nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2009‒12‒11
39 papers chosen by
Steve Ross
University of Connecticut

  1. Sprawl and Blight By Jan K. Brueckner; Robert W. Helsley
  2. Some Evidence on the Nature of Urbanization Economies By Krupka, Douglas J.
  3. Urban Growth in Germany – The Impact of Localization and Urbanization Economies By Annette Illy; Christoph Hornych; Michael Schwartz; Martin T.W. Rosenfeld
  4. An Industrial Agglomeration Approach to Central Place and City Size Regularities By Tomoya Mori; Tony E. Smith
  5. A Hedonic Analysis of the Value of Parks and Green Spaces in the Dublin Area By Mayor, Karen; Lyons, Seán; Duffy, David; Tol, Richard S. J.
  6. How Consistent Are Class Size Effects? By Konstantopoulos, Spyros
  7. Does public housing occupancy increase unemployment? By Claire Dujardin; Florence Goffette-Nagot
  8. Town versus Gown: The Effect of a College on Housing Prices and the Tax Base By Vandegrift, Donald; Lockshiss, Amanda; Lahr, Michael/L
  9. What Drives Personal Consumption? The Role of Housing and Financial Wealth. By Jiri Slacalek
  10. Low Income Shelter Financing in Slum Upgrading: India Urban Initiatives By Sally Merrill
  11. Intergovernmental Grants and Local Public Expenditure: Spending Decisions and Information Spillover Effects By Birkelöf, Lena
  12. Mortgage Loan Modifications: Program Incentives and Restructuring Design By Dan Magder
  13. Human Capital Spillovers, Productivity and Regional Convergence in Spain By Ramos, Raul; Surinach, Jordi; Artís, Manuel
  14. Accounting for housing in poverty analysis By Sutherland H; Mullan K; Zantomio F
  15. Modelling Australian Domestic and International Inbound Travel: a Spatial-Temporal Approach By Minfeng Deng; George Athanasopoulos
  16. The Impact of Local Decentralization on Economic Growth: Evidence from U.S. Counties By Hammond, George W.; Tosun, Mehmet S.
  17. Urban Issues, Reforms and Way Forward in India By Chetan Vaidya
  18. Urban Economics and Entrepreneurship By Edward L. Glaeser; Stuart S. Rosenthal; William C. Strange
  19. Access and Mobility for the Urban Poor in India: Bridging the Gap Between Policy and Needs By Madhav Badami
  20. How Local are Local Governments? Heterogeneous Effects of Intergovernmental Grants By Nilsson, Heléne L.
  21. Local Human Capital Externalities and Wages at the Firm Level: The Case of Italian Manufacturing By Bratti, Massimiliano; Leombruni, Roberto
  22. Wages, Productivity and Industry Composition – agglomeration economies in Swedish regions By Klaesson, Johan; Larsson, Hanna
  23. Neighborhood effects on unemployment ? A test à la Altonji By Claire Dujardin; Florence Goffette-Nagot
  24. Lessons from the Great American Real Estate Boom and Bust of the 1920s By Eugene N. White
  25. Incentive to discriminate? An experimental investigation of teacher incentives in India By Jain, Tarun; Narayan, Tulika
  26. Do Better Schools Lead to More Growth? Cognitive Skills, Economic Outcomes, and Causation By Hanushek, Eric A.; Woessmann, Ludger
  27. Measuring International Technology Spillovers and Progress Towards the European Research Area By Siedschlag, Iulia
  28. Renting versus Owning and the Role of Income Risk: The Case of Germany By Rainer Schulz; Martin Wersing; Axel Werwatz
  29. The importance of R&D subsidies and technological infrastructure for regional innovation performance - A conditional efficiency approach By Tom Broekel; Charlotte Schlump
  30. Do Local Public Expenditures on Functionally Impaired Crowd Out Other Local Public Expenditures? By Birkelöf, Lena
  31. The Impact of Reducing the Administrative Costs on the Efficiency in the Public Sector By Matei, Ani; Savulescu, Carmen
  32. The role of mobility in tax and subsidy competition By Alexander Haupt; Tim Krieger
  33. Happiness, Ideology and Crime in Argentine Cities By Rafael di Tella; Ernesto Schargrodsky
  34. Human Capital and Regional Wage Gaps. By Enrique López-Bazo; Elisabet Motellón
  35. Social Preferences and Transport Policy:The case of US speed limits By Daniel Albalate
  36. Testing Theories of Scarcity Pricing in the Airline Industry By Steven L. Puller; Anirban Sengupta; Steven N. Wiggins
  37. The Vehicle Rescheduling Problem By Spliet, R.; Gabor, A.F.; Dekker, R.
  38. VIllage Economics and the Structure of Extended Family Networks By Manuela Angelucci
  39. Which one to choose? New evidence on the choice and success of job search methods By Stephan Thomsen; Mick Wittich

  1. By: Jan K. Brueckner (Department of Economics, University of California-Irvine); Robert W. Helsley (Haas School of Business, University of California, Berkeley)
    Abstract: The objective of this paper is to show how the same market failures that contribute to urban sprawl also contribute to urban blight. The paper develops a simple dynamic model in which new suburban and older central-city properties compete for mobile residents. The level of housing services generated by older properties depends on current maintenance or reinvestment expenditures. In this setting, market failures that reduce the cost of occupying suburban locations, thus leading to excessive suburban development, also depress central-city housing prices and undermine maintenance incentives, leading to deficient levels of central-city reinvestment. Corrective policies that shift population from the suburbs to the center result in higher levels of reinvestment in central-city housing, therefore reducing blight.
