nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2009‒06‒03
twenty-one papers chosen by
Steve Ross
University of Connecticut

  1. The Swiss Housing Market By Steven C. BOURASSA; Martin HOESLI; Donato SCOGNAMIGLIO
  2. Keeping the Bubble Alive! The Effects of Urban Renewal and Demolition Subsidies in the East German Housing Market By Dominik Weiß
  3. The Effect of Classmate Characteristics on Individual Outcomes: Evidence from the Add Health By Robert Bifulco; Jason M. Fletcher; Stephen L. Ross
  4. Survival of the Fittest in Cities: Agglomeration, Polarization, and Income Inequality By Kristian Behrens; Frédéric Robert-Nicoud
  5. A Quantitative Analysis of Suburbanization and the Diffusion of the Automobile By Karen A. Kopecky; Richard M. H. Suen
  6. Migrants at School: Educational Inequality and Social Interaction in the UK and Germany By Entorf, Horst; Tatsi, Eirini
  7. International shocks and national house prices By Andrea Beltratti; Claudio Morana
  8. Housing and the Labor Market: Time to Move and Aggregate Unemployment By Rupert, Peter; Wasmer, Etienne
  9. Globalisation: Countries, Cities and Multinationals By Philip McCann; Zoltan J. Acs
  10. Standard-Setting and Knowledge Dynamics in Innovation Clusters By Julian P. Christ; André P. Slowak
  11. Financial Bubbles, Real Estate bubbles, Derivative Bubbles, and the Financial and Economic Crisis By Didier SORNETTE; Ryan WOODARD
  12. Using Large Data Sets to Forecast Housing Prices: A Case Study of Twenty US States By Rangan Gupta; Alain Kabundi; Stephen M. Miller
  13. Determinants and consequences of property tax collection in Mexico By Daniel Broid
  14. Restructuring Facility Networks under Economy of Scales By Marta Sofia R. Monteiro; Dalila B. M. M. Fontes; Fernando A. C. C. Fontes
  15. Tax Competition with Heterogeneous Firms By Richard E. Baldwin; Toshihiro Okubo
  16. Performance and ownership in the governance of urban water By Miguel A. García-Rubio; Francisco González-Gómez; Jorge Guardiola
  17. Predicting Securitized Real Estate Returns: Financial and Real Estate Factors vs. Economic Variables By Camilo SERRANO; Martin HOESLI
  18. Equity Effects of Road Pricing, A Review By David Levinson
  19. Housing policy in developing countries. The importance of the informal economy By Richard Arnott
  20. The core-periphery model with three regions By Sofia B. S. D. Castro; Joao Correia-da-Silva; Pascal Mossay
  21. A Fixed-Effects Analysis of How Income Inequality in a Municipality Affects Individual Mortality in Norway By Kravdal, Øystein

  1. By: Steven C. BOURASSA (University of Louisville); Martin HOESLI (University of Geneva, University of Aberdeen and Bordeaux Management School); Donato SCOGNAMIGLIO (IAZI / CIFI)
    Abstract: In contrast to many other countries, Switzerland generally has not seen soaring house prices in the 2000s and house prices have only recently started to diminish slightly. Also, Swiss authorities do not engage in trying to increase the homeownership rate much above its current relatively low level of 37.5%. In this paper, we present the main aspects of housing policy and finance in Switzerland which can help to explain these idiosyncrasies. We also analyze house prices and rents, and construct an index of residential land prices. The policies which are discussed in this paper may be useful to housing policy makers in other countries.
    Keywords: Housing policy, housing finance, house prices, rents, taxation, homeownership,Switzerland
    JEL: R31
    Date: 2009–05
  2. By: Dominik Weiß
    Abstract: German urban renewal programs are favoring the cities in the Eastern part since the re-unification in 1990. This was accompanied additionally by attractive tax incentives, designed as an accelerated declining balance method of depreciation for housing investments during the late 1990s. The accumulated needs for comfortable housing after 40 years of a disastrous housing policy of the GDR era were generally accepted as justification for the subvention policy. But various subsidies and tax incentives caused a construction boom, false allocations, and a price bubble in Eastern Germany. After recognizing that the expansion of housing supply was not in line with the demographic development and that high vacancy rates were jeopardizing housing companies and their financial backers, policy changed in 2001. Up to now, the government provides demolition grants to reduce the vast oversupply. By means of a real option approach, it is ex-plained how different available forms of subsidies and economic incentives for landlords lift real estate values. The option value representing growth expectations and opportunities is calculated as an observable market value less an estimated fundamental value. Empirical results disclose higher option premiums for cities in Eastern Germany and a strong correlation of the option premium with urban renewal spending.
