nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2010‒01‒10
forty-two papers chosen by
Steve Ross
University of Connecticut

  1. Spatial Structure and Productivity in U.S. Metropolitan Areas By Meijers, E.J.; Burger, M.J.
  2. On Spatial Equilibria in a Social Interaction Model Financial Centers By Pascal Mossay; Pierre M. Picard
  3. Housing and debt over the life cycle and over the business cycle By Matteo Iacoviello; Marina Pavan
  4. Spatial Interaction and Local Government Expenditures for Functionally Impaired in Sweden By Birkelöf, Lena
  5. Economic recovery, small business, and the challenge of commercial real estate By Dennis P. Lockhart
  7. State of Iowa Housing Data and Analysis By O'Brien, Meghan; Eathington, Liesl; Swenson, David A.
  8. Impending U.S. spending bust?: the role of housing wealth as borrowing collateral By Daniel Cooper
  9. Did Children’s Education Matter? Family Migration as a Mechanism of Human Capital Investment. Evidence From Nineteenth Century Bohemia By Klein, Alexander
  10. Toward a Strategic Urban Development and Housing Policy for the Philippines By Carino, Benjamin V.; Corpuz, Arturo G.
  11. Does Public Information about School Quality Lead to Flight from Low-Achieving Schools? By Friesen, Jane; Javdani, Mohsen; Woodcock, Simon D.
  12. A Harmonization of First and Second Natures By Pierre M. Picard; Dao-Zhi Zeng
  13. Peers, neighborhoods and immigrant student achievement - evidence from a placement policy By Grönqvist, Olof Åslund, Per-Anders Edin, Peter Fredriksson and Hans
  14. Spatial heterogeneity and the geographic distribution of airport noise By Jeffrey P. Cohen; Cletus C. Coughlin
  15. Regional inflation dynamics using space-time models By Helena Marques; Gabriel Pino; J.D.Tena
  16. Financial Bubbles, Real Estate bubbles, Derivative Bubbles, and the Financial and Economic Crisis By D. Sornette; R. Woodard
  17. The impact of Rosenwald Schools on Black achievement By Daniel Aaronson; Bhashkar Mazumder
  18. Persistent Disparities in Regional Unemployment: Application of a Spatial Filtering Approach to Local Labour Markets in Germany By Roberto Patuelli; Norbert Schanne; Daniel A. Griffith; Peter Nijkamp
  19. Reinvigorating Springfield's economy: lessons from resurgent cities By Yolanda K. Kodrzycki; Ana Patricia Muñoz with Lynn Browne; DeAnna Green; Marques Benton; Prabal Chakrabarti; David Plasse; Richard Walker; Bo Zhao
  20. Debts on debts By Joao Ricardo Faria; Le Wang; Zhongmin Wu
  21. Spatial development By Klaus Desmet; Esteban Rossi-Hansberg
  22. On Spatial dynamics By Klaus Desmet; Esteban Rossi-Hansberg
  23. Mortgage Indebtedness and Household Financial Distress By Georgarakos, Dimitris; Lojschova, Adriana; Ward-Warmedinger, Melanie E.
  25. An anthropometric study of inequality and social segregation in a castilian city. Zamora, 1840-1936 By ricardo hernández garcía; javier vicente ventoso; javier moreno lázaro
  26. International growth spillovers, geography and infrastructure By Roberts, Mark; Deichmann, Uwe
  27. Competitive Cities and Climate Change By Lamia Kamal-Chaoui; Alexis Robert
  28. What Happened to the East German Housing Market? – A Historical Perspective on the Role of Public Funding – By Claus Michelsen; Dominik Weiß
  29. Costly horizontal differentiation By João Correia-da-Silva; Joana Pinho
  30. Local social capital and geographical mobility By Quentin David; Alexandre Janiak; Etienne Wasmer
  31. Social Networks By de Martí, Joan; Zenou, Yves
  32. Labor Market Pooling, Outsourcing and Labor Contracts By Pierre M. Picard; David E. Wildasin
  33. Cultural Diversity and Local Labour Markets By Suedekum, Jens; Wolf, Katja; Blien, Uwe
  34. Fiscal Decentralization and Local Finance Reforms in the Philippines By Llanto, Gilberto M.
  35. Seeking similarity: how immigrants and natives manage at the labor market By Åslund, Olof; Hensvik, Lena; Nordström Skans, Oskar
  36. Did easy credit lead to economic peril?: home equity borrowing and household behavior in the early 2000s By Daniel Cooper
  37. Understanding and Misunderstanding Retail Multipliers By Swenson, David A.
  38. Entropy-based segregation indices By Ricardo Mora; Javier Ruiz-Castillo
  39. Estimating Human Capital Externalities:The Case of Spanish Regions By Manuel Hidalgo Pérez; Walter García-Fontes
  40. On tax competition, public goods provision and jurisdictions' size By Patrice Pieretti; Skerdilajda Zanaj
  41. State business tax incentives: examining evidence of their effectiveness By Jennifer Weiner
  42. Public bus transport demand elasticities in India By Filippini Massimo; Deb Kaushik

  1. By: Meijers, E.J.; Burger, M.J. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Recent concepts as megaregions and polycentric urban regions emphasize that external economies are not confined to a single urban core, but shared among a collection of close-by and linked cities. However, empirical analyses of agglomeration and agglomeration externalities so-far neglects the multicentric spatial organization of agglomeration and the possibility of ‘sharing’ or ‘borrowing’ of size between cities. This paper takes up this empirical challenge by analyzing how different spatial structures, in particular the monocentricity – polycentricity dimension, affect the economic performance of U.S. metropolitan areas. OLS and 2SLS models explaining labor productivity show that spatial structure matters. Polycentricity is associated with higher labor productivity. This appears to justify suggestions that, compared to relatively monocentric metropolitan areas, agglomeration diseconomies remain relatively limited in the more polycentric metropolitan areas, while agglomeration externalities are indeed to some extent shared among the cities in such an area. However, it was also found that a network of geographically proximate smaller cities cannot provide a substitute for the urbanization externalities of a single large city.
