nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2009‒08‒30
33 papers chosen by
Steve Ross
University of Connecticut

  1. Human Capital, Talent, Agglomeration and Regional Growth By Karlsson, Charlie; Johansson, Börje; Stough, Roger R.
  2. The role of the housing market in the migration response to employment shocks By Jeffrey Zabel
  3. Housing market heterogeneity in a monetary union By Margarita Rubio
  4. Revisiting the School Choice Debate in Chile By Bernardo Lara; Alejandra Mizala; Andrea Repetto
  5. The geography of research and development activity in the U.S. By Kristy Buzard; Gerald Carlino
  6. The Beveridge Curve in the Housing Market: Supply and Disequilibrium By Brian Peterson
  7. Spatial competition for passengers and its influence on efficiency of European airports By Pavlyuk, Dmitry
  8. Social stratification and out-of-school learning By Andersson, Christian; Johansson, Per
  9. Dynamics of neighborhood formation and segregation by income By Osiris Jorge, Parcero; Adolfo, Cristobal-Campoamor
  10. Agglomeration Externalities and Entrepreneurship - micro-level evidence from Sweden By Baltzopoulos, Apostolos
  11. Lock-in effects of road expansion on CO2 emissions : results from a core-periphery model of Beijing By Anas, Alex; Timilsina, Govinda R.
  12. Katrina's Children: Evidence on the Structure of Peer Effects from Hurricane Evacuees By Scott Imberman; Adriana D. Kugler; Bruce Sacerdote
  13. A spatial multilevel analysis of Italian SMEs Productivity By Giorgio Fazio; Davide Piacentino
  14. FIRM ENTRY, FIRM EXIT, AND URBAN-BIASED GROWTH By Yu, Li; Jolly, Robert W.; Orazem, Peter
  15. Effects of Class Size on Achievement of College Students By De Paola, Maria; Scoppa, Vincenzo
  16. Do Universities Generate Agglomeration Spillovers? Evidence from Endowment Value Shocks By Shawn Kantor; Alexander Whalley
  17. Spatial Effects of Foreign Direct Investment in US States By Eckhardt Bode; Peter Nunnenkamp; Andreas Waldkirch
  18. Artistic Clusters and Modern Artists’ Mobility - An Empirical Study By Christiane Hellmanzik, Department of Economics and IIIS, Trinity College Dublin
  19. What Determines the Attractiveness of EU Regions to the Location of Multinational Firms in the ICT Sector? By Siedschlag, Iulia; Zhang, Xiaoheng; Smith, Donal
  20. The Firm and the Region as Breeding Grounds for Entrepreneurs By Baltzopoulos, Apostolos
  22. Statistical modelling of financial crashes: Rapid growth, illusion of certainty and contagion By John M. Fry
  23. Smart places, getting smarter: facts about the young professional population in New England states By Heather Brome
  24. Voluntary Participation as a Determinant of Social Capital in France : Allowing for Parameter Heterogeneity By Marie Lebreton; Katia Melnik
  25. Strategic fiscal interaction among OECD countries By Pantelis Kammas
  26. Determinants of MNE Subsidiaries Decisions to Set Up Own R&D Laboratories - Theory and Evidence By Kottaridi, Constantina; Papanastassiou, Marina; Pitelis, Christos
  27. Employment and Income in India: Case of a City Economy By Jeemol Unni
  28. Development of a large-scale single U.S. region CGE model using IMPLAN data: A Los Angeles County example with a productivity shock application By James A. Giesecke
  29. Economic growth across Chinese provinces: in search of innovation-driven gains By Funke, Michael; Yu, Hao
  30. Pay-as-you-speed:An economic field-experiment By Hultkrantz, Lars; Lindberg, Gunnar
  31. Why do Education Vouchers Fail? By Peter Bearse, Buly A. Cardak, Gerhard Glomm, B. Ravikumar
  32. "Securitization, Deregulation, Economic Stability, and Financial Crisis, Part I-- The Evolution of Securitization" By Eric Tymoigne
  33. Introducing Expenditure Quality in Intergovernmental Transfers: A Triple-E Framework By Mala Lalvani

  1. By: Karlsson, Charlie (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Johansson, Börje (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Stough, Roger R. (School of Public Policy, George Mason University)
    Abstract: This paper is an introductory overview highlighting some of the current knowledge as regards three critical questions related to the emerging knowledge economy: i) Why does human capital and talent tend to agglomerate in large urban regions?, ii) How does this agglomeration affect the location of different types of economic activities?, and iii) How does this agglomeration affect regional growth? There are different underlying agglomerative forces creating spatially concentrated increasing returns to scale. Also, cities become centres of various amenities due to general increases in real incomes offering people spare time activities. One major reason for the agglomeration of production in urban regions and metro¬politan areas today is the existence of various positive externalities, providing good settings for industries and firms with knowledge-intensive and knowledge-creation activities, specialised business service firms and headquarters of multinational firms. There are strong tentative empirical evidences that the agglomeration of human capital contributes to regional development and growth. However, there is uncertainty concerning the size of the human capital externalities.