    Keywords: Urban sprawl; Urban blight; Market failures
    JEL: R00 R51 R52
    Date: 2009–09
  2. By: Krupka, Douglas J. (University of Michigan)
    Abstract: Urbanization economies – the effects on productivity and utility created endogenously by larger cities – are a fundamental component of both the economic geography of modern societies and the perpetuation of innovation and economic growth at a national level. Cities account for vast majorities of population – and even larger proportions of production and innovation – in all advanced economies. The nature of these endogenous effects of city size is thus of considerable importance. Krupka (2008) presents a general model in which exogenous variation in local productivity ("natural advantage") and development constraints generate covariation in local incomes, housing prices and population. In that model, the strength of the correlation amongst these variables depends on the nature of the dominant urbanization economy (or diseconomy). This paper looks at the data over the last several decades and finds that the data is consistent with city size increasing consumer/resident happiness and/or reducing productivity of employers.
    Keywords: agglomeration, urbanization economies, congestion, regional equilibrium, natural advantage, economic geography
    JEL: D5 J31 R12 R13 R23 R31
    Date: 2009–11
  3. By: Annette Illy; Christoph Hornych; Michael Schwartz; Martin T.W. Rosenfeld
    Abstract: This study examines the impact of localization and urbanization economies as well as the impact of city size on urban growth in German cities from 2003 to 2007. Although, from a theoretical perspective, agglomeration economies are supposed to have positive impacts on regional growth, prior empirical studies do not show consistent results. Especially little is known about agglomeration economies in Germany, where interregional support policy and the characteristics of the federal system are further determinants of urban growth. The results of the econometric analysis show a U-shaped relationship between specialization and urban growth, which particularly holds for manufacturing industries. We do not find evidence for the impact of Jacobs-externalities; however, city size shows a positive (but decreasing) effect on urban growth.
    Date: 2009–12
  4. By: Tomoya Mori (Institute of Economic Research, Kyoto University); Tony E. Smith (Department of Electrical and Systems Engineering, University of Pennsylvania)
    Abstract: An empirical regularity designated as the Number-Average Size (NAS) Rule was first identified for the case of Japan by Mori, Nishikimi and Smith [13], and has since been extended to the US by Hsu [6]. This rule asserts a negative log-linear relation between the number and average population size of cities where a given industry is present, i.e., of industry-choice cities. Hence one of its key features is to focus on the presence or absence of industries in each city, rather than the percentage distribution of industries across cities. But despite the strong empirical regularity of this rule, there still remains the statistical question of whether such location patterns could simply have occurred by chance. In this paper an alternative approach to industry-choice cities is proposed. This approach utilizes the statistical procedure developed in Mori and Smith [15] to identify spatially explicit patterns of agglomeration for each industry. In this context, the desired industry-choice cities are taken to be those (economic) cities that constitute at least part of a significant spatial agglomeration for the industry. These cluster-based choice cities are then used to reformulate both the NAS Rule and the closely related Hierarchy Principle of Christaller [2]. The key empirical result of the paper is to show that the NAS Rule not only continues to hold under this new definition, but in some respects is even stronger. The Hierarchy Principle is also shown to hold under this new definition. Finally, the present notion of cluster-based choice cities is also used to develop tests of both the locational diversity of industries and the industrial diversity of cities in Japan.
    Date: 2009–12
  5. By: Mayor, Karen; Lyons, Seán; Duffy, David; Tol, Richard S. J.
    Abstract: We use a hedonic house price model to estimate the value of green spaces and parks to homeowners in the Dublin area. Using a dataset of house sales between 2001 and 2006 and combining it with available data on the location of green spaces in Dublin it is possible to assess the different values assigned to green areas by homeowners. We find that the value of green space depends first of all on how far from the property it is located. We also find a difference in the values assigned to open access parks and green spaces. For every 10% increase in the share of green space and park area near a house, its average price increases by 7% to 9%. We also attempted to identify different individual parks and rank them according to their value, however due to spatial multicollinearity the results were mixed.
    Keywords: green spaces/hedonic regression/Ireland/urban parks
    Date: 2009–09
  6. By: Konstantopoulos, Spyros (Michigan State University)
    Abstract: Evidence from Project STAR has suggested that on average small classes increase student achievement. However, thus far researchers have focused on computing mean differences in student achievement between smaller and larger classes. In this study I focus on the distribution of the small class effects at the school level and compute the inconsistency of the treatment effects across schools. I use data from Project STAR and estimated small class effects for each school on mathematics and reading scores from kindergarten through third grade. The results revealed that school-specific small class effects are both positive and negative and that although students benefit considerably from being in small classes in some schools, in other schools being in small classes is a disadvantage. Small class effects were inconsistent and varied significantly across schools. Full time teacher aide effects were also inconsistent across schools and in some schools students benefit considerably from being in regular classes with a full time aide, while in other schools being in these classes is a disadvantage.
