
  4. By: Andersson, Martin (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Lööf, Hans (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Do agglomerations stimulate productivity? An extensive literature on agglomeration economies, or urban increasing returns, has analyzed this question with aggregated spatial data. This paper estimates the relationship between agglomeration and productivity at the firm level using static and dynamic models. It makes use of a rich dataset comprising register information on all manufacturing firms in Sweden with 10 or more employees over the period 1997-2004. Three things emerge. First, firms located in larger regions are more productive when controlling for size, human capital, physical capital, ownership structure, import and export, industry classification and time trend. Second, results from dynamic panel estimations suggest a learning effect in that agglomeration enhances firms’ productivity. Third, the role of agglomeration phenomena does not seem to have a clear coupling to firm size.
    Keywords: productivity; agglomeration economies; spatial externalities; external scale economies; urban increasing returns; spatial selection
    JEL: L25 R12 R30
    Date: 2009–03–25
  5. By: Bert M. Balk; W. Erwin Diewert; Alice O. Nakamura
    Abstract: This paper provides a brief introduction to a proposed new opportunity cost treatment of owner-occupied housing in measures of inflation for the United States. In addition, the paper introduces, and provides links to, a collection of nine other papers that discuss various aspects of the treatment of owner-occupied housing in measures of inflation for a number of nations, including Canada, Germany, Iceland, and the United States.
    Keywords: Durable goods, Consumer ; Consumer price indexes ; Cost of living adjustments ; Housing; Durable goods, Consumer Price Index, Cost of Living Index, Owner-occupied Housing, depreciation, hedonic regression models, rental equivalence approach, acquisitions approach, user cost approach, payments approach, maintenance and repair, renovations expenditures
    Date: 2009
  6. By: Lamia Kamal-Chaoui; Edward Leeman; Zhang Rufei
    Abstract: China has become the world’s largest urban nation, with over 600 million urban citizens today. Projections indicate that this level may reach 900 million in 2030. The way this urbanisation process is managed will have important policy implications for China and beyond. This paper provides an introduction to urban trends and policies in China. It describes urban growth trends, where and in what kinds of cities growth is occurring, how China’s cities are governed, and how public policy has influenced the extent, pace, and spatial distribution of urbanisation. As China continues to integrate with the globalising economy, its competitiveness will increasingly be driven by the capacities of its metropolitan regions to improve the productivity of enterprises in ever-widening supply chains. The report concludes with a description of some of the key policy challenges facing central and local urban governments in this global context, including: 1) institutional constraints to markets and factor mobility; 2) environmental challenges; 3) ensuring equity and helping vulnerable groups; and 4) metropolitan governance.
    Date: 2009–03–25
  7. By: Daniel Albalate (PPRE-IREA, Universitat de Barcelona); Laura Fernández-Villadangos (PPRE-IREA, Universitat de Barcelona)
    Abstract: Public authorities and road users alike are increasingly concerned by recent trends in road safety outcomes in Barcelona, which is the European city with the highest number of registered Powered Two-Wheel (PTW) vehicles per inhabitant,. In this study we explore the determinants of motorcycle and moped accident severity in a large urban area, drawing on Barcelona’s local police database (2002-2008). We apply non-parametric regression techniques to characterize PTW accidents and parametric methods to investigate the factors influencing their severity. Our results show that PTW accident victims are more vulnerable, showing greater degrees of accident severity, than other traffic victims. Speed violations and alcohol consumption provide the worst health outcomes. Demographic and environment-related risk factors, in addition to helmet use, play an important role in determining accident severity. Thus, this study furthers our understanding of the most vulnerable vehicle types, while our results have direct implications for local policy makers in their fight to reduce the severity of PTW accidents in large urban areas.
