nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2010‒01‒30
thirty-two papers chosen by
Steve Ross
University of Connecticut

  1. The Housing Cycle in Emerging Middle Eastern Economies and its Macroeconomic Policy Implications By Samya Beidas-Strom; Weicheng Lian; Ashwaq Maseeh
  2. School Competition and Efficiency with Publicly Funded Catholic Schools By David Card; Martin Dooley; Abigail Payne
  3. A Centered Index of Spatial Concentration- Axiomatic Approach with an Application to Population and Capital Cities By Filipe R. Campante; Quoc-Anh Do
  4. On Joint Modelling and Testing for Local and Global Spatial Externalities By Zhenlin Yang
  5. An SVAR Analysis of Monetary Policy Dynamics and Housing Market Responses in Australia By IKM Mokhtarul Wadud; Omar HMN Bashar; Huson Joher Ali Ahmed
  6. Does Immigration Induce ‘Native Flight’ from Public Schools? Evidence from a large scale voucher program By Gerdes, Christer
  7. Bubbles in Asset Prices By Burton G. Malkiel
  8. The Effects of School Board Consolidation and Financing on Student Performance By John Leach; A. Abigail Payne; Steve Chan
  9. The Corridor Problem: Preliminary Results on the No-toll Equilibrium By Richard Arnott; Elijah DePalma
  10. Industrial Agglomeration and Industrial Policies- The Philippine Experience By PIDS
  11. The 2008 Financial Crisis and Taxation Policy By Thomas Hemmelgarn; Gaëtan Nicodème
  12. The Location Decisions of Foreign Logistics Firms in China- Does Transport Network Capacity Matter? By Anthony Chin; Hong Junjie
  13. A Fistful of Dollars: Lobbying and the Financial Crisis By Thierry Tressel; Prachi Mishra; Deniz Igan
  15. Estimating Nonlinearities in Spatial Autoregressive Models By Nicolas Debarsy; Vincenzo Verardi
  16. Agglomeration or Selection? The Case of the Japanese Silk-reeling Industry, 1909-1916 By ARIMOTO Yutaka; NAKAJIMA Kentaro; OKAZAKI Tetsuji
  17. Instrumental Variable Quantile Estimation of Spatial Autoregressive Models By Liangjun Su; Zhenlin Yang
  18. Spatial-Temporal Dimensions of Efficiency among Electric Cooperatives in the Philippines By Rouselle F. Lavado; Erniel B. Barrios
  19. Manufacturing Jobs: Fear and Loathing in the Midwest By Eathington, Liesl; Swenson, David A.
  20. The measurement of rent inflation By Jonathan McCarthy; Richard W. Peach
  21. The Nature of Rural Infrastructure: Problems and Prospects By Suman Bery
  22. Regions as Networks: Towards a Conceptual Framework of Territorial Dynamics By Carlos Brito; Ricardo Correia
  23. GMM estimation of Spatial Panels with Fixed Effects By Moscone, Francesco; Tosetti, Elisa
  24. Industrial Agglomeration in the Philippines By Mari-Len Reyes-Macasaquit
  25. Endogenous Choice on Tax Instruments in a Tax Competition Model: Unit Tax versus Ad Valorem Tax By Nobuo Akai; Hikaru Ogawa; Yoshitomo Ogawa
  26. The Cost of contract renegotiation: evidence from the local public sector By Phillippe Gagnepain; Marc Ivaldi; David Martimort
  27. The cyclical trend of local public service governance: evidence from urban water management in Spain By Alberto Ruiz Villaverde; Miguel A. García-Rubio; Francisco González-Gómez
  28. Competition Policy and Regulation in Ports and Shipping By Gilberto M. Llanto; Enrico L. Basilio; Leilanie Basilio
  29. The Effects of Location and Sectoral Components of Growth By Asep Suryahadi; Daniel Suryadarma; Sudarno Sumarto
  30. Credit card use after the final mortgage payment: does the magnitude of income shocks matter? By Barry Scholnick
  31. Transport infraestructure, sunk costs and firms' export behaviour By Pedro Albarrán; Raquel Carrasco; Adelheid Holl
  32. Impact of Supermarkets on Traditional Markets and Retailers in Indonesia's Urban Centers By Daniel Suryadarma; Adri Poesoro; Sri Budiyati; Akhmadi; Meuthia Rosfadhila

  1. By: Samya Beidas-Strom; Weicheng Lian; Ashwaq Maseeh
    Abstract: This paper examines housing finance and housing price dynamics in selected emerging Middle Eastern economies over the past two decades. It finds that (i) mortgage markets have experienced rapid development, which has led to lower private per capita consumer spending volatility this decade; (ii) a downward price correction occurred in the housing market after 2007, which appears to have bottomed out; (iii) the rental market appears to be largely determined by region-specific economic fundamentals-a youthful working-age population and wealth variables; and (iv) a segregation between self-owned house and rental price dynamics exists in this region, rendering the former more sensitive to the business cycle.
