nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2009‒09‒19
seventeen papers chosen by
Steve Ross
University of Connecticut

  1. The Subprime Crisis and House Price Appreciation By William N. Goetzmann; Liang Peng; Jacqueline Yen
  2. Are Mortgage Rates Bubbling Up Trouble for Canadas Metropolitan Housing Sector? By Louis, Rosmy J; Brown, Ryan; Balli, Faruk
  3. Teacher Effectiveness in Urban High Schools By Richard Buddin; Gema Zamarro
  4. New Economic Geography reloaded: localized knowledge spillovers and the geography of innovation By Christ, Julian P.
  5. The Fundamental Law of Road Congestion: Evidence from US cities By Gilles Duranton; Matthew A. TUrner
  6. Estimating a Payment Vehicle for Financing Nourishment of Residential Beaches using a Spatial-lag Hedonic Property Price Model By O. Ashton Morgan; Stuart E. Hamilton
  7. Measuring Economic Growth from Outer Space By Vernon Henderson; Adam Storeygard; David N. Weil
  8. Estimating the Peace Dividend:The Impact of Violence on HousePrices in Northern Ireland By Timothy Besley; Hannes Mueller
  9. Diversity and Popularity in Social Networks By Yann Bramoulle; Brian Rogers
  10. Is there a rural-urban divide? Location and Productivity of UK manufacturing By Marian Rizov; Patrick Paul Walsh
  11. Transaktionen und Servicing in der Finanzkrise: Berichte und Referate des Frankfurt School NPL Forums 2008 By Schalast, Christoph; Bolder, Markus; Radünz, Claus; Siepmann, Stephanie; Weber, Thorsten
  12. Spatial Development By Klaus Desmet; Esteban Rossi-Hansberg
  13. Mom-and-Pop Meet Big-Box: Complements or Substitutes? By John C. Haltiwanger; Ron S. Jarmin; C. J. Krizan
  14. The Flypaper Effect Revisited By Fernando Aragon
  15. Track wear-and-tear cost by traffic class: Functional form, zero output values and marginal cost pricing recovery on the French rail network By Marc Gaudry; Emile Quinet
  16. Location and organization choice of firms By Kenmei Tsubota
  17. Isolation and Development By Quamrul Ashraf; Oded Galor; Omer Ozak

  1. By: William N. Goetzmann; Liang Peng; Jacqueline Yen
    Abstract: This paper argues that econometric analysis of housing price indexes before 2006 generated forecasts of future long-term price growth and low estimated probabilities of extreme price decreases. These forecasts of future increases in home-loan collateral values may have affected both the demand and the supply of mortgages. Standard time series models using repeat-sales indices suggested that positive trends had a long half-life. Expectations based on such models supported expectations that could lead to an asset bubble. Analysis of data from the HMDA loan data base and at the MSA level and at the loan level substantiates both supply and demand effects of past price trends in housing markets, particularly with respect to subprime mortgage applications and approvals. At the MSA level, past home price increases are associated with higher subprime applications and loan to value ratios. Approval probability of subprime loans was not affected by higher loan to value ratios. At the loan level, the approval probability of subprime applications is also positively associated with past home price appreciation. These results differ for prime mortgages.
    Date: 2009–09
  2. By: Louis, Rosmy J; Brown, Ryan; Balli, Faruk
    Abstract: This paper determines how mortgage rate and income shocks affect new and resale housing prices, housing starts, and housing sales in Canadas metropolitan areas. We assess the variance decompositions and impulse response results to mortgage rate and income shocks. An additional set of VARs is estimated to document whether the stock price, as an alternative source of investment, reduces the importance of the mortgage rate. Our results show that the importance of the mortgage rate and income varies significantly by metropolitan area and to a lesser degree, by the component of the housing market examined. More precisely, we find that: 1) two of BCs major metropolitan areas housing markets, Vancouver and Victoria, are vulnerable to interest rate bubble;. 2) Mortgage rates, and by extension the Bank of Canada monetary policy, seems to have little direct impact on Albertas major metropolitan housing markets, Calgary and Edmonton, while income can be expected to have a drastic effect; and 3) The housing markets of Ontarios major metropolitan area and Canadas Capital Region are prone to mortgage rate bubbles, but the impact is dampened due to their connectedness to national financial markets. What these results mean in terms of policy-making decision is that close attention needs to be paid to housing markets in Canada that are vulnerable to spikes in mortgage rates as we are coming out of the recession provoked by the housing market meltdown in the United States. Although it is true that Banking regulations in Canada have helped weather the storm, with the massive fiscal stimulus implemented in both Canada and the United States, eventually strong aggregate demand may build up pressure on prices to rise and interest rate will have to increase in order to maintain price stability, thereby causing troubles for mortgagees.