    Keywords: polycentricity;dispersion;labor productivity;urbanization externalities
    Date: 2009–12–08
  2. By: Pascal Mossay; Pierre M. Picard (CREA, University of Luxembourg)
    Abstract: Social interactions are at the essence of societies and explain the gathering of in- dividuals in villages, agglomerations, or cities. We study the emergence of multiple agglomerations as resulting from the interplay between spatial interaction external- ities and competition in the land market. We show that the geographical nature of the residential space tremendously a¤ects the properties of spatial equilibria. In particular, when agents locate on an open land strip (line segment), a single city emerges in equilibrium. In contrast, when the spatial economy extends along a closed land strip (circumference), multiple equilibria with odd numbers of cities arise. Spatial equilibrium configurations involve a high degree of spatial symmetry in terms of city size and location, and can be Pareto-ranked.
    JEL: A10
    Date: 2009
  3. By: Matteo Iacoviello; Marina Pavan
    Abstract: This paper describes an equilibrium life-cycle model of housing where nonconvex adjustment costs lead households to adjust their housing choice infrequently and by large amounts when they do so. In the cross-sectional dimension, the model matches the wealth distribution; the age profiles of consumption, homeownership, and mortgage debt; and data on the frequency of housing adjustment. In the time-series dimension, the model accounts for the procyclicality and volatility of housing investment, and for the procyclical behavior of household debt.
    Keywords: Housing ; Mortgage loans
    Date: 2009
  4. By: Birkelöf, Lena (Department of Economics, Umeå University)
    Abstract: The thesis consists of an introductory part and three self-contained papers. <p> Paper [I] studies the determinants of the differences in expenditure on services for functionally impaired individuals among municipalities in Sweden. A spatial autoregressive model is used in order to test whether the decisions on the expenditure level in a neighboring municipality affect the municipality’s own expenditure. The results show of spatial interaction among neighbors, possible due to mimicking. However, when controlling for differences among counties there is no evidence of spatial interaction. Therefore, the positive interaction first found can be interpreted either as a result of differences in the way county councils diagnose individuals or due to interaction among the neighbors in the same county. <p> Paper [II] takes advantage of a new intergovernmental grant 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 data used pertains to the periods before and after the introduction of the grant. A fixed-effects spatial lag model is used to study the spatial interactions among municipalities. The results show that before the grant, municipalities interact with their neighbors when setting the expenditure level, while there is no evidence of interaction in the second period. This would support the hypothesis that the grants provide information to the municipalities and the need for mimicking diminishes with the grant. <p> Paper [III] examines whether local public expenditures on services to functionally impaired individuals crowd out other local public expenditures in Sweden. The hypothesis 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 on spending for 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; Spatial econometrics; Intergovernmental grants; Spatial interaction; Intergovernmental grants; Expenditure crowding out; Functionally impaired
    JEL: H72 H77 I18 J14 R12 R50
    Date: 2009–12–17
  5. By: Dennis P. Lockhart
    Abstract: Remarks for the Urban Land Institute at the Emerging Trends in Real Estate Conference, Atlanta, Georgia, November 10, 2009
    Keywords: Economic development ; Real estate development
    Date: 2009
  6. By: Michela Ponzo (Dipartimento di Economia e Statistica, Università della Calabria)
    Abstract: In this paper we study the impact of the degree of school competition on achievement of Italian students. Specifically, competition is measured as the number of schools available to students in a given area. The aim is to evaluate whether an increase in school choice improves the quality of education. Using the third cycle of the Programme for International Student Assessment (PISA 2006) we investigate with simple Least Squares regression models, controlling for a range of individual and schools characteristics, if secondary school students with a wider range of schools choices perform better than those students whose choice is more limited. We find a significant positive correlation between students’ academic performance and the degree of local schools competition. Moreover, we show that students achieve much better outcomes if schools operating in more competitive environments also experience a higher pressure on academic standards coming from parents.
    Keywords: Educational Production Function, School Competition, Students Achievement, PISA
    JEL: J24 I2 I21 H72
    Date: 2009–12
  7. By: O'Brien, Meghan; Eathington, Liesl; Swenson, David A.
    Abstract: This is a comprehensive housing data compendium and analysis in support of the state of Iowa's quinquennial housing plan to the U.S. Department of Housing and Urban Development. It is composed of an overview of the state's economy, especially as it may pertain to housing needs and issues; a housing needs analysis that details the vulnerabilities and challenges for several population groups; and a housing market evaluation.