    Date: 2009–05
  3. By: Robert Bifulco (Syracuse University); Jason M. Fletcher (Yale University); Stephen L. Ross (University of Connecticut)
    Abstract: We use data from the National Longitudinal Study of Adolescent Health (Add Health) to examine the effects of classmate characteristics on economic and social outcomes of students. The unique structure of the Add Health allows us to estimate these effects using comparisons across cohorts within schools, and to examine a wider range of outcomes than other studies that have used this identification strategy. This strategy yields variation in cohort composition that is uncorrelated with student observables suggesting that our estimates are not biased by the selection of students into schools or grades based on classmate characteristics. We find that increases in the percent of classmates whose mother is college educated has significant, desirable effects on educational attainment and substance use. We find no evidence that in-school achievement, student attitudes, or behaviors serve as mechanisms for this effect. The percent of students from disadvantaged minority groups does not show any negative effects on the post-secondary outcomes we examine, but is associated with students reporting less caring student-teacher relationships and increased prevalence of some undesirable student behaviors during high school.
    Keywords: Education, Peer Effects, Cohort Study, Substance Abuse
    JEL: I21 I19 J13 J15
    Date: 2009–06
  4. By: Kristian Behrens; Frédéric Robert-Nicoud
    Abstract: Using a large sample of US urban areas, we provide systematic evidence that mean household income rises with city ('agglomeration'), that this effect is stronger for the top of the income distribution ('polarization'), and that household income inequality increases at a decreasing rate in city size ('inequality'). To account simultaneously for these facts, we develop a microfounded model of endogenous city formation in which urban centres select the most productive agents. Income inequality is driven by both the 'poverty' and the 'superstar' margins: whereas the least productive agents fail in a tougher urban environment, which increases 'poverty', the most productive agents become 'superstars' who reap the benefits from a larger urban market. At equilibrium, the returns to skills are increasing in city size, thereby dilating the income distribution. Our model is both rich and tractable enough to allow for a detailed investigation of when cities emerge, what determines their size, how they interact through the channels of trade, and how inter-city trade influences intra-city income inequality.
    Keywords: City size, agglomeration, income inequality, heterogeneity, firm selection
    JEL: D31 F12 R11 R12
    Date: 2009
  5. By: Karen A. Kopecky (Department of Economics, The University of Western Ontario); Richard M. H. Suen (Department of Economics, University of California Riverside)
    Abstract: Suburbanization in the U.S. between 1910 and 1970 was concurrent with the rapid diffusion of the automobile. A circular city model is developed in order to access quantitatively the contribution of automobiles and rising incomes to suburbanization. The model incorporates a number of driving forces of suburbanization and car adoption, including falling automobile prices, rising real incomes, changing costs of traveling by car and with public transportation, and urban population growth. According to the model, 60 percent of postwar (1940-1970) suburbanization can be explained by these factors. Rising real incomes and falling automobile prices are shown to be the key drivers of suburbanization.
    Keywords: automobile; suburbanization; population density gradients; technological progress
    JEL: E10 O11 N12 R12
    Date: 2009–01
  6. By: Entorf, Horst (University of Frankfurt); Tatsi, Eirini (University of Frankfurt)
    Abstract: We test potential social costs of educational inequality by analysing the influence of spatial and social segregation on educational achievements. In particular, based on recent PISA data sets from the UK and Germany, we investigate whether good neighbourhoods with a relatively high stock of social capital lead to larger 'social multipliers' than neighbourhoods with low social capital. Estimated 'social multipliers' are higher for the German early tracking schooling system than for comprehensive schools in the UK. After aggregating data and employing the Oaxaca-Blinder decomposition, the results suggest that the educational gap between natives and migrants is mainly due to the 'endowment effect' provided by the socioeconomic background of parents and cultural capital at home. Some adverse 'integration effects' do exist for female migrants in Germany who lose ground on other groups.