    Keywords: Business cycles , Consumption , Cross country analysis , Economic models , Emerging markets , Household credit , Housing , Housing prices , Middle East and Central Asia , North Africa , Price increases , Real estate prices ,
    Date: 2009–12–30
  2. By: David Card; Martin Dooley; Abigail Payne
    Abstract: The province of Ontario has two publicly funded school systems: secular schools (known as public schools) that are open to all students, and separate schools that are limited to children with Catholic backgrounds. A simple model of inter-system competition predicts that incentives for effort are higher in areas where there are more Catholic families who are relatively uncommitted to one system or the other. We measure the willingness of Catholic families to switch systems by studying the effect of school openings on enrollment at nearby schools in the competing system. The results suggest that families in rapidly growing areas have the weakest attachment to a particular system. We then relate student test score gains between 3rd and 6th grade to measures of potential cross-system competition. We find that competition for Catholic students has a significant effect on test outcomes in both systems, particularly in fast-growing areas. Our estimates imply that expanding competition to all students would raise average test scores in 6th grade by 6-8% of a standard deviation.
    Keywords: school competition; student achievement
    JEL: I20 I21 I28
    Date: 2010–01
  3. By: Filipe R. Campante; Quoc-Anh Do (Singapore Management University)
    Abstract: We construct an axiomatic index of spatial concentration around a center or capital point of interest, a concept with wide applicability from urban economics, economic geography and trade, to political economy and industrial organization. We propose basic axioms (decomposability and monotonicity) and renement axioms (order preservation, convexity, and local monotonicity) for how the index should respond to changes in the underlying distribution. We obtain a unique class of functions satisfying all these properties, defined over any n-dimensional Euclidian space- the sum of a decreasing, isoelastic function of individual distances to the capital point of interest, with specifc boundaries for the elasticity coecient that depend on n. We apply our index to measure the concentration of population around capital cities across countries and US states, and also in US metropolitan areas. We show its advantages over alternative measures, and explore its correlations with many economic and political variables of interest.
    Keywords: Spatial Concentration, Population Concentration, Capital Cities, Gravity, CRRA, Harmonic Functions, Axiomatics
    JEL: C43 F10 R23
    Date: 2010–01
  4. By: Zhenlin Yang (Singapore Management University)
    Abstract: This paper concerns the joint modeling, estimation and testing for local and global spatial externalities. Spatial externalities have become in recent years a standard notion of economic research activities in relation to social interactions, spatial spillovers and dependence, etc., and have received an increasing attention by econometricians and applied researchers. While conceptually the principle underlying the spatial dependence is straightforward, the precise way in which this dependence should be included in a regression model is complex. Following the taxonomy of Anselin (2003, International Regional Science Review 26, 153-166), a general model is proposed, which takes into account jointly local and global externalities in both modelled and unmodelled effects. The proposed model encompasses all the models discussed in Anselin (2003). Robust methods of estimation and testing are developed based on Gaussian quasi-likelihood. Large and small sample properties of the proposed methods are investigated.
    Keywords: Asymptotic property, Finite sample property, Quasi-likelihood, Spatial regression models, Robustness, Tests of spatial externalities
    JEL: C1 C2 C5
    Date: 2010–01
  5. By: IKM Mokhtarul Wadud; Omar HMN Bashar; Huson Joher Ali Ahmed
    Abstract: This paper examines the impact of monetary policy and a range of sector-specific and macroeconomic shocks on the Australian housing market using quarterly data for a period of 1974-2008. The paper develops a structural vector autoregressive (SVAR) model based on contemporaneous restrictions to analyse the dynamics of these shocks. The results indicate that supply of new houses in Australia rises with higher real house prices; and that house prices rise and fall with higher inflation rate and interest rate, respectively. Dynamics of the impulse responses reveal significant effect of monetary policy on new house constructions, real house prices, material costs and inflation. Results also suggest that housing output, real house prices and interest rates respond significantly to shocks to housing supply, housing demand and to a number of other variables. These results are expected to shed some lights on the current policy environment pertaining to the Australian housing sector.