    Keywords: Human Capital Externalities; Talent; Knowledge Creation; Knowledge Spillover; Agglomeration; Urban Region; Regional Growth
    JEL: D62 D83 J24 R12 R23
    Date: 2009–08–26
  2. By: Jeffrey Zabel
    Abstract: The United States is known for the ability of its residents to move to where the jobs are, and this has helped the nation maintain its position as the world’s top economy. Households’ decisions to move depend not only on job prospects but also on the relative cost of housing. I investigate how the housing market affects the flow of workers across cities. This occurs through at least two channels: the relative mobility of homeowners versus renters, and the relative cost of housing across markets. I use homeownership rates to measure the former, and use an index that measures house prices across metropolitan statistical areas (MSAs); the price elasticity of housing supply; and the growth rate of house prices to capture the latter. ; To show how variation in these factors affects cross-city migration, I estimate a VAR model of migration, employment, wages, house prices, and new housing supply using data from 277 U.S. MSAs for 1990–2006. The impulse response functions based on employment supply and demand shocks show substantial variation when evaluated at different values of the homeownership rate, the price elasticity of housing supply, relative housing prices, and their growth rates. I also allow for spillover effects in the model that reflect the impact of a labor demand shock in the nearest city.
    Keywords: Migration, Internal - United States ; Housing - Prices ; Labor mobility
    Date: 2009
  3. By: Margarita Rubio (Banco de España)
    Abstract: This paper studies the implications of cross-country housing market heterogeneity for a monetary union, also comparing the results with a flexible exchange rate and independent monetary policy setting. I develop a two-country new Keynesian general equilibrium model with housing and collateral constraints to explore this issue. Results show that in a monetary union, consumption reacts more strongly to monetary policy shocks in countries with high loan-to-value ratios (LTVs), a high proportion of borrowers or variable-rate mortgages. As for asymmetric technology shocks, output and house prices increase by more in the country receiving the shock if it can conduct monetary policy independently. I also fi nd that after country-specific housing price shocks consumption does not only increase in the country where the shock takes place, there is an international transmission. From a normative perspective, I conclude that housing-market homogenization in a monetary union is not beneficial per se, only when it is towards low LTVs or predominantly fixed-rate mortgages. Furthermore, I show that when there are asymmetric shocks but identical housing markets, it is beneficial to form a monetary union with respect to having a flexible exchange rate regime. However, for the examples I consider, net benefits decrease substantially if there is LTV heterogeneity and are negative under different mortgage contracts.
    Keywords: Housing market, collateral constraint, monetary policy, monetary union
    JEL: E32 E44 F36
    Date: 2009–08
  4. By: Bernardo Lara; Alejandra Mizala; Andrea Repetto
    Abstract: In this paper we re-analyze the effect of private voucher education on student academic performance in Chile using new data and a novel identification strategy. Most schools in Chile provide either primary or secondary education. We analyze the effect of private voucher education on students that are forced to enroll at a different school to attend secondary education once graduated from primary schooling. Moreover, contrary to the previous literature on Chile’s universal voucher system, the data set used in this paper contains information on previous academic achievement and thus allows us to control for it. Using a number of propensity score based econometric techniques and changes-in-changes estimation methods we find that private voucher education leads to small, sometimes not statistically significant differences in academic performance. The estimated effect of private voucher education amounts to about 4 to 6 percent of one standard deviation in test scores. The literature on Chile based on cross sectional data had previously found positive effects of about 15 to 20 percent of one standard deviation. JEL Classifications: I200, I210.