    JEL: A1
    Date: 2009–12–15
  8. By: Daniel Cooper
    Abstract: Using data from the Panel Study of Income Dynamics, this paper considers the mechanism by which changing house values impact U.S. household spending. The results suggest that house values affect consumption by serving as collateral for households to borrow against to smooth their spending. The results show that the consumption of households who need to borrow against their home equity increases by roughly 11 cents per $1.00 increase in their housing wealth. Changing house values, however, have little effect on the expenditures of households who do not need to borrow to finance their consumption. Based on these results, the paper further finds that declining housing wealth has a relatively small implied negative impact on aggregate consumption expenditures.
    Keywords: Home equity loans
    Date: 2009
  9. By: Klein, Alexander (Department of Economics, University of Warwick)
    Abstract: This paper analyzes the rural-urban migration of families in the Bohemian region of Pilsen in 1900. Using a new 1300-family dataset from the 1900 population census I examine the role of children‘s education in rural-urban migration. I find that families migrated to the city such that the educational attainment of their children would be maximized and that there is a positive correlation between family migration and children being apprentices in urban areas. The results suggest that rural-urban migration was powered not only by the exploitation of rural-urban wage gaps but also by aspirations to engage in human capital investment.
    Keywords: migration ; human capital investment ; family decision-making
    Date: 2009
  10. By: Carino, Benjamin V.; Corpuz, Arturo G.
    Abstract: Philippine cities provide the highest levels of service and living standards in the country. Much of what happens to the country in terms of production and employment, income and consumption, and access to basic services and amenities will continue to be determined by the performance of its urban system. Overall, however, the Philippines is characterized by its lack of urban competitiveness. Although its urban areas account for an overwhelming majority of national economic growth, they have also been underperforming relative to their potentials and other cities in East Asia. In particular, the urban system is plagued by high transaction costs and production inefficiencies; lack of infrastructure and service facilities; inability to attract significant amounts of investments; outmigration of talent; diminishing competitiveness of its primary international gateway and service center (Metro Manila); lack of financial resources; high poverty incidence; deteriorating urban environment; and weak governance. Addressing these problems is not easy or simple. Invariably, however, it is rooted in (1) improving the competitiveness of the urban system, (2) addressing urban poverty and (3) housing problems, (4) building sustainable communities, and (5) improving governance specifically, strengthening the role of local governments in managing the environment and in ensuring the sustainability of communities.
    Keywords: urban development, Philippines, housing policy
    Date: 2009
  11. By: Friesen, Jane (Simon Fraser University); Javdani, Mohsen (Simon Fraser University); Woodcock, Simon D. (Simon Fraser University)
    Abstract: We estimate the effect of publicly disseminated information about school-level achievement on students' mobility between elementary schools. We find that students are more likely to leave their school when poor school-level performance is revealed. In general, parents respond to information soon after it becomes available. Once the information is absorbed, they do not respond to subsequent releases, even when it is reframed and given widespread media attention. Parents in low-income neighborhoods and those who speak a non-English language at home respond most strongly. However, non-English speaking parents only respond when information is widely disseminated and discussed in the media.
    Keywords: information, school choice
    JEL: I21
    Date: 2009–12
  12. By: Pierre M. Picard; Dao-Zhi Zeng (CREA, University of Luxembourg)
    Abstract: This paper investigates the joint impact of the first nature and the second nature forces on industry location. Towards this aim, we develop a two-region new economic geography model where local factor congestion and location advantages compete with demand linkages and product market crowding. In particular we study the case of absolute location advantage in a single industry model and the case of comparative advantages in a two-industry model. We characterize the structure of industries and discuss the possibilities of catastrophic changes, endogenous industrial asymmetries and specialization. We find that absolute location advantage are associated with a smooth agglomeration process and comparative advantages with a catastrophic process.
    JEL: R10 R13 F12
    Date: 2009
  13. By: Grönqvist, Olof Åslund, Per-Anders Edin, Peter Fredriksson and Hans (Department of Economics)
    Abstract: Immigrants typically perform worse than other students in the OECD countries. We examine to what extent this is due to the population characteristics of the neighborhoods that immigrants grow up in. We address this issue using a governmental refugee placement policy which provides exogenous variation in the initial place of residence in Sweden. The main result is that, for a given share of immigrants in a neighborhood, immigrant school performance is increasing in the number of higly educated adults sharing the subject's ethnicity. A standard deviation increase in the fraction of highly educated adults in the assigned neighborhood increases compulsory school GPA by 0.9 percentile ranks. This magnitude corresponds to a tenth of the gap in student performance between refugee immigrant and native-born children. We also provide tentative evidence that the overall share of immigrants in the neighborhood has a negative effect on GPA.
    Keywords: Peer effects; Ethnic enclaves; Immigration; School performance
    JEL: I20 J15 Z13
    Date: 2009–12–10
  14. By: Jeffrey P. Cohen; Cletus C. Coughlin
    Abstract: One might expect that houses closer to an airport and those in higher minority population neighborhoods experience more airport noise. We find evidence supporting these conjectures when estimating a standard ordered probit model for houses sold near the Atlanta airport. However, because the various neighborhood demographics surrounding the airport can be heterogeneous, and the noise contours are not necessarily correlated with distance in certain neighborhoods, we hypothesize that the impacts of explanatory variables on the probability of greater noise vary across space. We explore spatial heterogeneity by estimating ordered probit locally weighted regressions (OPLWR). These results differ from those using a standard ordered probit model. Moreover, we find notable differences in parameter estimates for different observations (i.e., houses). Even in relatively small areas, our results imply that the standard ordered probit model can generate biased estimates.