    Keywords: peer effects, identification, social interaction, reflection problem, empirical analysis, education, migrants
    JEL: I20 J15 J18 O15 Z13
    Date: 2009–05
  7. By: Andrea Beltratti; Claudio Morana
    Abstract: The paper investigates linkages between general macroeconomic conditions and the housing market for the G-7 area. Among the key results of the paper, it is found that the US are an important source of global fluctuations not only for real activity, nominal variables and stock prices, but also for housing prices. Yet, also regional factors may be relevant to account for house prices dynamics. Secondly, albeit distinct driving forces for real activity and ?nancial factors can be pointed out, sizeable global interactions can be found. In particular, global supply-side shocks are found to be important determinant of G-7 house prices fluctuations. The linkage between housing prices and macroeconomic developments is however bidirectional, since evidence of signi?cant wealth e¤ects can be found, with investment showing in general a stronger reaction than consumption and output.
    Keywords: G7, house prices, international business cycle, factor vector autoregressive models, common factors
    JEL: C22 E31 E32
    Date: 2008–06
  8. By: Rupert, Peter (University of California, Santa Barbara); Wasmer, Etienne (Sciences Po, Paris)
    Abstract: The Mortensen-Pissarides model with unemployment benefits and taxes has been able to account for the variation in unemployment rates across countries but does not explain why geographical mobility is very low in some countries (on average, three times lower in Europe than in the U.S.). We build a model in which both unemployment and mobility rates are endogenous. Our findings indicate that an increase in unemployment benefits and in taxes does not generate a strong decline in mobility and accounts for only half to two-thirds of the difference in unemployment from the US to Europe. We find that with higher commuting costs the effect of housing frictions plays a large role and can generate a substantial decline in mobility. We show that such frictions can account for the differences in unemployment and mobility between the US and Europe.
    Keywords: labor search frictions, unemployment, housing market imperfections, commuting costs
    JEL: J30 J60 R20
    Date: 2009–05
  9. By: Philip McCann (University of Waikato NZ; University of Reading UK; University of Groningen, The Netherlands); Zoltan J. Acs (George Mason University)
    Abstract: In this paper we explore the relationship between the size of a country, the size of its cities, and the economic performance of the country. In order to do this we integrate three different literature, namely the literature on optimal country size, literature on historical processes of urbanisation and the performance of cities, and literature on the role of multinational firms in the global economy. Using an economic geography perspective, we demonstrate that the relationship between city-size and the prosperity of the nation state, to a much more complex set of relationships. In the modern era of globalisation the role of global companies within the city-region is critical, and city-regions in turn are seen to drive national economies. As such, the relationships between firms, cities and countries have been largely reversed, casting doubt on various institutional economic theories.
    Keywords: scale, cities, countries, multinational firms, globalisation
    JEL: R12 F23 N90 O33
    Date: 2009–06–04
  10. By: Julian P. Christ (Universität Hohenheim); André P. Slowak (Universität Hohenheim)
    Abstract: Extensive research has been conducted on how firms and regions take advantage of spatially concentrated assets, and also why history matters to regional specialisation patterns. In brief, it seems that innovation clusters as a distinctive regional entity in international business and the geography of innovation are of increasing importance in STI policy, innovation systems and competitiveness studies. Recently, more and more research has contributed to an evolutionary perspective on collaboration in clusters. Nonetheless, the field of cluster or regional innovation systems remains a multidisciplinary field where the state of the art is determined by the individual perspective (key concepts could, for example, be industrial districts, innovative clusters with reference to OECD, regional knowledge production, milieus & sticky knowledge, regional lock-ins & path dependencies, learning regions or sectoral innovation systems). According to our analysis, the research gap lies in both quantitative, comparative surveys and in-depth concepts of knowledge dynamics and cluster evolution. Therefore this paper emphasises the unchallenged in-depth characteristics of knowledge utilisation within a cluster’s collaborative innovation activities. More precisely, it deals with knowledge dynamics in terms of matching different agents´ knowledge stocks via knowledge flows, common technology specification (standard-setting), and knowledge spillovers. The means of open innovation and system boundaries for spatially concentrated agents in terms of knowledge opportunities and the capabilities of each agent await clarification. Therefore, our study conceptualises the interplay between firm- and cluster-level activities and externalities for knowledge