    Date: 2009
  5. By: Kristy Buzard; Gerald Carlino
    Abstract: This study details the location patterns of R&D labs in the U.S., but it differs from past studies in a number of ways. First, rather than looking at the geographic concentration of manufacturing firms (e.g., Ellison and Glaeser, 1997; Rosenthal and Strange, 2001; and Duranton and Overman, 2005), the authors consider the spatial concentration of private R&D activity. Second, rather than focusing on the concentration of employment in a given industry, the authors look at the clustering of individual R&D labs by industry. Third, following Duranton and Overman (2005), the authors look for geographic clusters of labs that represent statistically significant departures from spatial randomness using simulation techniques. The authors find that R&D activity for most industries tends to be concentrated in the Northeast corridor, around the Great Lakes, in California's Bay Area, and in southern California. They argue that the high spatial concentration of R&D activity facilitates the exchange of ideas among firms and aids in the creation of new goods and new ways of producing existing goods. They run a regression of an Ellison and Glaeser (1997) style index measuring the spatial concentration of R&D labs on geographic proxies for knowledge spillovers and other characteristics and find evidence that localized knowledge spillovers are important for innovative activity.
    Keywords: Research and development ; Geography
    Date: 2009
  6. By: Brian Peterson (Indiana University Bloomington)
    Abstract: There is a long-run `Beveridge Curve' in the Housing market given by the negative relationship between the vacancy rate of housing and the rate of household formation. This is true in the owner-occupied market, the rental market, and the total market for housing irrespective of ownership status. The Beveridge Curve represents a long-run supply condition that can be explained by assuming that (1) the cost to produce a new house is decreasing in the growth rate of the housing stock and (2) the probability to sell a new house is decreasing in the vacancy rate. Short-run deviations from the Beveridge curve represent a measurement of oversupply. Using a years of supply metric, for the total housing market irrespective of ownership, in 2007-2008 there were 0.995 years of supply, more than three times the previous peak of 0.285 years of supply in 1973-1974. Comparing the rental market to the owner-occupied market, oversupply generally shows up in the rental market, not the owner-occupied market and the oversupply in the rental market is twice as volatile as oversupply in the owner-occupied market, implying that a large part of the market adjustment to housing supply occurs in the rental market. Interestingly two-thirds of the oversupply in 2007-2008 resided in the rental market as opposed to the owner-occupied market. Using FHFA data for house prices, 46% of the movements in oversupply in the owner-occupied market since 1975 can be explained by house price movements. The last result suggests that at short horizons (4-6 years) house prices are not determined by supply. Rather, house prices drive supply at short time horizons, permitting bubbles and oversupplies of housing to form.
    Date: 2009–06
  7. By: Pavlyuk, Dmitry
    Abstract: This study deals with estimation of European airports' efficiency values and their interrelation with a level of competition pressure for passengers among airports. In this paper we present a new adaptive definition of airport's catchment area. Using this definition we develop an indicator of a level of competition pressure, based on overlapping of airport's potential catchment areas. We apply a stochastic frontier model to estimate efficiencies of airports. The method includes the construction of a production frontier for a sample of airports and estimation of individual airports' efficiency values as distances from this frontier. We use a classic production approach to airport activities, where an airport enterprise uses labour resources (a number of employees) and infrastructure (a number of runways, gates, check-ins and parking spaces) for transportation of passengers. Also we use a re-sampling jack-knife technique to test the reliability of airports' efficiencies estimates. We investigate a relationship between a level of competition pressure and airports' operation efficiencies in case of imperfect spatial competition for passengers.
    Keywords: stochastic frontier; efficiency; airport; spatial competition
    JEL: L93 C51
    Date: 2009–08–14
  8. By: Andersson, Christian (Swedish National Audit Office); Johansson, Per (IFAU - Institute for Labour Market Policy Evaluation)
    Abstract: To study effects of out-of-school learning we use data on boarding home pupils who attended elementary public schools in the 1940’s. The out-of-school environment at the boarding homes could be considered being more learner friendly than the home environment on average: the pupils at the boarding homes had daily scheduled time for doing their homework under assistance of a junior school teacher and, in addition, they had access to a small library. The placement at boarding homes was based on the distance to the nearest school and had, thus, no direct connection to pupils’ skills which simplifies the empirical analysis based on register data. We find that the more learning friendly environment equalize skills at school leaving age. The effect is larger for kids with low initial ability.