    Keywords: Housing Markets; Metropolitan Areas in Canada; Monetary Policy; Stock Prices; Provincial Income; Variance Decomposition
    JEL: E42 E31 L85
    Date: 2009
  3. By: Richard Buddin; Gema Zamarro
    Abstract: This research examines whether teacher licensure test scores and other teacher qualifications affect high school student achievement. The results are based on longitudinal student-level data from Los Angeles. The achievement analysis uses a value-added approach that adjusts for both student and teacher fixed effects. The results show little relationship between traditional measures of teacher quality (e.g., experience and education level) and student achievement in English Language Arts (ELA) or math. Similarly, teacher aptitude and subject-matter knowledge, as measured on state licensure tests, have no significant effects on student achievement. Achievement outcomes differ substantially from teacher to teacher, however, and the effects of a good ELA or math teacher spillover from one subject to the other.
    Keywords: Teacher quality, teacher licensure, student achievement, high school, two-level fixed effects, education production function
    JEL: J44 J45 H0 H75 I21
    Date: 2009–08
  4. By: Christ, Julian P.
    Abstract: Despite the increasing and newly inspired interests in geographical economics and industry location theory, the majority of existing New Economic Geography models ignores the interdependence between spatial concentration, knowledge diffusion, invention and growth. For this reason, the paper exclusively surveys the emergence and development of New Economic Geography Growth models in the context of the existing geography of innovation literature. The first part of the paper contributes with a classification of first- and second-nature causes of agglomeration and clustering. This part will also discriminate between static and dynamic externalities. Therefore, the chapter particularly compiles the differences between urbanization and localization externalities, and MAR, Jacobian and Porter externalities. A second concern of the paper is to highlight the modeling peculiarities of New Economic Geography Growth models. Besides approaching the main differences and similarities between first- and second-generation NEG models, the paper additionally reviews and discloses complemental contributions to the geography of innovation literature in the course of time. For this purpose, the paper examines in a meta-study 61 empirical contributions, which are related to the knowledge production function, the concept of spatial dependence and knowledge spillovers. The meta-study is complemented by bibliometric research. The paper ultimately concludes that the empirical studies that are related to the concept of (localized) knowledge spillovers and spatial association have caused a fundamental upgrading of the New Economic Geography literature towards non-pecuniary externalities. Consequently, the paper shows that recently developed second-generation NEG models offer alternative backward and forward linkages, which similarly determine centripetal and centrifugal forces, circular causality and finally the geography of innovation.
    Keywords: New Economic Geography Growth,geography of innvation,localized knowledge spillovers,dynamic externalities,core-periphery
    Date: 2009
  5. By: Gilles Duranton; Matthew A. TUrner
    Abstract: Abstract: We investigate the relationship between interstate highways and highway vehicle kilometers traveled (vkt) in us cities. We find that vkt increases proportionately to highways and identify three important sources for this extra vkt: an increase in driving by current residents; an increase in transportation intensive production activity; and an inflow of new residents. The provision of public transportation has no impact on vkt. We also estimate the aggregate city level demand for vkt and find it to be very elastic. We conclude that an increased provision of roads or public transit is unlikely to relieve congestion and that the current provision of roads exceeds the optimum given the absence of congestion pricing.
    Keywords: highways, vehiclekilometers traveled, public transport, congestion.
    JEL: L91 R41
    Date: 2009–09–08
  6. By: O. Ashton Morgan; Stuart E. Hamilton
    Abstract: Beach nourishment projects are common methods for coastal states to protect beaches and property from the natural erosive process. However, while the beneficiaries of beach nourishment tend to be local property owners and recreators, projects are typically funded at the state level. Based on the benefit principle, as local residents receive more of the erosion protection benefits of the nourishment projects, we estimate a value capture tax, designed to levy the financing burden in a manner that approximates the distribution of benefits. The benefits of nourishment projects to coastal property owners are estimated using the results from a spatial-lag hedonic model that controls for viewshed effects. Key Words:
    Date: 2009
  7. By: Vernon Henderson; Adam Storeygard; David N. Weil
    Abstract: GDP growth is often measured poorly for countries and rarely measured at all for cities. We propose a readily available proxy: satellite data on lights at night. Our statistical framework uses light growth to supplement existing income growth measures. The framework is applied to countries with the lowest quality income data, resulting in estimates of growth that differ substantially from established estimates. We then consider a longstanding debate: do increases in local agricultural productivity increase city incomes? For African cities, we find that exogenous agricultural productivity shocks (high rainfall years) have substantial effects on local urban economic activity.