    Keywords: Airports ; Regional economics
    Date: 2009
  15. By: Helena Marques (Universitat de les Illes Balears); Gabriel Pino (Universidad de Concepción, Chile); J.D.Tena (Universidad di Sassari, Italia y Universidad Carlos III, Spain)
    Abstract: This paper provides empirical evidence of the role of spatial factors on the determination of inflation dynamics for a representative set of tradable commodities in Chile. We present a simple model that explains inflation divergence across regions in a monetary union with similar preferences as a consequence of the geographical allocation of producers in the different regions. Our results indicate that spatial allocation together with transport costs are important determinants of regional inflation while macroeconomic common factors do not play an important role in this process. Existing literature had obtained the opposite result for Europe and the reasons for that difference warrant further investigation. Moreover, we find that geographical distance seems to be a more appropriate measure of neighbourhood than the adjacency of regions.
    Keywords: regional inflation dynamics, space-time models, Chile
    JEL: E31 E52 E58 R11 C23 C21
    Date: 2009
  16. By: D. Sornette; R. Woodard
    Abstract: The financial crisis of 2008, which started with an initially well-defined epicenter focused on mortgage backed securities (MBS), has been cascading into a global economic recession, whose increasing severity and uncertain duration has led and is continuing to lead to massive losses and damage for billions of people. Heavy central bank interventions and government spending programs have been launched worldwide and especially in the USA and Europe, with the hope to unfreeze credit and boltster consumption. Here, we present evidence and articulate a general framework that allows one to diagnose the fundamental cause of the unfolding financial and economic crisis: the accumulation of several bubbles and their interplay and mutual reinforcement has led to an illusion of a ``perpetual money machine'' allowing financial institutions to extract wealth from an unsustainable artificial process. Taking stock of this diagnostic, we conclude that many of the interventions to address the so-called liquidity crisis and to encourage more consumption are ill-advised and even dangerous, given that precautionary reserves were not accumulated in the ``good times'' but that huge liabilities were. The most ``interesting'' present times constitute unique opportunities but also great challenges, for which we offer a few recommendations.
    Keywords: Financial crisis, bubbles, real estate bubble, derivatives, super-exponential
    JEL: O16
    Date: 2009–05–02
  17. By: Daniel Aaronson; Bhashkar Mazumder
    Abstract: The Black-White gap in completed schooling among Southern born men narrowed sharply between the World Wars after being stagnant from 1880 to 1910. We examine a large scale school construction project, the Rosenwald Rural Schools Initiative, which was designed to dramatically improve the educational opportunities for Southern rural Blacks. From 1914 to 1931, nearly 5,000 school buildings were constructed, serving approximately 36 percent of the Black rural school-aged Southern population. We use historical Census data and World War II enlistment records to analyze the effects of the program on school attendance, literacy, high school completion, years of schooling, earnings, hourly wages, and migration. We find that the Rosenwald program accounts for at least 30 percent of the sizable educational gains of Blacks during the 1910s and 1920s. We also use data from the Army General Classification Test (AGCT), a precursor to the AFQT, and find that access to Rosenwald schools increased average Black scores by about 0.25 standard deviations adding to the existing literature showing that interventions can reduce the racial gap in cognitive skill. In the longer run, exposure to the schools raised the wages of blacks that remained in the South relative to Southern whites by about 35 percent. For blacks the private rate of return to a year of additional schooling induced by Rosenwald was about 18 percent. Moreover, Rosenwald significantly increased Northern migration of young adult Blacks, with no corresponding impact on schoolage Blacks or young adult Whites, likely fueling further income gains. Across all outcomes, the improvements were highest in counties with the lowest levels of Black school attendance suggesting that schooling treatments can have a very large impact among those at the bottom of the skill distribution.
    Date: 2009
  18. By: Roberto Patuelli (Institute for Economic Research (IRE), University of Lugano, Switzerland; The Rimini Centre for Economic Analysis, Italy); Norbert Schanne (Institute for Employment Research (IAB), Nuremberg, Germany); Daniel A. Griffith (School of Economic, Political and Policy Sciences, University of Texas at Dallas, USA); Peter Nijkamp (Department of Spatial Economics, VU University Amsterdam, The Netherlands)
    Abstract: The geographical distribution and persistence of regional/local unemployment rates in heterogeneous economies (such as Germany) have been, in recent years, the subject of various theoretical and empirical studies. Several researchers have shown an interest in analysing the dynamic adjustment processes of unemployment and the average degree of dependence of the current unemployment rates or gross domestic product from the ones observed in the past. In this paper, we present a new econometric approach to the study of regional unemployment persistence, in order to account for spatial heterogeneity and/or spatial autocorrelation in both the levels and the dynamics of unemployment. First, we propose an econometric procedure suggesting the use of spatial filtering techniques as a substitute for fixed effects in a panel estimation framework. The spatial filter computed here is a proxy for spatially distributed region-specific information (e.g., the endowment of natural resources, or the size of the ‘home market’) that is usually incorporated in the fixed effects coefficients. The advantages of our proposed procedure are that the spatial filter, by incorporating region-specific information that generates spatial autocorrelation, frees up degrees of freedom, simultaneously corrects for time-stable spatial autocorrelation in the residuals, and provides insights about the spatial patterns in regional adjustment processes. In the paper we present several experiments in order to investigate the spatial pattern of the heterogeneous autoregressive coefficients estimated for unemployment data for German NUTS-3 regions.