    Keywords: Pedagogic personal; homework; early interventions
    JEL: I20 N34
    Date: 2009–08–10
  9. By: Osiris Jorge, Parcero; Adolfo, Cristobal-Campoamor
    Abstract: This paper analyzes some determinant conditions under which neighborhood formation gives rise to segregation by income. In contrast to the literature, we explore the sequential arrival of poor and rich individuals to neighborhoods exploited by oligopolistic land developers. These developers try to maximize a discounted flow of lot prices during neighborhood formation, taking advantage of the local externalities generated by the rich and the poor. Under a speedy arrival of new potential inhabitants and/or low discount rates, competing developers are more likely to concentrate rich people in the same neighborhood. This happens because the benefits from early agglomeration are outweighed by a more profitable matching of rich neighbors within nearby lots.
    Keywords: land developers; segregation; income distribution; arrival rates
    JEL: H23 R21
    Date: 2009–08–25
  10. By: Baltzopoulos, Apostolos (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Past research on the effects of agglomeration externalities on regional economic development is inconclusive and has focused mainly on employment growth and innovative output. This paper considers the link between agglomeration externalities and entrepreneurship. It does so by looking at the importance of Marshallian specialization and Jacobian diversity externalities for regional entrepreneurial output implementing an individual level data set that allows considering not only the effect on total number of start-ups but also on the propensity of the entrepreneur to start his new venture in an industry he has previous experience in. The results suggest that while Marshallian externalities have a positive, Jacobian externalities have a negative effect on regional entrepreneurial output. However, Jacobian externalities increase the probability that an entrepreneur will start a firm in an industry he has relevant experience in, especially in the case of knowledge intensive industries.
    Keywords: Entrepreneurship; externalities; spatial agglomeration
    JEL: O12 O18 R11 R30
    Date: 2009–08–26
  11. By: Anas, Alex; Timilsina, Govinda R.
    Abstract: In the urban planning literature, it is frequently explicitly asserted or strongly implied that ongoing urban sprawl and decentralization can lead to development patterns that are unsustainable in the long run. One manifestation of such an outcome is that if extensive road investments occur, urban sprawl and decentralization are advanced and locked-in, making subsequent investments in public transit less effective in reducing vehicle kilometers traveled by car, gasoline use and carbon dioxide emissions. Using a simple core-periphery model of Beijing, the authors numerically assess this effect. The analysis confirms that improving the transit travel time in Beijing’s core would reduce the city’s overall carbon dioxide emissions, whereas the opposite would be the case if peripheral road capacity were expanded. This effect is robust to perturbations in the model’s calibrated parameters. In particular, the effect persists for a wide range of assumptions about how location choice depends on travel time and a wide range of assumptions about other aspects of consumer preferences.
    Keywords: Transport Economics Policy&Planning,Roads&Highways,Energy and Environment,Environment and Energy Efficiency,Economic Theory&Research
    Date: 2009–08–01
  12. By: Scott Imberman; Adriana D. Kugler; Bruce Sacerdote
    Abstract: In 2005, hurricanes Katrina and Rita forced many children to relocate across the Southeast. While schools quickly enrolled evacuees, receiving families worried about the impact of evacuees on non-evacuee students. Data from Houston and Louisiana show that, on average, the influx of evacuees moderately reduced elementary math test scores in Houston. We reject linear-in-means models of peer effects and find evidence of a highly non-linear but monotonic model - student achievement improves with high ability and worsens with low ability peers. Moreover, exposure to undisciplined evacuees increased native absenteeism and disciplinary problems, supporting a "bad apple" model in behavior.
    JEL: H23 I21 J24
    Date: 2009–08
  13. By: Giorgio Fazio; Davide Piacentino
    Abstract: In this paper, we adapt multilevel analysis methods to investigate the spatial variability of SMEs productivity across the Italian territory, and account for differences in the socio-economic context. Our results suggest that to properly capture the variability of the data, it is important to allow for both spatial mean and slope effects. Social decay has the expected negative impact. However, while this effect is larger on firms with smaller capital intensity, firms with higher capital intensity seem to be less affected by geography. Greater territorial heterogeneity emerges among those firms with lower capital to labour ratios.
    Keywords: Firm heterogeneity, Spatial variability, Socio-economic Context, Multilevel Analysis
    JEL: C31 R11 R12 R30
    Date: 2009–06
  14. By: Yu, Li; Jolly, Robert W.; Orazem, Peter
    Abstract: We introduce a taxonomy that classifies industries using three criteria: net growth in the number of firms; the interrelationship between firm entry and firm exit; and the degree of urban-bias in industry growth. We show that in 9 of 15 two-digit NAICS industries investigated, there is evidence of urban bias consistent with a comparative advantage to starting a business in urban markets. The urban advantage is due primarily to faster firm entry rates. Urban and rural firms have similar firm exit rates, consistent with a presumption that there are equal expected profit rates conditional on entry across markets. Urban areas grow faster because they induce faster firm entry and not because urban firms are more likely to succeed.