    Keywords: small classes, treatment variability, meta-analysis
    JEL: I20
    Date: 2009–11
  7. By: Claire Dujardin (CORE - Center for Operations Research and Econometrics - Université Catholique de Louvain); Florence Goffette-Nagot (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: This paper shows that living in public housing has no effect on the probability of being unemployed in France, once we account for the endogeneity of public housing. We estimate a simultaneous probit model of unemployment and public housing. On a first sample for Lyon, we instrument public housing with the gender composition of children. On a second national sample, the instrument is the city-level share of public housing. Both samples yield the same conclusion, which we justify by showing that a small amount of selection on unobservables is enough to eliminate the positive effect found in “naive” estimates.
    Keywords: Public housing; unemployment; simultaneous probit models; instrumental variables
    Date: 2009
  8. By: Vandegrift, Donald; Lockshiss, Amanda; Lahr, Michael/L
    Abstract: This paper investigates whether the presence of college increases house prices and the tax base. Colleges provide cultural and recreational amenities to the surrounding area but lifestyle choices of students may create negative externalities that depress property prices. In addition, colleges are exempt from property taxes. While the property tax exemption reduces the tax base, the amenity value of the college may cause more development on the remaining land. Previous literature considers the impact of a wide range of amenities including open space, however, none try to capture the effect from a college in a given area. We find that the presence of a college is associated with house prices that are about 11 percent higher. However, the interaction of the college dummy and enrollment is also significant and negative. Taken together, the results suggest that small colleges have the largest effect on house prices and the positive effect on house prices disappears once the college enrollment reaches about 12,500 students. We also find that the effect on house prices is stronger for four-year colleges (14 percent higher) and that the source of the differential is the degree to which the college is residential. For the tax base, the story is simpler. The presence of a college is associated with a tax base that is about 24 percent higher. As is the case with house prices, the effect of a four-year college on the tax base is stronger (about 32 percent) than the effect of a community college. However, neither the size of the college nor the degree to which the college is residential has an impact on the tax base.
    Keywords: Keywords: tax base; college; local amenities.
    JEL: H71 Q51 H23
    Date: 2009–07–07
  9. By: Jiri Slacalek (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: I investigate the effect of wealth on consumption in a new dataset with financial and housing wealth from 16 countries. The baseline estimation method based on the sluggishness of consumption growth implies that the eventual (long-run) marginal propensity to consume out of total wealth is 5 cents (averaged across countries). While the wealth effects are quite strong—between 4 and 6 cents—in countries with more developed mortgage markets and in market-based, Anglo-Saxon and non euro area economies, consumption only barely reacts to wealth elsewhere. The effect of housing wealth is somewhat smaller than that of financial wealth for most countries, but not for the US and the UK. The housing wealth effect has risen substantially after 1988 as it has become easier to borrow against housing wealth. JEL Classification: E21, E32, C22.
    Keywords: housing prices, wealth effect, consumption dynamics, portfolio choice.
    Date: 2009–11
  10. By: Sally Merrill
    Abstract: This report summarises findings from the USAID-sponsored project on models of financing for slum upgrading in India, undertaken on behalf of SPARC,a Mumbai-based NGO involved in slum upgrading and the National Housing Bank of India (NHB). This report primarily addresses the following topics: lack of finance for low income housing, lack of participation of banks in construction finance in slum projects, and suggestions for credit enhancements to better leverage subsidies and household contribution.
    Keywords: housing, low-income housing, finance, urban housing finance, finance for low income housing, banks in housing finance, slum projects, slum rehabilitation, subsidies, household contribution, household participation,National Housing Bank, SPARC, Mumbai, India, Urban Studies
    Date: 2009
  11. By: Birkelöf, Lena (Department of Economics, Umeå University)
    Abstract: This empirical study takes advantage of a new intergovernmental grant in order to investigate the expenditure behavior of the municipalities in Sweden in two ways. First, the grant is used to study the effect on municipal spending related to the grant. Second, the grant is used to test a hypothesis of spatial interaction among municipalities due to mimicking behavior. The grant and expenditures studied here pertain to one specific service area of the Swedish municipalities; services to functionally impaired individuals. The grant was introduced in 2004. The data used pertains to the period before (2001-2003) and after (2004-2007) the introduction of the grant. A fixed-effects spatial lag model is used to study the (possible) spatial interactions among municipalities. Interestingly, the results show that during the first time period, the municipalities interact with their neighbors when setting the expenditure level, possibly due to mimicking. In the second time period, after the introduction of the grant, there is no evidence of interaction. This would support the hypothesis that the governmental grants provide information to the municipalities and the need for mimicking diminishes with the grant.