    Keywords: Road Safety, Motorcycles, Mopeds, Accidents, Severity, Transportation
    JEL: I18 K42 R41
    Date: 2009–03
  8. By: Jonas D. M. Fisher; Martin Gervais
    Abstract: We document that home ownership of households with "heads" aged 25 - 44 years fell substantially between 1980 and 2000 and recovered only partially during the 2001-2005 housing boom. The 1980-2000 decline in young home ownership occurred as improvements in mortgage opportunities made it easier to purchase a home. This paper uses an equilibrium life-cycle model calibrated to micro and macro evidence to understand why young home ownership fell over a period when it became easier to own a home. Our findings indicate that a trend toward marrying later and the increase in household earnings risk that occurred after 1980 account for 3/5 to 4/5 of the decline in young home ownership. incompl s
    Keywords: Housing, home ownership, tenure choice, first-time home-buyers, marriage, income risk CL HG2567 C4A8
    Date: 2009
  9. By: Kristopher S. Gerardi; Andreas Lehnert; Shane M. Sherland; Paul S. Willen
    Abstract: This paper explores the question of whether market participants could have or should have anticipated the large increase in foreclosures that occurred in 2007 and 2008. Most of these foreclosures stemmed from loans originated in 2005 and 2006, leading many to suspect that lenders originated a large volume of extremely risky loans during this period. However, the authors show that while loans originated in this period did carry extra risk factors, particularly increased leverage, underwriting standards alone cannot explain the dramatic rise in foreclosures. Focusing on the role of house prices, the authors ask whether market participants underestimated the likelihood of a fall in house prices or the sensitivity of foreclosures to house prices. The authors show that, given available data, market participants should have been able to understand that a significant fall in prices would cause a large increase in foreclosures although loan-level (as opposed to ownership-level) models would have predicted a smaller rise than actually occurred. Examining analyst reports and other contemporary discussions of the mortgage market to see what market participants thought would happen, the authors find that analysts, on the whole, understood that a fall in prices would have disastrous consequences for the market but assigned a low probability to such an outcome. incompl s
    Keywords: subprime, foreclosure, house prices, underwriting standards CL HG2567 A4A5
    Date: 2009
  10. By: Kai Carstensen; Oliver Hülsewig; Timo Wollmershäuser
    Abstract: This paper explores the importance of housing and mortgage market heterogeneity in 13 European countries for the transmission of monetary policy. We use a pooled VAR model which is estimated over the period 1995-2006 to generate impulse responses of key macroeconomic variables to a monetary policy shock. We split our sample of countries into two disjoint groups according to the impact of the monetary policy shock on real house prices. Our results suggest that in countries with a more pronounced reaction of real house prices the propagation of monetary policy shocks to macroeconomic variables is amplified.
    Keywords: Pooled VAR model, house prices, monetary policy transmission, country clusters, sign restrictions
    JEL: C32 C33 E52
    Date: 2009
  11. By: Ingo Fender; Martin Scheicher
    Abstract: This paper investigates the market pricing of subprime mortgage risk on the basis of data for the ABX.HE family of indices, which have become a key barometer of mortgage market conditions during the recent financial crisis. After an introduction into ABX index mechanics and a discussion of historical pricing patterns, we use regression analysis to establish the relationship between observed index returns and macroeconomic news as well as market-based proxies of default risk, interest rates, liquidity and risk appetite. The results imply that declining risk appetite and heightened concerns about market illiquidity - likely due in part to significant short positioning activity - have provided a sizeable contribution to the observed collapse in ABX prices since the summer of 2007. In particular, while fundamental factors, such as indicators of housing market activity, have continued to exert an important influence on the subordinated ABX indices, those backed by AA and AAA exposures have tended to react more to the general deterioration of the financial market environment. This provides further support for the inappropriateness of pricing models that do not sufficiently account for factors such as risk appetite and liquidity risk, particularly in periods of heightened market pressure. In addition, as related risk premia can be captured by unconstrained investors, ABX pricing patterns appear to lend support to government measures aimed at taking troubled assets off banks' balance sheets - such as the US Troubled Asset Relief Program (TARP).
    Keywords: ABX index, mortgage-backed securities, pricing, risk premia
    Date: 2009–03
  12. By: Okubo, Toshihiro (---); Picard, Pierre M. (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE); ---)
    Abstract: In this paper we build a quality-augmented version of an economic geography model where consumers have heterogenous tastes for a set of manufacturing varieties. We discuss a footloose capital model and a footloose entrepreneur model. We show that firms selling the goods with higher values select the region hosting the largest number of consumers. Larger countries thus get better access to the higher quality products. We also show that the effect of spatial selection on firms' spatial distribution crucially depends on the properties of the taste distribution across varieties. Finally, we show that taste heterogeneity smooths the agglomeration patterns but that it should be considered neither as a dispersion force nor as an agglomeration force. Indeed, the introduction of taste heterogeneity makes an initially dispersed economy less dispersed and an initially agglomerated economy less agglomerated.