    Keywords: Entry – Exit Pattern, Taxonomy, Urban-Bias, Expansion, Churning, Entrepreneurship, Economic Development
    JEL: L2
    Date: 2009–08–27
  15. By: De Paola, Maria; Scoppa, Vincenzo
    Abstract: In this paper we investigate the effects of class size on the achievements of a sample of college students enrolled at a middle-sized Italian public university. To estimate the effects of class size we exploit the exogenous variations in class size determined by a maximum class size rule introduced by the 2001 Italian university reform. From our analysis it emerges that large teaching classes produce negative effects on student performance measured both in terms of the grades obtained in exams and the probability of passing exams. These results are robust to the use of a matching estimator.
    Keywords: Class size; student achievement; educational production function
    JEL: C23 I21 J24
    Date: 2009–08–25
  16. By: Shawn Kantor; Alexander Whalley
    Abstract: In this paper we quantify the extent and magnitude of agglomeration spillovers from a formal institution whose sole mission is the creation and dissemination of knowledge -- the research university. We use the fact that universities follow a fixed endowment spending policy based on the market value of their endowments to identify the causal effect of the density of university activity on labor income in the non-education sector in large urban counties. Our instrument for university expenditures is based on the interaction between each university's initial endowment level at the start of the study period and the variation in stock market shocks over the course of the study period. We find modest but statistically significant spillover effects of university activity. The estimates indicate that a 10% increase in higher education spending increases local non-education sector labor income by about 0.5%. As the implied elasticity is no larger than what previous work finds for agglomeration spillovers arising from local economic activity in general, university activity does not appear to make a place any more productive than other forms of economic activity. We do find, however, that the magnitude of the spillover is significantly larger for firms that are technologically closer to universities in terms of citing patents generated by universities in their own patents and sharing a labor market with higher education.
    JEL: I2 O3 R1
    Date: 2009–08
  17. By: Eckhardt Bode; Peter Nunnenkamp; Andreas Waldkirch
    Abstract: Abstract: This paper estimates the aggregate productivity effects of Marshallian externalities generated by foreign direct investments (FDI) in the US. In contrast to earlier work, this paper puts special emphasis on controlling for Marshallian externalities and other intra- and inter-regional spillovers generated by domestic firms. The productivity effects of these externalities may, if not accounted for appropriately, be falsely attributed to FDI. This paper also deals with the potential endogeneity of FDI and the presence of spatial lags by employing a system generalized method of moments (GMM) estimator. We use a regional production function framework that models Marshallian externalities and other intra- and inter-regional spillovers explicitly as determinants of total factor productivity, and tests several empirical specifications of this model, using data for US states from 1977—2003. The results indicate that FDI does, in fact, generate positive externalities, while those from domestic firms are negative
    Keywords: Foreign Direct Investment, US States, Spatial Econometrics, Marshallian Externalities
    JEL: C31 F21 F23
    Date: 2009–07
  18. By: Christiane Hellmanzik, Department of Economics and IIIS, Trinity College Dublin
    Abstract: Based on a global sample of the 214 most prominent modern visual artists born between 1850-1945, this paper analyses the extent of mobility and the determinants of the decision to locate in the artistic clusters of Paris and New York. It is argued that the extent of mobility decreases over time and traveling is a complement to relocating permanently. Moreover, French and German artists move considerably less and American artists significantly more than their counterparts born elsewhere. A location choice model shows that the affiliation with an artistic style is a good predictor for the likelihood of moving to a cluster. This can be explained by specialised human capital spillovers. For both clusters, short-term visits are a substitute for permanent relocation. Having received formal art training increases the likelihood of moving to New York, whereas the patronage system is an important relocation factor only in the case of Paris.