accumulation but also for the specification of technology. It remains particularly unclear how, why and by whom knowledge is aligned and ascribed to a specific sectoral innovation system. Empirically, this study contributes with several descriptive calculations of indices, e.g. knowledge stocks, GINI coefficients, Herfindahl indices, and Revealed Patent Advantage (RPA), which clearly underline a high spatial concentration of both mechanical engineering and biotechnology within a European NUTS2 sample for the last two decades. Conceptually, our paper matches the geography of innovation literature, innovation system theory, and new ideas related to the economics of standards. Therefore, it sheds light on the interplay between knowledge flows and externalities of cluster-specific populations and the agents’ use of such knowledge, which is concentrated in space. We find that knowledge creation and standard-setting are cross-fertilising each other: although the spatial concentration of assets and high-skilled labour provides new opportunities to the firm, each firm’s knowledge stocks need to be contextualised. The context in terms of ‘use case’ and ‘knowledge biography’ makes technologies (as represented in knowledge stocks) available for collaboration, but also clarifies relevance and ownership, in particular intellectual property concerns. Owing to this approach we propose a conceptualisation which contains both areas with inter- and intra-cluster focus. This proposal additionally concludes that spatial and technological proximity benefits standard-setting in high-tech and low-tech industries in very different ways. More precisely, the versatile tension between knowledge stocks, their evolution, and technical specification & implementation requires the conceptualisation and analysis of a non-linear process of standard-setting. Particularly, the use case of technologies is essential. Related to this approach, clusters strongly support the establishment of technology use cases in embryonic high-tech industries. Low-tech industries in contrast rather depend on approved knowledge stocks, whose dynamics provide better and fast accessible knowledge inputs within low-tech clusters.
    Keywords: innovation clusters, standard-setting, knowledge externalities and flows, knowledge alignment, mechanical engineering, biotechnology
    JEL: D89 L22 M20 O32
    Date: 2009–01
  11. By: Didier SORNETTE (ETH Zurich and Swiss Finance Institute); Ryan WOODARD (ETH Zurich)
    Abstract: The financial crisis of 2008, which started with an initially well-defined epicenter focused on mortgage backed securities (MBS), has been cascading into a global economic recession, whose increasing severity and uncertain duration has led and is continuing to lead to massive losses and damage for billions of people. Heavy central bank interventions and government spending programs have been launched worldwide and especially in the USA and Europe, with the hope to unfreeze credit and boltster consumption. Here, we present evidence and articulate a general framework that allows one to diagnose the fundamental cause of the unfolding financial and economic crisis: the accumulation of several bubbles and their interplay andmutual reinforcement has led to an illusion of a “perpetual money machine” allowing financial institutions to extract wealth from an unsustainable artificial process. Taking stock of this diagnostic, we conclude that many of the interventions to address the so-called liquidity crisis and to encourage more consumption are ill-advised and even dangerous, given that precautionary reserves were not accumulated in the “good times” but that huge liabilities were. The most “interesting” present times constitute unique opportunities but also great challenges, for which we offer a few recommendations.
    Keywords: Financial crisis, bubbles, real estate, derivatives, out-of-equilibrium, super-exponential growth, crashes, complex systems
    JEL: O16
  12. By: Rangan Gupta (Department of Economics, University of Pretoria); Alain Kabundi (Department of Economics and Econometrics, University of Johannesburg); Stephen M. Miller (College of Business, University of Las Vegas, Nevada)
    Abstract: We implement several Bayesian and classical models to forecast housing prices in 20 US states. In addition to standard vector-autoregressive (VAR) and Bayesian vector autoregressive (BVAR) models, we also include the information content of 308 additional quarterly series in some models. Several approaches exist for incorporating information from a large number of series. We consider two approaches – extracting common factors (principle components) in a Factor-Augmented Vector Autoregressive (FAVAR) or Factor-Augmented Bayesian Vector Autoregressive (FABVAR) models or Bayesian shrinkage in a large-scale Bayesian Vector Autoregressive (LBVAR) models. In addition, we also introduce spatial or causality priors to augment the forecasting models. Using the period of 1976:Q1 to 1994:Q4 as the in-sample period and 1995:Q1 to 2003:Q4 as the out-of-sample horizon, we compare the forecast performance of the alternative models. Based on the average root mean squared error (RMSE) for the one-, two-, three-, and four–quarters-ahead forecasts, we find that one of the factor-augmented models generally outperform the large-scale models in the 20 US states examined in this paper.