    Keywords: unemployment persistence, dynamic panel, hysteresis, spatial filtering, fixed effects
    JEL: C21 C23 R12
    Date: 2009–12
  19. By: Yolanda K. Kodrzycki; Ana Patricia Muñoz with Lynn Browne; DeAnna Green; Marques Benton; Prabal Chakrabarti; David Plasse; Richard Walker; Bo Zhao
    Abstract: As part of the Federal Reserve Bank of Boston's commitment to supporting efforts to revitalize the economy of Springfield, Massachusetts, this paper analyzes the economic development approaches of other mid-sized manufacturing-oriented cities during the past half century. From among a comparison group of 25 municipalities that were similar to Springfield in 1960, the study identifies 10 "resurgent cities" that have made substantial progress in improving living standards for their residents, and that are recognized as vital communities in a broader sense by experts on urban economic development and policy. These case studies suggest that industry mix, demographic composition, and geographic position are not the key factors distinguishing the resurgent cities from Springfield. Instead, the most important lessons from the resurgent cities concern leadership and collaboration. Initial leadership in these cities came from a variety of key institutions and individuals. In some cases, the turnaround started with efforts on the part of the public sector, while in other cases nongovernmental institutions or private developers were at the forefront. Regardless of who initiated the turnaround, economic redevelopment efforts spanned decades and involved collaborations among numerous organizations and sectors.
    Keywords: Cities and towns ; Cities and towns - Massachusetts ; Economic policy - Massachusetts
    Date: 2009
  20. By: Joao Ricardo Faria; Le Wang; Zhongmin Wu
    Abstract: This paper studies the impact of mortgages on consumer debt and on debt on durable goods. We first present a stylized model in which an outstanding debt, representing mortgages, affects positively consumer debt, and debt on durable goods. The model is empirically tested for the U.S. using PSID 2005 wave. Our results are striking. First, we find strong evidence supporting a positive association between mortgage loans and consumer debts, regardless of the measures used, the control variables used, and the methods used. Second, we find that the effects of mortgages on the debt on durable goods are in general smaller than the effects of mortgages on consumer debt. Third, our distributional analysis reveals that the effects monotonically decrease as the quantile increases. Finally, our results are also confirmed by the results using the U.K. data.
    Keywords: Consumer expenditure, housing, credit, censored regressions
    JEL: G21 E44 R21 R31
    Date: 2009–12
  21. By: Klaus Desmet (Universidad Carlos III de Madrid and CEPR); Esteban Rossi-Hansberg (Princeton University)
    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.
    Date: 2009–12–16
  22. By: Klaus Desmet (Universidad Carlos III de Madrid and CEPR); Esteban Rossi-Hansberg (Princeton University)
    Abstract: It has long been recognized that the forces that lead to the agglomeration of economic activity and to aggregate growth are similar. Unfortunately, few formal frameworks have been advanced to explore this link. We critically discuss the literature and present a simple framework that can circumvent some of the main obstacles we identify. We discuss the main characteristics of an equilibrium allocation in this dynamic spatial framework, present a numerical example to illustrate the forces at work, and provide some supporting empirical evidence.
    Keywords: dynamic spatial models; technology diffusion; spillovers; trade; factor mobility; growth
    JEL: O3 O4 R1
    Date: 2009–12–16
  23. By: Georgarakos, Dimitris (Goethe University Frankfurt); Lojschova, Adriana (European Central Bank); Ward-Warmedinger, Melanie E. (European Central Bank)
    Abstract: Using comparable survey data from twelve European countries we investigate households' attitudes towards mortgage indebtedness. We find that a given debt burden creates much higher distress in Southern countries, France and Belgium, where fewer households have a mortgage outstanding relative to countries where a sizeable part of the population uses mortgage debt, like the UK, the Netherlands, and Denmark. This is the case after taking into account ppp-adjusted income levels, a rich set of socioeconomic characteristics, housing traits, country-specific constant terms, and household unobserved heterogeneity. We attribute part of this asymmetry to cross-country differences in the expansion of credit markets, which facilitate differential access to liquidity. Household's reported distress is also affected by excess indebtedness relative to the debt load of reference households, and crucially so in countries with less expanded mortgage markets. Thus it appears that households evaluate their own debt burden partly in comparison with the debt position of their peer group and in a way consistent with social stigma considerations which lessen in significance as markets expand. Households' assessment of a debt burden therefore tends to diminish in more expanded credit markets and this process can be reinforced by reference to other households in a growing pool of debt holders.
    Keywords: mortgage debt, credit markets, financial distress, household finance, peer effects
    JEL: D12 D14 G21
    Date: 2009–12
  24. By: Maria De Paola; Michela Ponzo; Vincenzo Scoppa (Dipartimento di Economia e Statistica, Università della Calabria)
    Abstract: In this paper we analyze class size effects on college students exploiting data from a project offering special remedial courses in Mathematics and Language skills to freshmen enrolled at an Italian medium sized public University. To estimate the effects of class size we take advantage of the fact that students and teacher where virtually randomly assigned to teaching classes of different sizes. From our analysis it emerges that, controlling for a number of individual characteristics, larger classes determine a significant and sizeable negative effect on student performance in Mathematics. Importantly, this negative effect is significantly larger for low ability students and negligible for high ability students. On the other hand, class size effects do not appear to be relevant for student achievement in Language Skills.