    Keywords: Monetary transmission, Housing market, Structural VAR
    JEL: R31 E52 E62 C51
    Date: 2009–12–22
  6. By: Gerdes, Christer (Stockholm University Linnaeus Center for Integration Studies - SULCIS)
    Abstract: Recent studies point to a positive correlation between ethnic heterogeneity due to immigration and the propensity of opting out from public schools for private alternatives. However, immigration across regions is hardly exogenous, which obstructs attempts to reveal causal mechanisms. This paper explores changes in the immigrant population in Danish municipalities 1992-2004, a period marked by a substantial influx of refugees, where a state-sponsored placement policy restricted their initial choice of residence. Besides such demographic changes, for more than hundred years Denmark has allowed parents to enroll their children into so called ‘free schools’, i.e. schools that are privately operated. Taken together, this provides a unique opportunity to determine if there has been ‘native flight’ from public schools to free schools. Results from this study indicate an increase in native Danes propensity to enroll their children in free schools as the share of children with immigrant background becomes larger in their municipality of residence. The effect is most pronounced in small and medium sized municipalities, while it seems absent in larger municipalities. One explanation for the latter holds that residential segregation within larger municipalities makes a choice of private alternatives less attractive.
    Keywords: school choice; immigration; private schools
    JEL: H70 I28 J15 J78 R50
    Date: 2010–01–22
  7. By: Burton G. Malkiel (Princeton University)
    Abstract: The severe world-wide recession of 2008-09 has focused attention on the role of asset-price bubbles in exacerbating economic instability in capitalist economies. The boom in house prices in the United States from 2000 through 2006 is a case in point. According to the Case-Shiller 20-city index, the inflation-adjusted price of a median-sized house in the United States doubled over the period 2000-2006. House prices rose far more than the underlying fundamental drivers of home prices such as family income and rents. The bursting of the bubble was followed by a sharp rise in foreclosures and massive declines in the value of mortgage-backed securities and a variety of derivatives tied to these securities. The collapse of these prices led to the weakening, and in some cases the collapse, of major financial institutions around the world and contributed to one of the most serious recessions in the United States in the entire post-World War II period. The housing bubble is the most recent example of the asset-price bubbles that have often afflicted capitalist economies. Sharp increases in asset prices have frequently led to crashes and subsequent sharp declines in economic activity. Many economists have argued, controversially, that central banks should adjust their policy instruments to account not only for their forecasts of future inflation and the gap between actual and potential output, but for asset prices as well. This paper will address three topics. First, I will describe what economists mean when they use the term bubble, and I will contrast the behavioral-finance view of asset pricing with the efficient-market paradigm in an attempt to understand why bubbles might persist and why they may not be arbitraged away. Second, I will review some major historical examples of asset-price bubbles as well as the (minority) view that they may not have been bubbles at all. I will also examine the corresponding changes in real economic activity that have followed the bursting of such bubbles. Finally, I will examine the most hotly-debated aspect of any discussion of asset-price bubbles: what, if anything, should policy makers do about them? Should they react to sharp increases in asset prices that they deem to be unrelated to fundamentals? Should they take the view that they know more than the market does? Should they recognize that asset-price bubbles are a periodic flaw of capitalism and conduct their policies so as to temper any developing excesses? Or should they focus solely on their primary targets of inflation and real economic activity? In my discussion I will pay particular attention to bubbles that are associated with sharp increases in credit and leverage.
    Keywords: Asset prices, price bubbles, housing prices, housing bubble
    JEL: D01 D40 E30 H30 G33
    Date: 2010–01
  8. By: John Leach; A. Abigail Payne; Steve Chan
    Abstract: Over the last 20 years, states and provinces have become increasingly involved in the financing and administration of elementary and secondary education. Local school boards, however, still retain control over key aspects of the provision of education. Historically, these boards were organized at the community level so as to meet the wants of the local community. Today, states and provinces have become more interested in consolidating school boards and moving to a more centralized funding scheme. Do these changes result in improved student achievement? This paper attempts to answer these questions by examining the school board consolidation and funding changes instituted by the province of Ontario. We differentiate the effects of the policy changes based on observed differences in the school boards prior to consolidation. We show that students in previously high wealth school boards perform worse after the policy change compared to students in previously low wealth school boards.