    Date: 2009–08–17
  19. By: Siedschlag, Iulia (ESRI); Zhang, Xiaoheng (ESRI); Smith, Donal (ESRI)
    Abstract: We examine the attractiveness of European Union regions for location of multinationals in the Information and Communication Technologies (ICT) sector. Using data on 8,543 foreign subsidiaries established in 229 regions of the European Union over the period 1998-2008 we find that on average, the location probability increases with regional demand, agglomeration economies, technological development, flexibility of labour markets, and information technology infrastructure. The determinants of the location choice of ICT multinationals are different for regions in Western Europe and Central and Eastern Europe. While in Western Europe, regions with higher GDP per capita are preferred for both ICT multinationals in manufacturing and service sectors, in Central and Eastern Europe, regions with lower GDP per capita attract the bulk of ICT multinationals in the service sector. Unemployment rates appear negatively correlated with the probability of location in the whole European Union and Western Europe, while they increase attractiveness for regions in Central and Eastern Europe. Some determinants are also found to have heterogeneous effects on multinationals from different countries. In particular, US multinationals are not sensitive to labour costs while EU multinationals respond to this factor negatively.
    Keywords: Foreign direct investment; Information and Communication Technologies; Location choice; Conditional logit; Nested logit; European Union.
    Date: 2009
  20. By: Baltzopoulos, Apostolos (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: The present study carries out a mutli-level analysis of entrepeneurship by considering the choice of the individual to leave his job position to become self-employed. A comprehensive data-set matching the individual to his place of work allows controlling for the characteristics of both the firm and the region he worked in before starting his own firm. The results suggest that small firms spawn entrepreneurs more frequently and individuals working in larger regions that are characterized by larger local markets, higher accumulation of knowledge resources and higher population density are more likely to transcend into entrepreneurship. I also find evidence that people are more likely to select the path of self-employment in the face of weak local competition.
    Keywords: Entrepreneurship; self-employment; externalities
    JEL: D01 O12 O18 R10
    Date: 2009–08–26
  21. By: ERIC M. LEEPER, MICHAEL PLANTE, NORA TRAUM (Indiana University Bloomington, Indiana University and Ball State University, Indiana University Office)
    Abstract: Dynamic stochastic general equilibrium models that include policy rules for government spending, lump-sum transfers, and distortionary taxation on labor and capital income and on consumption expenditures are fit to U.S. data under a variety of specifica- tions of fiscal policy rules. We obtain several results. First, the best fitting model allows a rich set of fiscal instruments to respond to stabilize debt. Second, responses of aggregate variables to fiscal policy shocks under rich fiscal rules can vary considerably from responses that allow only non-distortionary fiscal instruments to finance debt. Third, based on esti- mated policy rules, transfers, capital tax rates, and government spending have historically responded strongly to government debt, while labor taxes have responded more weakly. Fourth, all components of the intertemporal condition linking debt to expected discounted surpluses—transfers, spending, tax revenues, and discount factors—display instances where their expected movements are important in establishing equilibrium. Fifth, debt-financed fiscal shocks trigger long lasting dynamics so that short-run multipliers can differ markedly from long-run multipliers, even in their signs.
    Date: 2009–07
  22. By: John M. Fry
    Abstract: We develop a rational expectations model of financial bubbles and study ways in which a generic risk-return interplay is incorporated into prices. We retain the interpretation of the leading Johansen-Ledoit-Sornette model, namely, that the price must rise prior to a crash in order to compensate a representative investor for the level of risk. This is accompanied, in our stochastic model, by an illusion of certainty as described by a decreasing volatility function. The basic model is then extended to incorporate multivariate bubbles and contagion, non-Gaussian models and models based on stochastic volatility. Only in a stochastic volatility model where the mean of the log-returns is considered fixed does volatility increase prior to a crash.
    Keywords: Financial crashes, super-exponential growth, illusion of certainty, contagion, housing-bubble.
    JEL: C00 E30 G10
    Date: 2009–10–08
  23. By: Heather Brome
    Abstract: Each of the New England states is wrestling with how to retain a skilled workforce and sustain economic competitiveness while facing an aging population. In particular, each state fears that it is losing young, educated workers to other states and regions. This paper builds on earlier research about trends in the region’s young professionals: it looks at the supply of young professionals in each state to better understand trends in that population. The analysis reveals that, while there are some differences between the New England states, all are facing slow growth or no growth in its population of young professionals.