    Keywords: Class size, student achievement, educational production function
    JEL: C23 I21 J24
    Date: 2009–12
  25. By: ricardo hernández garcía (departamento de fundamentos del análisis económico e historia e instituciones económicas de la universidad de valladolid.); javier vicente ventoso (ies jorge santayana (ávila).); javier moreno lázaro (departamento de fundamentos del análisis económico e historia e instituciones económicas de la universidad de valladolid.)
    Abstract: this paper proposes several indicators for income distribution derived from the height of individuals. From the study of these indicators, we can conclude that the economic backwardness that zamora suffered led a further deterioration of living standards compared to other more economically advanced areas in the region, but less drastic changes in income distribution. Even so, anthropometric indicators show the strong bias and discrimination suffered by unskilled workers as well as the social segregation of the needy, who were isolated in the marginal areas of the city. (paper in Spanish)
    Keywords: Living standards, Income distribution, Anthropometry, Urban history, Castille, Zamora
    JEL: N30 N33 N90 N93 O15
    Date: 2009–11
  26. By: Roberts, Mark; Deichmann, Uwe
    Abstract: There is significant academic evidence that growth in one country tends to have a positive impact on growth in neighboring countries. This paper contributes to this literature by assessing whether growth spillovers tend to vary significantly across world regions and by investigating the contribution of transport and communication infrastructure in promoting neighborhood effects. The study is global, but the main interest is on Sub-Saharan Africa. The authors define neighborhoods both in geographic terms and by membership in the same regional trade association. The analysis finds significant evidence for heterogeneity in growth spillovers, which are strong between OECD countries and essentially absent in Sub-Saharan Africa. The analysis further finds strong interaction between infrastructure and being a landlocked country. This suggests that growth spillovers from regional"success stories"in Sub-Saharan Africa and other lagging world regions will depend on first strengthening the channels through which such spillovers can spread -- most importantly infrastructure endowments.
    Keywords: Achieving Shared Growth,Transport Economics Policy&Planning,Economic Growth,Economic Theory&Research,Country Strategy&Performance
    Date: 2009–12–01
  27. By: Lamia Kamal-Chaoui; Alexis Robert
    Abstract: Cities are part of the climate change problem, but they are also a key part of the solution. This report offers a comprehensive analysis of how cities and metropolitan regions can change the way we think about responding to climate change. Cities consume the vast majority of global energy and are therefore major contributors of greenhouse gas emissions. At the same time, the exposed infrastructure and prevalent coastal location of many cities makes them common targets for climate change impacts such as sea level rise and fiercer storms. This report illustrates how local involvement through ?climate-conscious? urban planning and management can help achieve national climate goals and minimise tradeoffs between environmental and economic priorities. Six main chapters analyse the link between urbanisation, energy use and CO2 emissions; assess the potential contribution of local policies in reducing global energy demand and the trade-offs between economic and environmental objectives at the local scale; discuss complementary and mutually reinforcing policies such as the combination of compact growth policies with those that improve mass transit linkages; and evaluate a number of tools, including the ?greening? of existing fiscal policies, financing arrangements to combat climate change at the local level, and green innovation and jobs programmes. One of the main messages of this report is that urban policies (e.g. densification or congestion charges) can complement global climate policies (e.g. a carbon tax) by reducing global energy demand, CO2 emissions and the overall abatement costs of reducing carbon emissions. To inform the groundswell of local climate change action planning, the report highlights best practices principally from OECD member countries but also from certain non-member countries.
    Keywords: cities, climate change, global warming, government policy, planning, regional economics, regional, sustainable development, territorial, urban sustainability, urban
    JEL: Q42 Q48 Q54 Q55 Q58 R00
    Date: 2009–12–15
  28. By: Claus Michelsen; Dominik Weiß
    Abstract: The paper analyses the development of the East German housing market after the reunification of the former German Democratic Republic and the Federal Republic of Germany in 1990. We analyse the dynamics of the East German housing market within the framework of the well-known stock-flow model, proposed by DiPasquale and Wheaton. We show that the today observable disequilibrium to a large extend is caused by post-unification housing policy and its strong fiscal incentives to invest into the housing stock. Moreover, in line with the stylized empirical facts, we show that ‘hidden reserves’ of the housing market were reactivated since the economy of East Germany became market organized. Since initial undersupply was overcome faster than politicians expected, the implemented fiscal stimuli were too strong. In contrast to the widespread opinion that outward migration caused the observable vacancies, this paper shows that not weakness of demand but supply side policies caused the observable disequilibrium.
    Keywords: housing market transition, housing subsidies, housing supply, East Germany
    JEL: D5 H2 R21 R31
    Date: 2009–12
  29. By: João Correia-da-Silva (CEF.UP and Faculdade de Economia, Universidade do Porto); Joana Pinho (Faculdade de Economia, Universidade do Porto)
    Abstract: We study the effect of quadratic differentiation costs in the Hotelling model of endogenous product differentiation. The equilibrium location choices are found to depend on the magnitude of the differentiation costs (relatively to the transportation costs supported by consumers). When the differentiation costs are low, there is maximum differentiation. When they are intermediate, there is partial differentiation, with a degree of differentiation that decreases with the differentiation costs. When they are above a certain threshold, there is no equilibrium. In any case, the socially optimal degree of differentiation is always lower than the equilibrium level. We also study the case of collusion between firms. If firms can combine locations but not prices, they locate asymmetrically when differentiation costs are high and choose maximum differentiation when they are low. When collusion extends to price setting, there is partial differentiation.