    Keywords: economic growth; remote sensing; urbanization; income measurement
    Date: 2009
  8. By: Timothy Besley; Hannes Mueller
    Abstract: This paper exploits data on the pattern of violence across regions and over time toestimate the impact of the peace process in Northern Ireland on house prices. Webegin with a linear model that estimates the average treatment effect of a conflictrelatedkilling on house prices - showing a negative correlation between house pricesand killings. We then develop an approach based on an economic model where theparameters of the statistical process are estimated for a Markov switching modelwhere conflict and peace are treated as a latent state. From this, we are able toconstruct a measure of the discounted number of killings which is updated in thelight of actual killings. This model naturally suggests a heterogeneous effect ofkillings across space and time which we use to generate estimates of the peacedividend. The economic model suggests a somewhat different pattern of estimates tothe linear model. We also show that there is some evidence of spillover effects ofviolence in adjacent regions.
    Keywords: Peace Dividend, Northern Ireland, Conflict, Housing Price, MarkovChain
    JEL: D74 O16 P16
    Date: 2009–05
  9. By: Yann Bramoulle; Brian Rogers
    Abstract: Homophily, the tendency of linked agents to have similar characteristics, is an im- portant feature of social networks. We present a new model of network formation that allows the linking process to depend on individuals types and study the impact of such a bias on the network structure. Our main results fall into three categories: (i) we compare the distributions of intra- and inter-group links in terms of stochastic dominance, (ii) we show how, at the group level, homophily depends on the groups size and the details of the formation process, and (iii) we understand precisely the determinants of local homophily at the individual level. Especially, we ¯nd that popular individuals have more diverse networks. Our results are supported empirically in the AddHealth data looking at networks of social connections between boys and girls.
    Keywords: social networks, homophily, AddHealth, diversity, degree distributions
    JEL: A14 D85 I21
    Date: 2009–01
  10. By: Marian Rizov (Middlesex University Business School, UK and Wageningen University, The Netherlands); Patrick Paul Walsh (SPIRe and The Geary Institute University College Dublin)
    Abstract: We compute the productivity gaps in manufacturing industries by urban, rural less sparse and rural sparse locations in the UK. This is done by using firm-specific total factor productivities, which are estimated by a semi-parametric algorithm within 4-digit manufacturing industries using FAME data over the period 1994-2001, by each location. We analyse the productivity differentials across locations by decomposing them into firm differences within the same industry and by differences that are explained by industry composition effects. Our analysis indicates that at the end of twentieth century a rural-urban divide in manufacturing productivity still remains but there is a tendency of convergence between rural and urban location categories. Even though industry productivity is different by location, industry composition effects are positively correlated with industry productivity by location suggesting that locations with high productivity are also characterised by industrial structures with higher productivity.
    Keywords: Total factor productivity, structural estimation, rural-urban divides, UK manufacturing
    JEL: D24 R11 R30
    Date: 2009–09–09
  11. By: Schalast, Christoph; Bolder, Markus; Radünz, Claus; Siepmann, Stephanie; Weber, Thorsten
    Abstract: The report describes the current developments of the German market for Non Performing Loans/Distressed Debt as it is influenced by the financial crisis/credit crunch. Furthermore the sale of (small and medium sized) real estate portfolios since summer 2007 is analysed in more detail.
    Keywords: Non performing loans,distressed debt,portfolio management,workout,outsourcing,servicing,banking and regulation law,bankers duty of secrecy,failing banks,corporate loans,consumer loans,real estate loans
    JEL: K12 K19 K22 K29
    Date: 2009
  12. By: Klaus Desmet; Esteban Rossi-Hansberg
    Abstract: We present a theory of spatial development. A continuum of locations in a geographic area choose each period how much to innovate (if at all) in manufacturing and services. Locations can trade subject to transport costs and technology diffuses spatially across locations. The result is an endogenous growth theory that can shed light on the link between the evolution of economic activity over time and space. We apply the model to study the evolution of the U.S. economy in the last few decades and find that the model can generate the reduction in the employment share in manufacturing, the increase in service productivity in the second part of the 1990s, the increase in land rents in the same period, as well as several other spatial and temporal patterns.