    Keywords: heterogeneous taste and quality, spatial selection, economic geography, agglomeration, home market effect.
    JEL: F12 F15 R11 R12
    Date: 2008–12
  13. By: Laura Abramovsky (Institute for Fiscal Studies); Helen Simpson (Institute for Fiscal Studies and CMPO, Bristol)
    Abstract: <p><p>We investigate evidence for spatially mediated knowledge transfer from university research. We examine whether firms locate their R&D labs near universities, and whether those that do are more likely to co-operate with, or source knowledge from universities. We find that pharmaceutical firms locate R&D near to frontier chemistry research departments, consistent with accessing localised knowledge spillovers, but also linked to the presence of science parks. In industries such as chemicals and vehicles there is less evidence of immediate co-location, but those innovative firms that do locate near to relevant research departments are more likely to engage with universities.</p></p>
    Keywords: Innovation, geography, spillovers, public research
    JEL: O3 R11 R13 I23
    Date: 2009–01
  14. By: W. Erwin Diewert; Alice O. Nakamura
    Abstract: In this paper, we take stock of how statistical agencies in different nations are currently accounting for housing in their consumer price indexes (CPIs). The rental equivalence and user cost approaches have been favourites of economists. Both can be derived from the fundamental equation of capital theory. Concerns about these approaches are taken up. We go on to argue that an opportunity cost approach is the correct theoretical framework for accounting for owner-occupied housing (OOH) in a CPI. This approach, first mentioned in a 2006 OECD paper by Diewert, is developed more fully here. We explore the relationship of this new approach to the usual rental equivalency and user cost approaches. The new approach leads to an owner-occupied housing opportunity cost (OOHOC) index that is a weighted average of the rental and the financial opportunity costs. ; We call attention to the need for more direct measures of inflation for owner-occupied housing services. In a 2007 paper, Mishkin argues that central banks with supervisory authority can reduce the likelihood of bubbles forming through prudential supervision of the financial system. However, the official mandates of central banks typically focus on managing measured inflation. Barack Obama has pledged to give the Federal Reserve greater oversight of a broader array of financial institutions. We believe that an important addition to this pledge should be to give the BLS, BEA, and Census Bureau the funds and the mandate to aggressively develop improved measures of inflation for owner-occupied housing services. Central banks and national governments have many policy instruments at their disposal that they could use, in the future, to control inflation in housing markets. What they lack are appropriate measures of inflation in the market for owner-occupied housing services. The proposed new opportunity cost measure for accounting for OOH in a CPI will not be simple or cheap to implement. However, the current financial crisis makes it clear that the costs of not having an adequate measure for inflation in the cost of owner-occupied housing services can be far greater.
    Keywords: Durable goods, Consumer ; Consumer price indexes ; Cost of living adjustments ; Housing; Durable goods, Consumer Price Index, Cost of Living Index, Owner Occupied Housing, depreciation, hedonic regression models, rental equivalence approach, acquisitions approach, user cost approach, payments, approach, maintenance and repair, renovations expenditures
    Date: 2009
  15. By: Eric Marcon (AgroParisTech - AgroParisTech, Ecofog - Ecologie des forêts de Guyane - CIRAD : UMR93 - CNRS : UMR2728 - INRA : UR0745 - Université des Antilles-Guyane - Ecole Nationale du Génie Rural des Eaux et des Forêts); Florence Puech (LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat)
    Abstract: This study introduces two new measures of spatial concentration. The proposed M functions constitute an extension to Ripley's functions (Ripley, 1976, 1977). They allow the evaluation of the relative geographic concentration and co-location of industries in a non-homogeneous spatial framework. Some rigorous comparisons with similar recently developed tools prove the relevance of the M functions in the field of spatial economics.