    Keywords: school district consolidation; student achievement
    JEL: I20 I28 H75
    Date: 2010–02
  9. By: Richard Arnott (Department of Economics, University of California Riverside); Elijah DePalma (Department of Statistics, University of California, Riverside)
    Abstract: Consider a traffic corridor that connects a continuum of residential locations to a point central business district, and that is subject to flow congestion. The population density function along the corridor is exogenous, and except for location vehicles are identical. All vehicles travel along the corridor from home to work in the morning rush hour, and have the same work start time but may arrive early. The two compo- nents of costs are travel time costs and schedule delay (time early) costs. Determining equilibrium and optimum traffic flow patterns for this continuous model, and possible extensions, is termed “The Corridor Problemâ€. Equilibria must satisfy the trip-timing condition, that at each location no vehicle can experience a lower trip price by depart- ing at a different time. This paper investigates the no-toll equilibrium of the basic Corridor Problem.
    Keywords: morning commute; congestion; corridor; equilibrium
    Date: 2010–01
  10. By: PIDS (Philippine Institute for Development Studies)
    Abstract: In the relatively new body of ideas dubbed “new economic geography� and “spatial economics,� we find insights on the potentials of industrial agglomeration for regional and national economic development. This paper looked into the evolution of industrial development in the country as a means of elucidating the centripetal and centrifugal forces leading to agglomeration of firms and investments. A micro perspective was provided with the case study extended into the prime region in the country, Greater Manila Area. It was found that industrial agglomeration in the country takes the form of special economic zones and industry clusters, indicating that the government is taking the route towards regional dispersal of industries and the clustering strategy to spur industrial dynamism and competitiveness and consequently, regional and national economic development.
    Keywords: economic geography, spatial economics, industrial development, economic development
    JEL: L52 L50 L51
    Date: 2010–01
  11. By: Thomas Hemmelgarn (European Commission.); Gaëtan Nicodème (Centre Emile Bernheim, Solvay Brussels School of Economics and Management, ECARES, Université Libre de Bruxelles, Brussels, European Commission, CEPR and CESifo.)
    Abstract: The 2008 financial crisis is the worst economic crisis since the Great Depression of 1929. It has been characterised by a housing bubble in a context of rapid credit expansion, high risk-taking and exacerbated financial leverage, leading to deleveraging and credit crunch when the bubble burst. This paper discusses the interactions between tax policy and the financial crisis. In particular, it reviews the existing evidence on the links between taxes and many characteristics of the crisis. Finally, it examines some possible future tax options to prevent such crises.
    Keywords: financial crisis, tax policy, taxation, fiscal stimulus, financial transaction tax, property tax.
    JEL: E62 F21 F30 G10 H20 H30 H50 H60
    Date: 2010–01
  12. By: Anthony Chin; Hong Junjie (Singapore Centre for Applied and Policy Economics)
    Abstract: In recent years the logistic needs have created tremendous pressure on the ‘hard’ transport infrastructure. Logistics and the harness of information technology are the key facilitators of mobility. The Chinese logistics market is still in its infancy and creates tremendous opportunities for investors. It recognized as one of important driving forces both for national economy and business. Beijing, Tianjin, Shanghai, Shenzhen and Guanzhou aspire to be regional or international logistics hubs and have adopted preferential policies in attracting FDIs in logistics. From 1996 to 2001, foreign capital invested in transportation, storage, post and telecommunications increased from USD6.96 billion to USD15.16 billion. This study looks at the location decisions of foreign logistics firms and identifies with the aid of a multinomial logit model factors that are crucial in attracting them to China. This is important as they have an important role to play in filling in the gap left by traditional Chinese firms, which largely concentrate, on warehousing and distribution. The results suggest that location of logistics firms depends on transport infrastructure, market size, labor quality and cost, agglomeration economies, communication cost, economic privatization degree, as well as government incentives. The importance of the above factors varies by source of region. European and North American firms favor higher population densities, lower labor cost, convenient airway transport and large cities while logistics firms from Hong Kong, Macao and Taiwan put more emphasis on communication infrastructure.