    Keywords: Local public expenditures; Intergovernmental grants; Spatial Interaction
    JEL: H72 H77 R12
    Date: 2009–12–04
  12. By: Dan Magder (Lone Star Funds)
    Abstract: Mortgage defaults and home foreclosures remain a growing problem that undermines the nascent US economic recovery. Delinquencies continue to skyrocket, up 300 percent since the beginning of the crisis, and the contagion has spread to prime loans where delinquencies have risen to over 11 percent of outstanding loans. The resulting foreclosures have broad consequences: Individuals lose their homes, banks take losses on the loans, neighbors suffer as area prices go down, and localities lose on property taxes. The economics of modifying loans to avoid defaults appear strong: Lenders lose an average of $145,000 during a foreclosure compared with less than $24,000 on a modified loan. Yet the track record of modification programs has been surprisingly poor. Potential lawsuits over modifying loans in securitization trusts may be a less important obstacle than many claim. More significant are misaligned incentives that put mortgage servicers in opposition to both investors and borrowers, conflicts between investors holding different tranches of mortgage-backed securities (MBS), operational impediments, and problems in loan modification design that contribute to redefaults. Policymakers should improve reporting metrics to highlight servicers’ conflicts of interest, shift the emphasis of loan modifications from short-term fixes to making the new loans more sustainable, and use government resources to drive operational/capacity improvements in the industry.
    Keywords: Mortgage Loan Modifications, Restructuring, Credit Crisis, HAMP
    JEL: E60 G18 G21
    Date: 2009–11
  13. By: Ramos, Raul (University of Barcelona); Surinach, Jordi (University of Barcelona); Artís, Manuel (University of Barcelona)
    Abstract: This paper analyses the differential impact of human capital, in terms of different levels of schooling, on regional productivity and convergence. The potential existence of geographical spillovers of human capital is also considered by applying spatial panel data techniques. The empirical analysis of Spanish provinces between 1980 and 2007 confirms the positive impact of human capital on regional productivity and convergence, but reveals no evidence of any positive geographical spillovers of human capital. In fact, in some specifications the spatial lag presented by tertiary studies has a negative effect on the variables under consideration.
    Keywords: regional convergence, productivity, human capital composition, geographical spillovers
    JEL: O18 O47 R23
    Date: 2009–11
  14. By: Sutherland H (Institute for Social and Economic Research); Mullan K (Australian National University); Zantomio F (Research Institute for the Evaluation of Public Policies)
    Abstract: The treatment of housing in the definition of income used to measure poverty makes a big difference to who is counted as poor. Both the Before Housing Costs (BHC) and After Housing Costs (AHC) measures in current use in the UK pose problems. We compare BHC and AHC income with an alternative measure, overcoming their respective flaws by including in income the difference between the estimated value of housing consumed and housing costs, or net imputed rent. We investigate whether findings about poverty among children and pensioners, and the effectiveness of poverty-reducing policies, are affected by accounting for housing in this way.
    Date: 2009–11–25
  15. By: Minfeng Deng; George Athanasopoulos
    Abstract: In this paper Australian domestic and international inbound travel are modelled by an anisotropic dynamic spatial lag panel Origin-Destination (OD) travel flow model. Spatial OD travel flow models have traditionally been applied in a single cross-sectional context, where the spatial structure is assumed to have reached its long run equilibrium and temporal dynamics are not explicitly considered. On the other hand, spatial effects are rarely accounted for in traditional tourism demand modelling. We attempt to address this dichotomy between spatial modelling and time series modelling in tourism research by using a spatial-temporal model. In particular, tourism behaviour is modelled as travel flows between regions. Temporal dependencies are accounted for via the inclusion of autoregressive components, while spatial autocorrelations are explicitly accounted for at both the origin and the destination. We allow the strength of spatial autocorrelation to exhibit seasonal variations, and we allow for the possibility of asymmetry between capital-city neighbours and non-capital-city neighbours. Significant spatial dynamics have been uncovered, which lead to some interesting policy implications.
    Keywords: Tourism demand, Dynamic panel models, Travel flow model.
    JEL: C21 C51 L83
    Date: 2009–11–24
  16. By: Hammond, George W. (West Virginia University); Tosun, Mehmet S. (University of Nevada, Reno)
    Abstract: We analyze the impact of fiscal decentralization on U.S. county population, employment, and real income growth. Our findings suggest that government organization matters for local economic growth, but that the impacts vary by government unit and by economic indicator. We find that single-purpose governments per square mile have a positive impact on metropolitan population and employment growth, but no significant impact on nonmetropolitan counties. In contrast, the fragmentation of general-purpose governments per capita has a negative impact on employment and population growth in nonmetropolitan counties. Our results suggest that local government decentralization matters differently for metropolitan and nonmetropolitan counties.