    Keywords: Costly product differentiation, Spatial competition, Hotelling model
    JEL: D43 L13 R32
    Date: 2009–12
  30. By: Quentin David; Alexandre Janiak; Etienne Wasmer (CREA, University of Luxembourg)
    Abstract: In this paper, we attempt to understand the determinants of mobility through introduc- ing the concept of local social capital. Investing in local ties is rational when workers do not expect to move to another region, and reciprocally, once local social capital is accumulated, incentives to move are reduced. We build a model to illustrate several types of complementarities: observationally close individuals may take di¤erent paths characterized by high local social capital and low mobility vs. low social capital and high propensity to move. Employment protection reinforces the accumulation of local social capital and thus reduces mobility. Externalities generate multiple equilibria in which mobility and social capital are negatively correlated across equilibria. European data supports the theory: the South of Europe is characterized by both low mobility and local social capital, while the North of Europe has higher mobility and a more general type of social capital. Within a country and at the individual level, more social capital is associated with lower mobility.
    JEL: A10
    Date: 2009
  31. By: de Martí, Joan (Universitat Pompeu Fabra); Zenou, Yves (Stockholm University)
    Abstract: We survey the literature on social networks by putting together the economics, sociological and physics/applied mathematics approaches, showing their similarities and differences. We expose, in particular, the two main ways of modeling network formation. While the physics/applied mathematics approach is capable of reproducing most observed networks, it does not explain why they emerge. On the contrary, the economics approach is very precise in explaining why networks emerge but does a poor job in matching real-world networks. We also analyze behaviors on networks, which take networks as given and focus on the impact of their structure on individuals’ outcomes. Using a game-theoretical framework, we then compare the results with those obtained in sociology.
    Keywords: random graph, game theory, centrality measures, network formation, weak and strong ties
    JEL: A14 C72 D85 Z13
    Date: 2009–12
  32. By: Pierre M. Picard; David E. Wildasin (CREA, University of Luxembourg)
    Abstract: Economic regions, such as urban agglomerations, face external demand and price shocks that produce income risk. Workers in large and diversified agglomerations may benefit from reduced wage volatility, while firms may outsource the production of intermediate goods and realize benefits from Chamberlinian externalities. Firms may also protect workers from wage risks through fixed wage contracts. This paper explores the relationships between firms’ risks, workers’ contracts, and the structure of production in cities.
    JEL: R12 R23 J31 J65
    Date: 2009
  33. By: Suedekum, Jens (University of Duisburg-Essen); Wolf, Katja (IAB, Nürnberg); Blien, Uwe (IAB, Nürnberg)
    Abstract: During the last decade there have been marked changes in the composition of the non-native workforce in the German labour market. In particular there has been a notable increase in the diversity of nationalities of which the foreign workforce is composed. In this paper we investigate the effects of this diversity for native employees. Our analysis is conducted at the local level and uses a panel of 326 Western German regions over the time period 1995-2006. When considering high-skilled foreign workers, we find that both the size of this group and the diversification into different nationalities raise local wages and employment for native employees. For low-skilled foreign workers we find negative size effects. However, these negative effects can be partly offset if the group of low-skilled foreigners is culturally diversified. Our results imply that diversity raises productivity at the local level, but that it is important to distinguish the skill composition of the foreign workforce. These findings remain robust in a variety of robustness checks that take into account omitted variable bias, self-selection of foreigners into particular regions, and spatial autocorrelation.
    Keywords: regional labour markets, cultural diversity, immigration, spatial equilibrium
    JEL: R23 J21 J31
    Date: 2009–12
  34. By: Llanto, Gilberto M.
    Abstract: The paper examines the progress being made in local finance reforms and indicates pathways to advance those reforms. A summary of the effects of decentralization is given as a contextual background for the discussion of local finance reforms. The inefficient tax assignment has constrained the mobilization of local tax revenues even as local government units have become very dependent on the intergovernmental fiscal transfer, called the “internal revenue allotment.” The paper raises the importance of revisiting the internal revenue allotment formula. It identifies the local finance reforms currently being undertaken and reports the progress being made at the local and national level. The final section comments on the outstanding issues in local finance reform and gives some recommendations.
    Keywords: internal revenue allotment, fiscal decentralization, local government code, intergovernmental fiscal transfers, tax-expenditure assignment
    Date: 2009
  35. By: Åslund, Olof (IFAU - Institute for Labour Market Policy Evaluation); Hensvik, Lena (IFAU - Institute for Labour Market Policy Evaluation); Nordström Skans, Oskar (IFAU - Institute for Labour Market Policy Evaluation)
    Abstract: We show that immigrant managers are substantially more likely to hire immigrants than are native managers. The finding holds when comparing establishments in the same 5-digit industry and location, when comparing different establishments within the same firm, when analyzing establishments that change management over time, and when accounting for within-establishment trends in recruitment patterns. The effects are largest for small and owner managed establishments in the for-profit sector. Separations are more frequent when workers and managers have dissimilar origin, but only before workers become protected by EPL. We also find that native managers are unbiased in their recruitments of former co-workers, suggesting that information deficiencies are important. We find no effects on entry wages. Our findings suggest that a low frequency of immigrant managers may contribute to the observed disadvantages of immigrant workers.