    Keywords: Geographic concentration ; Distance-based methods ; Ripley's K function ; M function
    Date: 2009–04–01
  16. By: CrabbŽ, Karen; VANDENBUSSCHE, Hylke (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Abstract: Tax competition within the EU is Þercer than in the rest of the OECD with tax rates falling rapidly. This paper analyzes tax responses of EU-15 countries to corporate tax changes in the EU-10 new member states as a function of their proximity to these new member states. The average corporate tax rate in the new member states has always been considerably lower than the average in the EU-15 countries. Their entry into the EU eliminated capital barriers, allowing Þrms to locate in one of the new EU-10 with full access to the European Market. Our results indicate that EU-15 countries geographically closer to the new member states respond stronger to corporate tax changes in these new member states. We use a theoretical and a spatial regression framework to test the hypothesis that distance to a low tax region intensiÞes countriesÕ tax reaction functions.
    Keywords: spatial tax competition, corporate taxes, fiscal reaction function.
    JEL: H25 H77 H39
    Date: 2008–12
  17. By: GAUTIER, Axel (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE)); YVRANDE-BILLON, Anne
    Abstract: In the French urban public transport industry, services are often delegated to a private firm by the mean of a fixed-term regulatory contract. This contract specifies the duties of the firm and a financial compensation. When it expires, a new contract is awarded, possibly to a different operator. Cost-plus and fixed-price (gross cost or net cost) contracts are commonly used to regulate the operators in the transport industry. In this paper, we analyse the incentives for the operator to reduce its cost. These incentives come from both the profit maximization during the current contract and the perspective of contract renewal. In our model, the amount of cost-reducing effort depends on the contract type and the time remaining till contract expiration. We use a sample of 124 French urban public transport networks covering the period 1995-2002 to test our predictions. Our proxy for the cost reducing effort is technical efficiency. The data largely confirm the importance of contract type on performances and the incentive effect of contract renewal.
    Keywords: incentive regulation, urban transport, stochastic frontier analysis.
    JEL: L33 L51 L92
    Date: 2008–12
  18. By: Allcott, Hunt; Ortega, Daniel E.
    Abstract: This program evaluation estimates the effects on standardized test scores of graduating from the Fe y Alegría private school system in Venezuela. The authors find an Average Treatment Effect on the order of 0.1 standard deviations (approximately 16 percent of the average score), using a control group of public school students. These effects are significantly larger for households at the bottom of the distribution, and smaller for those at the top. The authors posit that the better performance of the Fe y Alegría system stems from their labor contract flexibility and decentralized administrative structure.
    Keywords: Tertiary Education,Education For All,Secondary Education,Primary Education,Teaching and Learning
    Date: 2009–03–01
  19. By: Floris J. Huétink; Alexander van der Vooren; Floortje Alkemade
    Abstract: Within the Dutch transition policy framework, the transition to hydrogen-based transport is seen as a promising option towards a sustainable transport system. This transition requires the build-up of a hydrogen infrastructure as a certain level of refuelling infrastructure is necessary before (even the most innovative or environmentally friendly) consumers will substitute their conventional car for a hydrogen vehicle (Dunn 2002). This is often referred to as the chicken-and-egg problem of infrastructure development. However, the build-up of infrastructure is costly and irreversible and it is therefore important for policymakers to gain insight in the minimally required levels of initial infrastructure that will still set off the transition. In this paper we therefore present a diffusion model for the analysis of the effects of different strategies for hydrogen infrastructure development on hydrogen vehicle fleet penetration. Within the simulation model, diffusion patterns for hydrogen vehicles were created through the interactions of consumers, refuelling stations and technological learning. We compare our results to the benchmark patterns derived from the hydrogen roadmap. The strategies for initial infrastructure development differ with respect to the placement (urban or nationwide) and the number of initial refuelling stations. Simulation results indicate that when taking social learning between consumers into account, diffusion is generally lower than in the benchmark patterns. Furthermore, simulation results indicate that a nationwide deployment strategy generally leads to faster diffusion of hydrogen vehicles than a strategy focused on urban areas. These demand side aspects of the transition to sustainable mobility are considered especially important in the Netherlands since besides the high cost associated with infrastructure investment the Netherlands do not have a domestic car industry so that policy measures will most likely focus on infrastructure and consumers. Increased insights in the relation between infrastructure development strategies and hydrogen vehicle diffusion are thus necessary to further manage the transition to sustainable mobility.