    Keywords: fiscal decentralization, metropolitan, nonmetropolitan, population, employment, income, spatial econometrics
    JEL: E62 H7 R11
    Date: 2009–11
  17. By: Chetan Vaidya
    Abstract: The Government has launched a reform-linked urban investment programme, JNNURM. The paper has analysed urban trends, projected population, service delivery, institutional arrangements, municipal finances, innovative financing, and suggests that India’s future strategy should focus on: (a) inter-government transfers with built-in incentives to improve performance; (b) capacity building of ULBs; (c) investments on asset creation as well as management; (d)integrate urban transport with land use planning; (e) integrate various urban development and related programmes at local, state and national levels; (f) strengthen urban institutions and clarify roles of different organisations; (g) second generation of urban reforms should further focus on regulation, innovative financing and PPP, and climate change initiatives; and (h) different approach of supporting reform-linked investments needed for different states based on level of urbanisation. [Ministry of Finance WP]
    Keywords: JNNURM, urban renewal programme, urban trends, urban transport, transportation, urban development, climate change, PPPs, private-public partnerships, Urban Studies, urbanisation
    Date: 2009
  18. By: Edward L. Glaeser; Stuart S. Rosenthal; William C. Strange
    Abstract: Research on entrepreneurship often examines the local dimensions of new business formation. The local environment influences the choices of entrepreneurs; entrepreneurial success influences the local economy. Yet modern urban economics has paid relatively little attention to entrepreneurs. This essay introduces a special issue of Journal of Urban Economics dedicated to the geography of entrepreneurship. The paper frames the core questions facing researchers interested in assessing the local causes and consequences of entrepreneurship, perturbs a core urban model to incorporate entrepreneurship, and concludes by offering an agenda for future work on the spatial aspects of entrepreneurship.
    JEL: J23 L26 M13 O31 R30
    Date: 2009–11
  19. By: Madhav Badami
    Abstract: Indian cities are characterised by rapid growth in human as well as motor vehicle populations. Although the poor benefit the least from motor vehicle activity, they bear the brunt of its impacts. The policy challenge is, how to fulfill mass mobility needs, while minimizing these adverse impacts. But while the need to meet this and other urban challenges grows ever more urgent, Indian cities face severe resource constraints. The paper addresses the question of how to meet this policy challenge, given the realities of the Indian context. [Paper at the Forum on Urban Infrastructure and Public Service Delivery for the Urban PoorOrganized by the Woodrow Wilson International Center for Scholars and National Institute of Urban Affairs June 24-25, 2004.]
    Keywords: urban poor, delivery of services, needs, policy, transportation, motor vehicles,environmental impact, New Dlehi, India, Urban Studies
    Date: 2009
  20. By: Nilsson, Heléne L. (Department of Economics)
    Abstract: While the literature on how intergovernmental grants affect the budget of receiving jurisdictions is numerous, the very few studies that explicitly deal with likely endogeneity problems focus on grants targeted towards specific sectors or to specific type of recipients. The results from these studies are mixed and make clear that knowledge about grants effects is to this date still insufficient. This paper contributes by estimating causal effects on local expenditures and income tax rates of general, non-targeted grants to Finnish municipalities. This is done in a difference-in-difference model utilizing policy-induced increases in grants to three groups of remotely populated municipalities. The results show no statistically significant response in expenditures to the policy overall. However, when investigating the extent of heterogeneity I find a large, significant effect for two out of the three groups of treated municipalities but a likely null or even negative effect for the third group. The tax rate response is small and seems to be more homogeneous.
    Keywords: Intergovernmental grants; difference-in-difference; heterogeneous treatment effects; flypaper effect;
    JEL: C23 H71 H72 H77 R51
    Date: 2009–12–02
  21. By: Bratti, Massimiliano (University of Milan); Leombruni, Roberto (University of Turin)
    Abstract: We use a unique firm-level data set merging administrative information on average wages paid by firms by skill level (blue collars and white collars), Population Census information on the local stock of human capital available to firms and survey information on firm characteristics to investigate the existence and magnitude of local human capital externalities in Italian Manufacturing. The latter represents an interesting case study due to the prevalence of small family business and a technological lag with respect to the US, to which most evidence supporting local human capital spillovers refers. Our estimates show that in Italy, like in the US, firms located in geographical areas with a higher stock of human capital pay higher wages. This evidence is robust to many variants of the econometric specification and to addressing potential endogeneity issues using instrumental variables estimation and instruments based on the lagged expansion of the Italian higher education system and the lagged demographic structure.
    Keywords: firm, local human capital externalities, Italy, manufacturing, wages
    JEL: J24 J31 I20
    Date: 2009–12
  22. By: Klaesson, Johan (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Larsson, Hanna (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: It is a well known fact that wages have a tendency to be higher in larger regions. The source of the regional difference in wages between larger and smaller areas can be broadly divided into two parts. The first part can be attributed to the fact that regions have different industrial compositions. The second part is due to the fact that average regional productivity differs between regions. Using a decomposition method, akin to shift-share, we are able to separate regional wage disparities into an industrial composition component and productivity component. According to theory it is expected that productivity is higher in larger regions due to different kinds of economies of agglomeration. Also, larger regions are able to host a wider array of sectors compared to smaller regions. Output from sectors demanding a large local or regional market can only locate in larger regions. Examples of such sectors are e.g. various types of advanced services with high average wages. The purpose of the paper is to explain regional differences in wages and the productivity and composition components, respectively. The paper tests the dependence of wages, productivity and industrial composition effects on regional size (using a market potential measure). In the estimation we control for regional differences in education, employment shares, average firm size and self-employment. Swedish regional data from 2004 are used. The results verify that larger regions on average have higher wages, originating from higher productivity and more favorable industry composition.