    Keywords: Housing prices, Forecasting, Factor Augmented Models, Large-Scale BVAR models
    JEL: C32 R31
    Date: 2009–05
  13. By: Daniel Broid (Secreataría de Hacienda y Crédito Público (SHCP))
    Abstract: In this presentation, I will investigate the determinants of property tax collection in Mexico. The tax is paid by all owners of land and dwellings in Mexico for the right of holding their properties, and is collected and managed by municipal authorities at the local level. This type of tax has attractive economic features such as efficiency, progressiveness, and good capacity to finance local public goods. However, the amount of public funds that are raised through the collection of this tax are extremely low. This presentation will describe the main results of the study and show how Stata was used to perform the analysis.
    Date: 2009–06–05
  14. By: Marta Sofia R. Monteiro (Faculdade de Economia, Universidade do Porto, LIAAD-INESC L.A.,UP); Dalila B. M. M. Fontes (Faculdade de Economia, Universidade do Porto, LIAAD-INESC L.A.,UP); Fernando A. C. C. Fontes (Faculdade de Engenharia, Universidade do Porto, ISR-Porto, UP)
    Abstract: In this work we address the facility network restructuring problem. This problem is closely related to location/allocation and set covering problems. However, none of the above includes all its complexity nor involves all the decision types. Due to the presence of economies of scale, another type of complexity arises since we must minimize a concave cost function. Therefore we are extending current literature by considering a new problem. For this problem a local search heuristic is proposed, where an initially feasible solution, obtained by solving a related linear problem, is improved by a slope scaling procedure and then by drop and swap operations. Computational results showing the effectiveness and efficiency of the solution procedure are reported.
    Keywords: Location, Allocation, Covering, Concave Optimization, Heuristics
    JEL: C61 C44
    Date: 2009–06
  15. By: Richard E. Baldwin (Graduate Institute, Geneva); Toshihiro Okubo (Research Institute for Economics and Business Administration, Kobe University)
    Abstract: This paper studies tax competition in a setting that allows for agglomeration economies and heterogeneous firms. We find that the Nash equilibrium involves the large country charging a higher tax than the small nation, with this rate being too low from a social point of view. Tighter integration of markets leads to an intensification of competition, a drop in Nash tax rates, and a narrowing of the gap. Since large, productive firms are naturally more sensitive to tax difference in our model, large firms are the crux of tax competition in our model. This also means that tax competition has consequences for the average productivity of the big and small nations' industry; by lowering tax rates, the small nation can attract high-productivity firms.
    Keywords: Firm heterogeneity, Nash equilibrium tax, Stackelberg equilibrium tax, collusion, average productivity
    JEL: H32 P16
    Date: 2009–03
  16. By: Miguel A. García-Rubio (Universidad de Granada. Deparment of Applied Economics); Francisco González-Gómez (Universidad de Granada. Deparment of Applied Economics); Jorge Guardiola (Universidad de Granada. Deparment of Applied Economics)
    Abstract: In this paper the differences in terms of performance between public and the private governance in urban water management are investigated. A statistical ranking is implemented to determine programmatic efficiency differences in DEA, using an incomplete panel data that gathers information on 20 water utilities in Andalusia, in Southern Spain. In the model, labour and operational costs are considered as inputs. The volume of revenue water, the number of connections and the network length are used as outputs. The analysis indicates that private management is more efficient. The efficiency indicators adjusted by a variable related to quality are estimated and demonstrate that privatization of the service does not mean any loss in terms of quality. However, there are no significant differences between both types of management including as a desirable input hydraulic yield as a proxy of the degree of network renovation. A lower hydraulic efficiency in private management would suggest that the need to make significant investments could be an important factor when making the decision to privatize the management of the urban water service
    Keywords: : Water supply; Management; Local government;
    Date: 2009–06–02
  17. By: Camilo SERRANO (University of Geneva); Martin HOESLI (University of Geneva (HEC and SFI), University of Aberdeen, Bordeaux Ecole de Management)
    Abstract: Securitized real estate returns have traditionally been forecasted using economic variables. However, no consensus exists regarding the variables to use. Financial and real estate factors have recently emerged as an alternative set of variables useful in forecasting securitized real estate returns. This paper examines whether the predictive ability of the two sets of variables differs. We use fractional cointegration analysis to identify whether long-run nonlinear relations exist between securitized real estate and each of the two sets of forecasting variables. That is, we examine whether such relationships are characterized by long memory, short memory, mean reversion (no long-run effects) or no mean reversion (no long-run equilibrium). Empirical analyses are conducted using data for the U.S., the U.K., and Australia. The results show that financial and real estate factors generally outperform economic variables in forecasting securitized real estate returns. Long memory (long-range dependence) is generally found between securitized real estate returns and stocks, bonds, and direct real estate returns, while only short memory is found between securitized real estate returns and the economic variables. Such results imply that to forecast securitized real estate returns, it may not be necessary to identify the economic variables that are related to changing economic trends and business conditions.