    Keywords: logistics, transport infrastructure, investment,
    JEL: H54 P33
    Date: 2010–01
  13. By: Thierry Tressel; Prachi Mishra; Deniz Igan
    Abstract: Using detailed information on lobbying and mortgage lending activities, we find that lenders lobbying more on issues related to mortgage lending (i) had higher loan-to-income ratios, (ii) securitized more intensively, and (iii) had faster growing portfolios. Ex-post, delinquency rates are higher in areas where lobbyist' lending grew faster and they experienced negative abnormal stock returns during key crisis events. The findings are robust to (i) falsification tests using lobbying on issues unrelated to mortgage lending, (ii) a difference-in-difference approach based on state-level laws, and (iii) instrumental variables strategies. These results show that lobbying lenders engage in riskier lending.
    Keywords: Corporate sector , Economic models , Financial crisis , Financial institutions , Financial sector , Global Financial Crisis 2008-2009 , Governance , Housing , Legislation , Loans , Political economy ,
    Date: 2009–12–28
  14. By: Thulin, Per (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: This paper investigates the relationship between inter-firm labor mobility and regional productivity growth. Previous studies have shown that density is positively correlated with growth. I claim that it is not density in itself, but rather the attributes associated with it that drives economic growth. One such attribute is the increased possibility for labor mobility and knowledge diffusion that follows when firms and individuals locate in close proximity to each other. This hypothesis is tested using a matched employer-employee dataset where regional labor mobility is instrumented with density. The result shows that labor mobility increases regional growth rates.
    Keywords: Labor mobility; regional growth; agglomeration economies
    JEL: J62 R11 R23
    Date: 2009–12–18
  15. By: Nicolas Debarsy (CERPE - Centre de Recherches en Economie Régionale et Politique Economique - Université de Namur); Vincenzo Verardi (European Centre for Advanced Research in Economics and Statistics (ECARES) - Université Libre de Bruxelles, CRED - Centre de Recherche en Economie du Développement - Université de Namur)
    Abstract: In spatial autoregressive models, the functional form of autocorrelation is assumed to be linear. In this paper, we propose a simple semiparametric procedure, based on Yatchew's (1998) partial linear least squares, that relaxes this restriction. Simple simulations show that this model outperforms traditional SAR estimation when nonlinearities are present. We then apply the methodology on real data to test for the spatial pattern of voting for independent candidates in US presidential elections. We find that in some counties, votes for “third candidates” are non-linearly related to votes for “third candidates” in neighboring counties, which pleads for strategic behavior.
    Keywords: Spatial econometrics; semiparametric estimations
    Date: 2010–01–13
  16. By: ARIMOTO Yutaka; NAKAJIMA Kentaro; OKAZAKI Tetsuji
    Abstract: Plants in clusters are often more productive than those located in non-clusters. This has been explained by agglomeration effects that improve productivity of all plants in a region. However, recent theoretical development of trade and spatial economic theories with heterogeneous firms has shed light on another channel of productivity improvement in clusters, "plant-selection effects." This paper uses plant-level data on the Japanese silk reeling industry from 1909 to 1916 to distinguish between these two effects based on a nested model of firm-selection and agglomeration. We identify the plant-selection effect by using the fact that the two effects have different implications on the distribution of plant-level productivity. Major findings are as follows. First, we confirmed that plants in clusters were indeed more productive. Second, at the same time, the widths of distribution of plant productivity in clusters were narrower and more severely truncated than those in non-clusters. Finally, productivity distribution did not shift rightwards in clusters. Our findings imply that the plant-selection effect was the source of the higher plant-level productivity in silk-reeling clusters in this period.
    Date: 2010–01
  17. By: Liangjun Su; Zhenlin Yang (Singapore Management University)
    Abstract: We propose an instrumental variable quantile regression (IVQR) estimator for spatial autoregressive (SAR) models. Like the GMM estimators of Lin and Lee (2006) and Kelejian and Prucha (2006), the IVQR estimator is robust against heteroscedasticity. Unlike the GMM estimators, the IVQR estimator is also robust against outliers and requires weaker moment conditions. More importantly, it allows us to characterize the heterogeneous impact of variables on different points (quantiles) of a response distribution. We derive the limiting distribution of the new estimator. Simulation results show that the new estimator performs well in finite samples at various quantile points. In the special case of median restriction, it outperforms the conventional QML estimator without taking into account of heteroscedasticity in the errors; it also outperforms the GMM estimators with or without considering the heteroscedasticity.