    Keywords: College graduates - New England ; Migration, Internal ; Labor mobility
    Date: 2009
  24. By: Marie Lebreton (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579); Katia Melnik (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579)
    Abstract: This paper studies the effects of income, education and active memberships in voluntary organizations and clubs on "social capital" by using individual French data and allowing for parameter heterogeneity (Durlauf and Fafchamps, 2003). Survey responses to the questions concerning trust, social norms and individual involvement in the local life are used as proxies of social capital. The model developed in this paper is an Artificial Neural Network model or more precisely the Neuro-Coecient Smooth Transition Auto-Regressive (NCSTAR) model. It gives a vector of estimates for every observation of the dataset as a nonlinear function of its geographical position and its individual attributes. We show that accounting for parameter heterogeneity considerably improves the fit of the estimated model in comparison with the broadly used multinomial logit model. Our results suggest empirical evidences of signicant positive direct and indirect effects of active membership in voluntary organizations on trust (or rather trustworthiness, Glaeser et al, 2000) and individual's involvement in his or her community's life. This finding supports the considering of membership in voluntary organizations in France as promoting the values of cooperation and positive tendency towards public issues. However, the studied relationships are not stable across French departments and some regional patterns are detected.
    Keywords: Social capital, Parameter heterogeneity, Neural network models.
    Date: 2009–08–21
  25. By: Pantelis Kammas
    Abstract: This paper investigates whether OECD countries compete with each other for mobile factors by using various fiscal (tax-spending) policy instruments. We use a panel dataset of 20 OECD countries over the 1982-2000 period. There is evidence that international capital inflows (FDI) are affected by fiscal policy at home and abroad. Also, there is evidence of fiscal competition for mobile factors which takes place via capital tax rates. More precisely, we find that domestic capital tax rates react: (i) positively to changes in capital tax rates and (ii) negatively to changes in public investment spending in neighbouring countries. In contrast, evidence of such a strategic interdependence over public investment spending decisions is not established.
    Keywords: Capital mobility; tax competition; welfare
    JEL: F02 H2 H4
    Date: 2009–11–08
  26. By: Kottaridi, Constantina; Papanastassiou, Marina; Pitelis, Christos
    Abstract: We explore the determinants of MNE subsidiaries decisions to set-up own R&D laboratories drawing on evidence from UK regions. In this context, we also test for the interaction between firm's internal and external environments. We also integrate extant IB and strategic management literatures and incorporate recent debates in New Economic Geography (NEG) in specifying the 'external environment'. We find support for the role of firm's 'productive opportunity' and predictions of the NEG on the basis of an analysis of primary data. We discuss implications for managerial practice and government regional policies.
    Keywords: MNE subsidiaries, R&D laboratory, internal and external environment, productive opportunity
    Date: 2009
  27. By: Jeemol Unni
    Abstract: This paper analyses the pattern of growth observed in the city economy of Ahmedabad, a metropolitan city in the industrially developed state of Gujarat. The growth of this city is placed in the context of the overall performance of growth of output, employment and poverty in the Indian economy and that of Gujarat state. [GIDR WP No. 130].
    Keywords: informal, Gujarat, output, poverty, employment, City Economy; Ahmedabad; Urbanisation; Informal employment, employment, city, economy, Gujarat, Indian economy, Indian, metropolitan,
    Date: 2009
  28. By: James A. Giesecke
    Abstract: This paper details the construction of a large-scale computable general equilibrium (CGE) model for a single U.S. region. The model contains detailed treatment of margins and taxes, features not typically given prominence in U.S. regional CGE models. The starting point for the core of the CGE model's data base is information from IMPLAN, producers of regional I/O data at the U.S. county and state levels. IMPLAN's I/O tables, however, are in producer prices with aggregated treatment of margins and taxes. The methods for reconfiguring the I/O data into basic price flows with direct allocation of imports and a disaggregated treatment of taxes and margins are described. The method is applied to construction of a Los Angeles County model. An illustrative simulation of a productivity improvement in the Los Angeles County economy is then discussed.
    Keywords: CGE, IMPLAN
    JEL: C68 R13 R15
    Date: 2009–08
  29. By: Funke, Michael (BOFIT); Yu, Hao (BOFIT)
    Abstract: In this paper we analyse the impact of R&D on total factor productivity across Chinese provinces. We introduce innovations explicitly into a production function and evaluate their contribution to economic growth in 1993 - 2006. The empirical results highlight the importance and the interaction between local and external research. The evidence indicates that growth in China is not explained simply by factor input accumulation.