    Keywords: Minority workers; Labor mobility; Workplace segregation
    JEL: J15 J21 J62 M51
    Date: 2009–12–07
  36. By: Daniel Cooper
    Abstract: Using data from the Panel Study of Income Dynamics, this paper examines how households' home equity extraction during 2001-to-2003 and 2003-to-2005 affected their spending and saving behavior. The results show that a one-dollar increase in equity extraction led to ninety-five or ninety-eight cents higher consumption expenditures. Nearly all of this spending increase was reversed in the subsequent period. A fair amount of these expenditures went toward home improvements and repairs. In addition, households used home equity to help finance their purchases of used cars. Equity extraction also led to some household balance sheet reshuffling. In particular, households who extracted equity were somewhat more likely than other households to pay down their higher-cost credit card debt and to invest in other real estate and businesses. Overall, the results in this paper are consistent with households' extracting equity during the first half of this decade to fund one-time durable good consumption needs.
    Keywords: Home equity loans ; Consumer behavior
    Date: 2009
  37. By: Swenson, David A.
    Abstract: It is commonly assumed that local sales multiply-through the local economy in a predictable and robust manner. Another word for this is dollar-turnover. That is, a multiplier implies how many times a given dollar spent in an economy literally turns-over or otherwise results in other local transactions. That over-simple assumption, however, misses the crux of retail multipliers and their overall value to local economies and to the state overall. This exercise is intended to assist planners and community boosters to understand the statewide multiplier values of different aspects of retail sales.
    JEL: A1
    Date: 2009–12–10
  38. By: Ricardo Mora; Javier Ruiz-Castillo
    Abstract: Recent research (Reardon and Firebaugh, 2002, Frankel and Volij, 2009, and Mora and Ruiz- Castillo, 2009a) has shown that two entropy-based segregation indices possess an appealing mixture of basic and subsidiary but useful properties. It would appear that the only fundamental difference between the mutual information, or M index, and the Entropy, Information or H index, is that the second is a normalized version of the first. This paper introduces another normalized index in that family, the H* index that, contrary to what is often asserted in the literature, is the normalized entropy index that captures the notion of segregation as departures from evenness. More importantly, this paper shows that applied researchers do better using the M index than using either H or H* in two circumstances: (i) if they are interested in the decomposability of segregation measures for any partition of organizational units into larger clusters and of demographic groups into supergroups, and (ii) if they are interested in the invariance properties of segregation measures to changes in the marginal distributions by demographic groups and by organizational units.
    Keywords: Multigroup segregation measurement, Axiomatic properties, Entropy based indicators, Econometric models
    Date: 2009–11
  39. By: Manuel Hidalgo Pérez (Department of Economics, Universidad Pablo de Olavide); Walter García-Fontes (Universidad Pompeu Fabra y CREA)
    Abstract: We estimate the strength of schooling externalities for Spanish regions over the 1981-2001 period. Our empirical work employs both main approaches available in the literature. Both methodologies yield significant externalities. Using a growth accounting exercise, we find that human capital externalities account for one half of the increase in real wages for the period between 1981 and 2001.
    Keywords: externalities, human capital, constant composition.
    JEL: I21 J31 O47
    Date: 2009–12
  40. By: Patrice Pieretti; Skerdilajda Zanaj (CREA, University of Luxembourg)
    Abstract: In this paper, we analyse competition among jurisdictions to attract firms through low taxes on capital and/or high level of public goods, which enhance firms' productivity. We assume that the competing jurisdictions are different in (population) size and that the mobility of capital is costly. We nd that for moderate mobility costs, small economies can attract foreign capital if they supply higher levels of public goods than larger jurisdictions, without being tax havens. If mobility costs are high, we recover the classical result that small jurisdictions are attractive to foreign capital if they engage in tax dumping. Finally, we show that there exists a subset of mobility costs for which the dierentiation in public goods across jurisdictions is not able to relax tax competition.
    JEL: H25 H73 F13 F15 F22
    Date: 2009
  41. By: Jennifer Weiner
    Abstract: State governments commonly use business tax credits to promote economic development. Whether these incentives are successful at generating new economic activity - and whether they do so in a cost-effective manner - are important concerns, particularly in times of fiscal and economic stress. This paper explores the use and effectiveness of a selected group of incentives, namely tax credits geared toward capital investment, research and development, job creation, and film production. The paper examines the various credits offered by New England states and their structural features, and reviews and analyzes the available evidence on the effectiveness and cost-effectiveness of these types of incentives. The analysis reveals the challenges entailed in measuring the impact of business tax credits and the need for both analysts and policymakers to consider those challenges carefully when using existing studies to inform the tax credit debate.
    Keywords: Tax incentives ; Business tax ; Tax incentives - New England ; Business tax - New England
    Date: 2009
  42. By: Filippini Massimo (Istituto Mecop, Università della Svizzera italiana); Deb Kaushik (TERI University, New Delhi, India)
    Abstract: A number of static and dynamic specifications of a log linear demand function for public transport are estimated using aggregate panel data for 22 Indian states over the period 1990 to 2001. Demand has been defined as total passenger kilometers to capture actual market transactions, while the regressors include public transit fare, per capita income, service quality, and other demographic and social variables. In all cases, transit demand is significant and inelastic to the fare. Service quality is the most significant policy variable. Finally, social and demographic variables highlight the complex nature of public bus transit demand in India.
    Keywords: Demand Elasticities, Dynamic Panel Data, Bus Transport, India
    JEL: R41
    Date: 2009

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