    Keywords: Spatial Autoregressive Model, Quantile Regression, Instrumental Variable, Quasi Maximum Likelihood, GMM, Robustness
    JEL: C13 C21 C51
    Date: 2010–01
  18. By: Rouselle F. Lavado; Erniel B. Barrios (Philippine Institute for Development Studies)
    Abstract: The efficiency of 119 electric cooperatives in the Philippines from 1990-2002 is analyzed using a stochastic frontier model augmented with spatial-temporal terms, addressing the underestimation of technical efficiency usually encountered among maximum-likelihood based methods. The model is also robust to the choice of environmental variables that will be included in the inefficiency equation provided that the spatial distance measure substantially captures the efficiency-enhancing factors. The average of estimated technical efficiency is 0.86. The growth in technical efficiency of 1-2% per year is explained by the slow adjustment process in the operation of the cooperatives lacking the medium to feedback production outcomes in the previous year to their operation cycle in the following year. Medium-sized cooperatives need to organize for strategic competitive advantage and to facilitate attainment of production efficiency.
    Keywords: stochastic frontier, technical efficiency, electric cooperative, spatial externalities
    JEL: C21 C23 C51 D24
    Date: 2010–01
  19. By: Eathington, Liesl; Swenson, David A.
    Abstract: Many Midwestern communities are engaging in regional industrial targeting and cluster development strategies, often with a focus on their existing manufacturing strengths. However, local economic development officials are understandably nervous about investing more resources into a sector whose future growth prospects are unknown. This research describes a practical risk assessment tool for measuring a region’s vulnerability to near-term manufacturing job loss. Such a tool might be used to inform or prioritize regional strategic planning and industrial targeting efforts. As an additional benefit, the tool might help bridge the gaps between local expertise and regional understanding
    JEL: R0
    Date: 2010–01–21
  20. By: Jonathan McCarthy; Richard W. Peach
    Abstract: Providing for shelter represents a large portion of the typical household budget. Accordingly, rent, paid either to a landlord or to oneself as an owner-occupant, has a large weight in the CPI and in the personal consumption expenditures deflator, resulting in substantial scrutiny of how tenant rent and owners' equivalent rent are measured in these price indexes. In this paper, we describe how the Bureau of Labor Statistics (BLS) estimates tenant rent and owners' equivalent rent. We then estimate alternative inflation rates for tenant rent and owners' equivalent rent based on American Housing Survey data, following BLS methodology as closely as possible. Our alternative tenant rent inflation series is generally consistent with the corresponding BLS series. However, our alternative owners' equivalent rent inflation series is consistently lower than the corresponding BLS series by an amount large enough to have a significant effect on the overall inflation rate. This result is driven by the inverse relationship between rent inflation and the level of monthly housing cost evident in the American Housing Survey data.
    Keywords: Rent ; Consumer price indexes ; Consumption (Economics) ; Economic indicators ; Economic surveys ; Inflation (Finance)
    Date: 2010
  21. By: Suman Bery
    Abstract: This paper looks at rural infrastructure facilities in India, the lack of which is demonstrated to be an impediment to sustained economic development. It is argued that problems of rural infrastructure provision are different from those of the urban, given the smaller size, density and per capita incomes of rural agglomerations. [NCAER WP 94].
    Keywords: India, rural infrastructure, economic development, urban, per capita income, efficiency, household, population density, Indian, town, village,
    Date: 2010
  22. By: Carlos Brito (Faculdade de Economia, Universidade do Porto); Ricardo Correia (Escola Superior de Comunicação Administração e Turismo – Instituto Politécnico de Bragança)
    Abstract: Regions interact with multiple actors and industrial companies are one of the most important players in this interaction. By their strategic actions and relationships, companies are simultaneously present in different regions and influence a territory’s dynamics and structure. Moreover, territorial characteristics are also a condition that can shape a company’s action. This reciprocal influence is recognized by an emerging theoretical background of relational geography. Within the industrial network approach interest in this phenomenon is also increasing. However, the interactions between companies and regions have not been sufficiently explained. Thus, the main objective of this working paper is to produce new knowledge about the dynamics and interactions between regions and industrial networks. More precisely, the authors want to explain how companies’ strategic action is reflected in territorial dynamics and structure and how such factors affect the companies’ strategic action. Based on extensive research of the interactive relations between companies and regions, a model aimed at providing a better understanding of this mutual influence was developed.