    JEL: E32 O11 O18 O33 R12
    Date: 2009–09
  13. By: John C. Haltiwanger; Ron S. Jarmin; C. J. Krizan
    Abstract: In part due to the popular perception that Big-Boxes displace smaller, often family owned (a.k.a. Mom-and-Pop) retail establishments, several empirical studies have examined the evidence on how Big-Boxes’ impact local retail employment but no clear consensus has emerged. To help shed light on this debate, we exploit establishment-level data with detailed location information from a single metropolitan area to quantify the impact of Big-Box store entry and growth on nearby single unit and local chain stores. We incorporate a rich set of controls for local retail market conditions as well as whether or not the Big-Boxes are in the same sector as the smaller stores. We find a substantial negative impact of Big-Box entry and growth on the employment growth at both single unit and especially smaller chain stores – but only when the Big-Box activity is both in the immediate area and in the same detailed industry.
    JEL: L26 L81 R11 R3
    Date: 2009–09
  14. By: Fernando Aragon
    Abstract: This paper argues that there is nothing anomalous about the flypaper effect. Idevelop a simple median voter model of government spending with costly taxcollection that predicts the flypaper effect and provide a quantifiable measure of itsmagnitude. Using the model insights and previous estimates, I show that a tax ratebetween 8% to 16% would account for the flypaper effect observed in U.S. subnationalgovernments.
    Keywords: flypaper effect, intergovernmental transfers, public finance, fiscaldecentralization
    JEL: H71 H77
    Date: 2009–01
  15. By: Marc Gaudry; Emile Quinet
    Abstract: We address the issue of the allocation of railway track maintenance (wear-and-tear) costs to traffic output classes. Neglecting other rail cost categories, such as traffic control and track renewal, we consider a very general function relating maintenance cost C to a set of technical production characteristics K used to produce output vector T. The data base pertains to over 1500 sections of the French rail infrastructure in 1999, representing about 90% of the total network of 30 000 km of lines in regular service. In to the maintenance cost C, it provides by track section 15 technical characteristics (both state S and quality Q) and 4 train traffic outputs T. Input prices, assumed to be uniform in space, disappear from the analysis, as in other national cross-sectional cases. With database subsets of approximately 1 000 observations, several functional forms are tested: Linear, Log-Log, Trans-Log and Generalized Box-Cox. All are embedded in an unrestricted version (U-GBC) of Khaled's seminal restricted Generalized Box-Cox (R-GBC) functional specification. The U-GBC architecture, compared with its 4 principal nested variants, turns out to be by far the most appropriate, whether some observed zero Traffic sample values are used or not ?an issue previously neglected in the literature. It appears that several technical characteristics, such as maximum allowed speed and number of switches, are highly significant maintenance cost factors, which gives a hint that the derived marginal costs are short term; also, the relation between maintenance costs and traffic is non linear and differs significantly by traffic category. Implications of different specifications for marginal infrastructure cost charging are outlined.
    Date: 2009
  16. By: Kenmei Tsubota (Institute of Economic Research, Kyoto University)
    Abstract: We construct a two-region model of monopolistic competition with mobile entrepreneurs. Typical implicit assumption on increasing returns to scale sector is that firms can produce and sale only at one place. We explicitly introduce multi-plant case and examine location equilibrium with decreasing transpiration costs. The difference between single-plant and multi-plant firms lies in export-fixed cost and set-up fixed cost of multi-plant. We find that at certain transportation costs, firms change their organization type from multi-plant to single-plant and, with further decrease in transportation costs, firms concentrate in one region.
    Keywords: Economic Integration, Organization of Production, Horizontal FDI, Export Fixed Cost, Transaction Cost
    JEL: D21 F12 L23 R12
    Date: 2009–08
  17. By: Quamrul Ashraf; Oded Galor; Omer Ozak
    Abstract: This paper exploits cross-country variation in the degree of geographical isolation, prior to the advent of sea-faring and airborne transportation technologies, to examine its impact on the course of economic development across the globe. The empirical investigation establishes that prehistoric geographical isolation has generated a persistent beneficial effect on the process of development and contributed to the contemporary variation in the standard of living across countries.
    Keywords: Growth, Development; Isolation; Agglomeration; Globalization
    Date: 2009

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