    Keywords: Agglomeration Economies; Regions; Wages; Productivity; Industrial Composition; Sweden
    JEL: C21 J31 O18 R10 R12
    Date: 2009–11–23
  23. By: Claire Dujardin (CORE - Center for Operations Research and Econometrics - Université Catholique de Louvain); Florence Goffette-Nagot (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: The aim of this paper is to test for the influence of neighborhood deprivation on individual unemployment probability in the case of Lyon (France). We estimate a bivariate probit model of unemployment and location in a deprived neighborhood. Our identification strategy is twofold. First, we instrument neighborhood type by the gender composition of household's children and the spouse's workplace. Second, we use the methodology proposed by Altonji et al. (2005), that in our case consists in making hypotheses as to the correlation between the unobservables that determine unemployment and the unobservables that influence the selection into neighborhood types. Our results show that the effect of neighborhood deprivation is not significantly different from zero in the bivariate probit with exclusion restrictions. We also show that a correlation of the unobservables as low as ten percent of the correlation of observables is sufficient to explain the positive neighborhood effect that is observed when endogeneity is not accounted for.
    Keywords: Neighborhood effects ; unemployment ; simultaneous probit models ; instrumental variables ; selection on unobservables
    Date: 2009
  24. By: Eugene N. White
    Abstract: Although long obscured by the Great Depression, the nationwide “bubble” that appeared in the early 1920s and burst in 1926 was similar in magnitude to the recent real estate boom and bust. Fundamentals, including a post-war construction catch-up, low interest rates and a “Greenspan put,” helped to ignite the boom in the twenties, but alternative monetary policies would have only dampened not eliminated it. Both booms were accompanied by securitization, a reduction in lending standards, and weaker supervision. Yet, the bust in the twenties, which drove up foreclosures, did not induce a collapse of the banking system. The elements absent in the 1920s were federal deposit insurance, the “Too Big To Fail” doctrine, and federal policies to increase mortgages to higher risk homeowners. This comparison suggests that these factors combined to induce increased risk-taking that was crucial to the eruption of the recent and worst financial crisis since the Great Depression.
    JEL: E5 G18 G21 N12 N22
    Date: 2009–12
  25. By: Jain, Tarun; Narayan, Tulika
    Abstract: We address the challenge of designing performance-based incentive schemes for schoolteachers. When teachers specialize in different subjects in the presence of social prejudice, performance based pay which depends on the average of student performance can cause teachers to coordinate their effort in high status students and away from low status students. Laboratory experiments conducted in India with future teachers as subjects show that performance-based pay causes teachers to decrease effort in low caste Hindu students compared to upper caste Hindu or Muslim students. We observe greater effort and lower intra-class variation when teachers are penalized if students receive zero scores.
    Keywords: Teacher incentives; Laboratory experiments; Coordination games; Discrimination
    JEL: I28 J15 C91 I22
    Date: 2009–10–31
  26. By: Hanushek, Eric A. (Stanford University); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: We investigate whether a causal interpretation of the robust association between cognitive skills and economic growth is appropriate and whether cross-country evidence supports a case for the economic benefits of effective school policy. We develop a new common metric that allows tracking student achievement across countries, over time, and along the within-country distribution. Extensive sensitivity analyses of cross-country growth regressions generate remarkably stable results across specifications, time periods, and country samples. In addressing causality, we find, first, significant growth effects of cognitive skills when instrumented by institutional features of school systems. Second, home-country cognitive-skill levels strongly affect the earnings of immigrants on the U.S. labor market in a difference-in-differences model that compares home-educated to U.S.-educated immigrants from the same country of origin. Third, countries that improved their cognitive skills over time experienced relative increases in their growth paths. From a policy perspective, the shares of basic literates and high performers have independent significant effects on growth, and the estimates suggest that the high-performer effect is larger in poorer countries.
    Keywords: human capital, economic growth, cognitive skills
    JEL: H4 I2 J3 J61 O1 O4
    Date: 2009–11
  27. By: Siedschlag, Iulia
    Abstract: The objective of this paper is to contribute to the development of an evidence-based system to monitor progress towards the European Research Area (ERA) and a knowledge-based economy. We start with an overview of existing theory and empirical evidence on the role of international technology spillovers on economic growth. Further, we discuss the transmission channels of international technology spillovers and barriers to international technology diffusion. Next we turn to measuring specialisation in knowledge-based sectors and geographical concentration patterns of these sectors. The remainder of this paper proposes three sets of indicators to monitor progress towards the ERA and a knowledge-based economy in relation to international technology diffusion.