    Keywords: Fractional Cointegration, Fractionally Integrated Error Correction Model (FIECM), Forecasting, Multifactor Models, Securitized Real Estate, REITs
    JEL: G11 C53
    Date: 2009–03
  18. By: David Levinson (Nexus (Networks, Economics, and Urban Systems) Research Group, Department of Civil Engineering, University of Minnesota)
    Abstract: Are road pricing strategies regressive or progressive? This is a question that has been confronting researchers, practitioners, and policy-makers who seek to implement new mechanisms to raise funds for transportation while simultaneously managing demand. The theoretical literature is mixed, as is the empirical literature. In part this has to do with the various types of road pricing strategies that are being debated, different definitions of equity, and alternative assumptions about revenue recycling. Despite this seeming complexity, the literature is clear that equity issues are addressable. This paper provides a synthesis of the literature to date on both the theory of equity, as applied to road pricing, and the findings of empirical and simulation studies of the effects of particular implementations of road pricing, and suggested remedies for real or perceived inequities. To summarize, while there are certainly potential issues with equity associated with road pricing, those issues can be addressed with intelligent mechanism design that provides the right incentives to travelers and uses the raised revenues in a way to achieve desired equitable ends. These include cutting other taxes and investing in infrastructure and services.
    JEL: R41 R42 R48 D02 D63
    Date: 2009
  19. By: Richard Arnott (Department of Economics, University of California Riverside)
    Abstract: All countries have a formal economy and an informal economy. But, on average, in developing countries the relative size of the informal sector is considerably larger than in developed countries. This paper argues that this has important implications for housing policy in developing countries. That most poor households derive their income from informal employment effectively precludes income-contingent transfers as a method of redistribution. Also, holding fixed real economic activity, the larger is the relative size of the informal sector, the lower is fiscal capacity, and the more distortionary is government provision of a given level of goods and services, which restricts the desirable scale and scope of government policy. For the same reasons, housing policies that have proven successful in developed countries may not be successful when employed in developing countries.
    Date: 2008–01
  20. By: Sofia B. S. D. Castro (Faculdade de Economia and Centro de Matematica, Universidade do Porto); Joao Correia-da-Silva (CEF.UP and Faculdade de Economia, Universidade do Porto); Pascal Mossay (School of Economics, Henley Business School, University of Reading and Departamento de Fundamentos del Analisis Economico, Universidad de Alicante.)
    Abstract: We study a 3-region core-periphery model à la Krugman and compare our results with those of the standard 2-region model. The conditions for the stability of the dispersion and concentration configurations are established. Like in the 2-region model, dispersion and concentration can be simultaneously stable. We show that the 2- region (3-region) model favors the dispersion (concentration) of economic activity. Finally, we extend the core-periphery model to the case of n regions and show that stability of concentration with 2 regions implies stability of concentration with any even number of regions.
    Keywords: new economic geography, core-periphery
    JEL: R12 R23
    Date: 2009–06
  21. By: Kravdal, Øystein (Department of Economics)
    Abstract: There is still much uncertainty about the impact of income inequality on health and mortality. Some studies have supported the original hypothesis about adverse effects, while others have shown no effects, and a few even indicated beneficial effects. In this investigation, register data covering the entire Norwegian population were used to estimate how income inequality in the municipality of residence, measured by the Gini coefficient, affected mortality in men and women aged 30-89 in the years 1980- 2002, net of their individual incomes. The total exposure time was about 55 million person years, and there were about 850000 deaths. Adverse effects were estimated when individual and average income and some other commonly used control variables were included in the models. However, because there are annual measurements in each municipality, the data provide a rare opportunity to include also municipality fixed-effects, to pick up time-invariant unobserved factors at that level. When this was done, there was actually more evidence for beneficial than for adverse effects. In addition to illustrating the potential importance of the fixed-effects approach, these findings should add to the scepticism about the existence of harmful health effects of income inequality, and especially in a Nordic context.
    Keywords: Fixed-effects; Gini; Income; Inequality; Mortality; Municipality; Norway; Register
    JEL: J01
    Date: 2009–06–04

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