    Keywords: transition management, sustainable mobility
    Date: 2009–03
  20. By: Hugo Nopo; Natalia Winder
    Abstract: This study analyzes social mobility and human capital accumulation among ethnic minorities in Mexican urban areas, exploring changes in educational attainment and labor market status and using panel data from the Mexican Family Life Survey (MFxLS). The results indicate important ethnic differences in human capital accumulation patterns, especially in education, where non-indigenous individuals seem to accumulate human capital more rapidly than individuals of indigenous descent. Also, key socio-demographic characteristics linked to those patterns of human capital accumulation seem to differ between indigenous and non-indigenous individuals. In particular, for indigenous peoples in urban areas, human capital accumulation and wealth accumulation seem to work as substitutes rather than complements in the short run.
    Keywords: Social mobility, human capital accumulation, education, ethnic minorities, urban areas, Mexico
    JEL: D13 J15 O18
    Date: 2008–12
  21. By: Dahlby, Bev (University of Alberta, Department of Economics); Rodden, Jonathan (Stanford University); Wilson, Sam (University of Alberta, Department of Economics)
    Abstract: A median voter model is developed to explain the size of the vertical fiscal gap in a federation, i.e. the extent to which subnational governments' expenditures exceed their own-source tax revenues. In our model, individuals vote in subnational elections and in federal elections to determine tax rates and spending on public services by each level of government and transfers to the subnational governments. In the resulting political equilibrium, intergovernmental transfers from the central government are affected by the tax sensitivity of the tax bases of the central and subnational governments, the degree of inequality in the tax bases of the subnational governments, the allocation of spending responsibilities between the central and subnational governments, and whether the federal legislature is unicameral or bicameral.
    Keywords: intergovernmental grants; median voter model; fiscal federalism; vertical fiscal gap; vertical fiscal imbalance
    JEL: H71 H72 H77
    Date: 2009–01
  22. By: Sharon Kukla-Acevedo (Deparment of Political Science, Central Michigan University); Megan Streams (College of Public Service and Urban Affairs, Tennessee State University); Eugenia F. Toma (Martin School of Public Policy and Administration, University of Kentucky)
    Abstract: Title II of the Higher Education Act requires states to evaluate their teacher preparation programs (TPPs). In response, many states have introduced measures to evaluate TPPs similar to the ways in which they are evaluating K-12 schools. Some states, including Kentucky, have initiated pilot projects to assess the feasibility of statewide TPP evaluations. This paper stems from the Kentucky initiative and addresses methodological and data issues raised by the efforts to evaluate teacher preparation programs. This paper identifies some of the conceptual and empirical challenges of TPP evaluations. The purpose of this exercise is to serve as a model of learning for scholars interested in TPP evaluation and for policymakers and practitioners who are considering similar types of evaluations for their states.
    Keywords: Teacher preparation, evaluation, student achievement
    Date: 2009–03
  23. By: Makowsky, Michael; Thomas, Stratmann
    Abstract: Traffic accidents are one of the leading causes of injury and death in the U.S. The role of traffic law enforcement in the reduction of accidents has been studied by relatively few papers and with mixed results that may be due to a simultaneity problem. Traffic law enforcement may reduce accidents, but police are also likely to be stricter in accident-prone areas. We use municipal budgetary shortfalls as an instrumental variable to identify the effect of traffic citations on traffic safety and show that budgetary shortfalls lead to more frequent issuance of tickets to drivers. Using a panel of municipalities in Massachusetts, we show that increases in the number of tickets written reduce motor vehicle accidents and accident related injuries, and that tickets issued to younger drivers have a larger effect in reducing accidents. The findings show that failure to control for endogeneity results in a significant underestimation of the positive impact of law enforcement on traffic safety.
    Keywords: accidents; safety; law enforcement; simultaneity
    JEL: K32 H71 K42 C33
    Date: 2008–11–28
  24. By: Michael Paffermayr
    Abstract: This paper suggests that one should account for the endogeneity of important explanatory variables and the persistence of technology shocks when analyzing spatial convergence among regions.Specifically, it is argued that a systems approach is called for that includes the average growth rate and the initial income level as the endogenous variables. For 212 European regions the estimation results reveal a substantial correlation between the disturbances of the equation explaining initial income per capita and that of its subsequent average growth rate. Moreover, the estimated speed of convergence is found substantially higher in a systems framework. This holds true for both spatial conditional and unconditional convergence.