    Keywords: Absorptive capacity/European Research Area/International technology spillovers/Knowledge-intensive economy/growth
    JEL: F23 F42 F43 O33 O47
    Date: 2009–11
  28. By: Rainer Schulz; Martin Wersing; Axel Werwatz
    Abstract: In a world with complete markets and no transactions cost, the decision whether to rent or buy a home is separate from a household's professional income risk. If markets are incomplete and have frictions, however, profession- specific income risk, regional house price risk, and mobility needs will interact and should affect the tenure mode choice. Using panel data from West Germany, we establish homogeneous profession groups and estimate their regional net income risk and regional mobility. We then examine the impact of the risk and mobility variables on the tenure mode decision at the aggregate and the individual household level. We find that the diversification potential of renting affects the tenure mode choice as do mobility needs.
    Keywords: Tenure mode choice, background risk, household mobility
    JEL: R21 G11 J24 C25
    Date: 2009–12
  29. By: Tom Broekel; Charlotte Schlump
    Abstract: The importance of R&D subsidies for innovation activities is highlighted by numerous firm-level studies. These approaches miss however the systematic regional character of innovation activities and potential firm-spanning effects of this policy measure. The literature on regional innovation performance has widely neglected R&D subsidies so far. This paper analyzes the importance of R&D subsidies as well as the relevance of a publicly funded technological infrastructure for the innovation efficiency of German regions. Using conditional nonparametric frontier techniques we find positive effects of R&D subsidies and somewhat smaller ones for the technological infrastructure, which however vary between industries.
    Keywords: innovation policy, regional innovation efficiency, technological infrastructure, stepwise conditional efficiency analysis
    JEL: O18 O38 R58 R12
    Date: 2009–11
  30. By: Birkelöf, Lena (Department of Economics, Umeå University)
    Abstract: This paper examines whether local public expenditures on services to functionally impaired individuals crowd out other local public expenditures in Sweden. Over the last ten years, these expenditures have increased by more than 90 percent while other municipal expenditures have experienced increases of up to 30 percent. The impact of expenditures on functionally impaired individuals is tested on five different spending areas using a two-stage least squares (2SLS) fixed-effects model. While the results give no support for crowding out in the areas of social assistance, culture & leisure, and childcare & preschool, a negative relationship on spending for elderly & disabled care and education is found, suggesting that crowding out indeed occurs within the municipal sector. The negative relationships are significant both in a statistical and an economic sense.
    Keywords: Local public expenditures; Functionally impaired; Expenditure crowding out
    JEL: H72 J14 R50
    Date: 2009–12–04
  31. By: Matei, Ani; Savulescu, Carmen
    Abstract: The goal of the paper is to evaluate the impact of reducing the administrative costs on the efficiency in the public sector. Within the general framework provided by the specialised literature, the proposed methodology uses the classical model of a function of production, thus describing the factors of influence of the administrative costs on production and productivity in the public sector. The theoretical results are empirical exemplified for a local service of public utility. Adapting the theoretical model to the empirical situation is grounded on statistic methods of analysis and regression. The interpretation of results inscribes in the economic framework specific for public economics. The results aim both the novel model of analysis and the concrete evaluation of the economic impact of reducing the administrative expenditure in the public sector. At the same time, the general topic of reducing the administrative costs is extended towards the public sector. The most relevant conclusion refers to the capacity of the classical economic models in developing the public sector
    Keywords: administrative costs;efficiency; productivity; public sector
    JEL: D73 H72 H59
    Date: 2009–02–15
  32. By: Alexander Haupt (University of Plymouth); Tim Krieger (University of Paderborn)
    Abstract: In this paper, we analyse the role of mobility in tax and subsidy competition. Our primary result is that increasing ‘relocation’ mobility of firms leads to increasing ‘net’ tax revenues under fairly weak conditions. While enhanced relocation mobility intensifies tax competition, it weakens subsidy competition. The resulting fall in the governments’ subsidy payments overcompensates the decline in tax revenues, leading to a rise in net tax revenues. We derive this conclusion in a model in which two governments are first engaged in subsidy competition and thereafter in tax competition, and firms locate and potentially relocate in response to the two political choices.
    Keywords: Tax competition, subsidy competition, capital and firm mobility, foreign direct investment
    JEL: H71 H87 F H
    Date: 2009
  33. By: Rafael di Tella; Ernesto Schargrodsky
    Abstract: This paper uses self-reported data on victimization, subjective well being and ideology for a panel of individuals living in six Argentine cities. While no relationship is found between happiness and victimization experiences, a correlation is documented, however, between victimization experience and changes in ideological positions. Specifically, individuals who are the victims of crime are subsequently more likely than non-victims to state that inequality is high in Argentina and that the appropriate measure to reduce crime is to become less punitive (demanding lower penalties for the same crime).
    Keywords: Happiness, crime, beliefs
    JEL: I31 K42 R29
    Date: 2009–11
  34. By: Enrique López-Bazo (Faculty of Economics, University of Barcelona); Elisabet Motellón (Faculty of Economics, University of Barcelona)
    Abstract: This paper uses micro-level data to analyse the effect of human capital on regional wage differentials. The results for the set of Spanish regions confirm that they differ in the endowment of human capital, but also that the return that individuals obtain from it varies sharply across regions. Regional heterogeneity in returns is especially intense in the case of education, particularly when considering its effect on the employability of individuals. These differences in endowment and, especially, in returns to human capital, account for a significant proportion of regional wage gaps.