    Keywords: China; R&D; R&D Spillovers; patents; regional economic growth; semiparametric estimators
    JEL: C14 O47 R11 R12
    Date: 2009–08–26
  30. By: Hultkrantz, Lars (Örebro University and VTI); Lindberg, Gunnar (VTI)
    Abstract: We report a vehicle-fleet experiment with an economic incentive given to car drivers for keeping within speed limits. A pay-as-you-speed traffic insurance scheme was simulated with a monthly participation bonus that was reduced by a non-linear speeding penalty. Actual speed was monitored by a GPS in-vehicle device. Participating drivers were randomly assigned into two-by two treatment groups, with different participation-bonus and penalty levels, and two control groups (high and low participation bonus, but no penalty). A third control group consists of drivers with the same technical equipment who did not participate but whose driving could be monitored. We evaluate changes in behaviour from twelve-month differences in proportion of driving time per month that the car was exceeding the maximum allowed speed on the road. We find that the participating drivers significantly reduced severe speeding violations during the first experiment month, while in the second experiment month, after having received feedback reports with an account of earned payments, only those participating subjects that were given a speeding penalty reduced severe speed violations. We find no significant effects from the size of the participation bonus (high vs. low), or the size of the penalty (high vs. low rate).
    Keywords: Traffic insurance; traffic safety; Intelligent Transport Systems; ITS; Intelligent Speed Adaptation; ISA
    JEL: H23 I18 K42 R41
    Date: 2009–08–26
  31. By: Peter Bearse, Buly A. Cardak, Gerhard Glomm, B. Ravikumar (University of North Carolina at Greensboro, La Trobe University,Indiana Univeristy, University of Iowa)
    Abstract: We examine quantitatively why uniform vouchers have repeatedly su¤ered electoral defeats against the current system where public and private schools coexist. We argue that the topping-up option available under uniform vouchers is not sufficiently valuable for the poorer households to prefer the uniform vouchers to the current mix of public and private education. We then develop a model of publicly funded means-tested edu- cation vouchers where the voucher received by each household is a linearly decreasing function of income. Public policy, which is determined by majority voting, consists of two dimensions: the overall funding level (or the tax rate) and the slope of the means testing function. We solve the model when the political decisions are sequential ?households vote ?rst on the tax rate and then on the extent of means testing. We establish that a majority voting equilibrium exists. We show that the means-tested voucher regime is majority preferred to the status-quo. These results are robust to alternative preference parameters, income distribution parameters and voter turnout.
    Date: 2009–08
  32. By: Eric Tymoigne
    Abstract: This study analyzes the trends in the financial sector over the past 30 years, and argues that unsupervised financial innovations and lenient government regulation are at the root of the current financial crisis and recession. Combined with a long period of economic expansion during which default rates were stable and low, deregulation and unsupervised financial innovations generated incentives to make risky financial decisions. Those decisions were taken because it was the only way for financial institutions to maintain market share and profitability. Thus, rather than putting the blame on individuals, this paper places it on an economic setup that requires the growing use of Ponzi processes during enduring economic expansion, and on a regulatory system that is unwilling to recognize (on the contrary, it contributes to) the intrinsic instability of market mechanisms. Subprime lending, greed, and speculation are merely aspects of the larger mechanisms at work. It is argued that we need to change the way we approach the regulation of financial institutions and look at what has been done in other sectors of the economy, where regulation and supervision are proactive and carefully implemented in order to guarantee the safety of society. The criterion for regulation and supervision should be neither Wall Street's nor Main Street's interests but rather the interests of the socioeconomic system. The latter requires financial stability if it's to raise, durably, the standard of living of both Wall Street and Main Street. Systemic stability, not profits or homeownership, should be the paramount criterion for financial regulation, since systemic stability is required to maintain the profitability--and ultimately, the existence--of any capitalist economic entity. The role of the government is to continually counter the Ponzi tendencies of market mechanisms, even if they are (temporarily) improving standards of living, and to encourage economic agents to develop safe and reliable financial practices. See also, Working Paper No. 573.2, "Securitization, Deregulation, Economic Stability, and Financial Crisis, Part II: Deregulation, the Financial Crisis, and Policy Implications."
    Date: 2009–08
  33. By: Mala Lalvani
    Abstract: The present study has sought to introduce, conceptualise and operationalise a scheme for integrating the ‘quality’ dimension of public spending into the devolution scheme of intergovernmental transfers by the Finance Commission. The study illustrates a scheme of inter-se distribution from an incentive fund, which we would like to label as a “Quality Control Fund” (QCF). Portions of this fund could be kept aside to reward States for their performance on the three aspects of expenditure quality, viz., Expenditure Adequacy, Effectiveness and Efficiency. [DRG Study Series No. 30]
    Keywords: Expenditure, Fiscal Responsibility, fiscal, Merit Goods, finance, adequacy, effectiveness, quality, public spending,
    Date: 2009

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