    Keywords: Spatial beta-convergence, Spatial Solow model, Spatial systems maximum likelihood estimation, Europeanregions
    JEL: R11 C31 O47
    Date: 2009–03
  25. By: Peter Robinson (Institute for Fiscal Studies and London School of Economics)
    Abstract: <p>We consider cross-sectional data that exhibit no spatial correlation, but are feared to be spatially dependent. We demonstrate that a spatial version of the stochastic volatility model of financial econometrics, entailing a form of spatial autoregression, can explain such behaviour. The parameters are estimated by pseudo Gaussian maximum likelihood based on log-transformed squares, and consistency and asymptotic normality are established. Asymptotically valid tests for spatial independence are developed.</p>
    Date: 2008–10
  26. By: Dahlby, Bev (University of Alberta, Department of Economics)
    Abstract: Does democracy lead to the creation of too many municipalities? We analyze this issue within the context of the Alesina and Spolare (1996) model where the quality of municipal services deteriorates with the distance from the center of a municipality. Individuals can vote in a referendum to split an existing municipality. We show that social welfare will decline when municipalities are split if the level of the public service, as chosen by the median voter, is lower in the new smaller municipalities. In general, the model indicates that there may be a democratic bias in favour of creating too many municipalities.
    Keywords: median voter model; fiscal federalism; succession; municipal boundaries
    JEL: H71 H72 H77
    Date: 2009–02
  27. By: Daniele, Vittorio
    Abstract: The aim of this paper is twofold. Firstly, it examines the evolution of regional disparities among the Italian regions during the period 1980-2007. Secondly, the paper analyses the relationship between public spending and regional productivity growth. This analysis is based on the Regional Public Accounts (RPA), a detailed database which measures public financial flows at the territorial level for the period 1996-2006. Results show how the process of both σ and β convergence has mainly concerned labour productivity, while the convergence in per capita GDP has been very weak. The impact of public spending has been different, depending on the expenditure categories and the regions considered. While in the more developed regions of the Northern area of Italy we found a positive correlation between capital expenditure and growth, in the less developed Mezzogiorno the correlation was found only for current expenditure.
    Keywords: Italy; regional convergence; development policy.
    JEL: R58 O18 R38
    Date: 2009–03–29
  28. By: Dahlby, Bev (University of Alberta, Department of Economics)
    Abstract: A lump-sum intergovernmental transfer has a "price effect", as well as an "income effect", because it allows the recipient government to reduce its tax rate, which lowers its marginal cost of public funds, while still providing the same level of public service. This reduction in the effective price of providing the public service helps to explain the "flypaper effect" - the empirical observation that a lump-sum grant has a much larger effect on spending than an increase in personal income. Contrary to the assertions of Mieszkowski (1994) and Hines and Thaler (1995), a model of a benevolent local government financing its expenditures with a distortionary tax predicts flypaper effects from lump-sum grants that are similar to those observed in many econometric studies
    Keywords: flypaper effect; marginal cost of public funds; intergovernmental grants; fiscal federalism
    JEL: H71 H72 H77
    Date: 2009–01
  29. By: Simon Loertscher; Andras Niedermayer
    Abstract: Mechanisms where intermediaries charge a commission fee and have the sellers set the price are widely used in practice e.g. by real estate agents, stock brokers, art galleries, or auction houses. We model competition between intermediaries in a dynamic random matching model, where in every period a buyer, a seller, and an intermediary are randomly matched. In any period, every intermediary has a temporary monopoly and designs an exchange mechanism that maximizes his own expected profits. Traders’ valuations for the indivisible good depend on their option value of future trade. The following results obtain. First, we show that the intermediary can achieve the highest possible profit with a fee setting mechanism. Second, we characterize when these fees are linear. Third, fee setting is an equilibrium outcome in a dynamic market. Fourth, when the rematching probability increases or, equivalently, the period length decreases, the equilibrium fees become smaller. Our model is applicable to stock brokers and auction houses as intermediaries. It can further explain several of the stylized facts observed in real estate brokerage, such as the 6 percent fee, the relation between listing price and time on market, inefficient free entry, higher prices for houses owned by brokers, and home owners who bought during a boom asking higher prices. We also provide various extensions.
    Keywords: brokers, applied mechanism design, linear commission fees, optimal indirect mechanisms, internet auctions, auction houses.
    JEL: C72 C78 L13
    Date: 2008–11

This nep-ure issue is ©2009 by Steve Ross. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.