    Keywords: Education, Experience, Regional disparities, Returns to human capital, Wage gap decomposition.
    Date: 2009–11
  35. By: Daniel Albalate (Faculty of Economics, University of Barcelona)
    Abstract: This article, in reviewing the long-running US debate on speed limits, illustrates how a different valuation of the trade-off between private mobility needs and safety concerns can shape transport policies. It is argued that the regulatory decentralization debate, together with the speed limit in force in each state, obey the social preferences and valuation given to this trade-off. Such a view is consistent with evidence that higher speed limits are to be found in states with greater private mobility needs, even though their fatality rates might be among the highest in the country. By contrast, lower speed limits and supporters of a low national speed limit are to be found in states that show a greater concern for safety outcomes and which are less dependent on private mobility. By reviewing these events and examining the role played by the main actors and analyzing their motivations, the article identifies important lessons for similar future discussions on transport policy.
    Keywords: Speed Limits; Transport Policy; Social Preferences; Policy Analysis.
    Date: 2009–11
  36. By: Steven L. Puller; Anirban Sengupta; Steven N. Wiggins
    Abstract: This paper investigates why passengers pay substantially different fares for travel on the same airline between the same two airports. We investigate questions that are fundamentally different from those in the existing literature on airline price dispersion. We use a unique new dataset to test between two broad classes of theories regarding airline pricing. The first group of theories, as advanced by Dana (1999b) and Gale and Holmes (1993), postulates that airlines practice scarcity based pricing and predicts that variation in ticket prices is driven by differences between high demand and low demand periods. The second group of theories is that airlines practice price discrimination by using ticketing restrictions to segment customers by willingness to pay. We use a unique dataset, a census of ticket transactions from one of the major computer reservation systems, to study the relationships between fares, ticket characteristics, and flight load factors. The central advantage of our dataset is that it contains variables not previously available that permit a test of these theories. We find only mixed support for the scarcity pricing theories. Flights during high demand periods have slightly higher fares but exhibit no more fare dispersion than flights where demand is low. Moreover, the fraction of discounted advance purchase seats is only slightly higher on off-peak flights. However, ticket characteristics that are associated with second-degree price discrimination drive much of the variation in ticket pricing.
    JEL: L1 L93
    Date: 2009–12
  37. By: Spliet, R.; Gabor, A.F.; Dekker, R. (Erasmus Econometric Institute)
    Abstract: The capacitated vehicle routing problem is to find a routing schedule describing the order in which geographically dispersed customers are visited to satisfy demand by supplying goods stored at the depot, such that the traveling costs are minimized. In many practical applications, a long term routing schedule has to be made for operational purposes, often based on average demand estimates. When demand substantially differs, constructing a new schedule is beneficial. The vehicle rescheduling problem is to find a new schedule that not only minimizes the total traveling costs but also minimizes the costs of deviating from the original schedule. In this paper two mathematical programming formulations of the rescheduling problem are presented as well as two heuristic methods, a two-phase heuristic and a modified savings heuristic. Computational and analytical results show that for sufficiently high deviation costs, the two-phase heuristic generates a schedule that is on average close to optimal or even guaranteed optimal, for all considered problem instances. The modified savings heuristic generates schedules of constant quality, however the two-phase heuristic produces schedules that are on average closer to the optimum.
    Keywords: vehicle routing;vehicle rescheduling problem;operational planning
    Date: 2009–11–26
  38. By: Manuela Angelucci
    Abstract: This paper documents how the structure of extended family networks in rural Mexico relates to the poverty and inequality of the village of residence. Using the Hispanic naming convention, we construct within-village extended family networks in 504 poor rural villages. Family networks are larger (both in the number of members and as a share of the village population) and out-migration is lower the poorer and the less unequal the village of residence.
    Keywords: extended family network, Hispanic naming convention, village marginality, residence, poverty, inequality, families, villages, rural, family, Mexico, residence, population, migration,
    Date: 2009
  39. By: Stephan Thomsen (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Mick Wittich
    Abstract: This paper provides new evidence on the choice and success of six different job search channels comprising the public employment agency, advertisements in newspapers and journals, internet job search, recruitment agencies, direct applications, and the social network. In addition, job search intensity and its effects are regarded. Relying on panel data for Germany, we are able to consider observed and unobserved heterogeneity in the estimation. In line with findings for other countries, the results show that consideration of various channels in individual job search increases the employment chances. With regard to the determinants, the estimates exhibit clear differences between the job search channels and with respect to search intensity. The results for success of the job search channels reveal that the public employment agency is ineffective and even harms the employment chances of the unemployed job seekers. In contrast, direct application for jobs and internet job search provide successful channels and increase the employment chances.
    Keywords: job search, unemployment, job placement, Germany, SOEP
    JEL: J64 J62 J20
    Date: 2009–06

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