    Keywords: industrial networks, relationships, territory, regional development
    JEL: R19
    Date: 2010–01
  23. By: Moscone, Francesco; Tosetti, Elisa
    Abstract: In this paper we consider the estimation of a panel data regression model with spatial autoregressive disturbances, fixed effects and unknown heteroskedasticity. Following the work by Kelejian and Prucha (1999), Lee and Liu (2006a) and others, we adopt the Generalized Method of Moments (GMM) and consider as moments a set linear quadratic conditions in the disturbances. As in Lee and Liu (2006a), we assume that the inner matrices in the quadratic forms have zero diagonal elements to robustify moments against unknown heteroskedasticity. We derive the asymptotic distribution of the GMM estimator based on such conditions. Hence, we carry out some Monte Carlo experiment to investigate the small sample properties of GMM estimators based on various sets of moment conditions.
    Keywords: spatial econometrics; panel data; within estimator
    JEL: C15
    Date: 2010–01–19
  24. By: Mari-Len Reyes-Macasaquit (Philippine Institute for Development Studies)
    Abstract: The economic reform process in the Philippines was accelerated in the 1980s and 1990s. The reforms were found to have yielded positive results in terms of the nature of industrial agglomeration in the country as this was found to have occurred in the 1990s based on the results of the survey and econometrics analyses. The latter also identified the factors that influenced firms to agglomerate in the country, referring to economic fundamentals and deliberate policy and public action by government. However, industrial upgrading and innovation in the country was found to be weak. Expenditures on R&D are low and linkages between stakeholders are not strong. There are firms that have undergone upgrading in terms of introduction of new goods, upgrading of machineries, and opening of new markets but they tended to rely more on their in-house capabilities probably due to inadequate support from the government’s institutional infrastructure and financial system, which came out from the estimation results. The agglomeration strategies that are currently being pursued in the Philippines – establishment of economic zones and industry clustering – have the potential to address some of the issues and problems identified.
    Keywords: industrial agglomeration, industrial clusters, economic zones, industrial upgrading, innovation
    JEL: L52 L53 L50
    Date: 2010–01
  25. By: Nobuo Akai (Osaka School of International Public Policy, Osaka University); Hikaru Ogawa (School of Economics, Nagoya University); Yoshitomo Ogawa (Faculty of Economics, Kinki University)
    Abstract: This paper analyzes an endogenous choice problem with regard to tax instruments in a capital tax competition model. Considering a symmetric and two-region model of tax competition, where each region is allowed to choose either unit or ad valorem tax, we show that selecting unit tax as a policy instrument is the dominant strategy of governments. An interpretation of this result is clearly explained by the properties of the best response curves.
    Keywords: Tax competition, Unit tax, Ad valorem tax
    JEL: H20 H21 H77
    Date: 2010–01
  26. By: Phillippe Gagnepain; Marc Ivaldi; David Martimort
    Abstract: We construct and estimate a structural principal/agent model of contract renegotiation in the French urban transport sector in a context where operators are privately informed on their innate costs (adverse selection) and can exert cost-reducing managerial effort (moral hazard). This model captures two important features of the industry. First, only two types of contracts are used in practice by local public authorities to regulate the service: cost-plus and fixedprice contracts with positive subsidies. Second, these subsidies increase over time. Such increasing subsidies are consistent with the theoretical hypothesis that principals cannot commit not to renegotiate and contracts are renegotiationproof. We compare this situation to the hypothetical case with full commitment. The distribution of innate costs of operators is shifted upwards under this hypothetical scenario. The welfare gains of commitment are significant and accrue mostly to operators. Estimates of the weights that local governments give to the operator´s profit in their objective functions and of the social value of the cost-reducing managerial effort are obtained as by-products.
    Date: 2009–09
  27. By: Alberto Ruiz Villaverde (Universidad de Granada. Department of Applied Economics); Miguel A. García-Rubio (Universidad de Granada. Department of Applied Economics); Francisco González-Gómez (Universidad de Granada. Department of Applied Economics)
    Abstract: The level of public and private involvement in economic activity in societies has changed over time. One may talk about the existence of a cyclical trend in which the most important periods of public governance are replaced by periods in which private management dominates the situation. This phenomenon may also be observed in local areas. Some authors have pointed out the existence of an alternation in the provision of municipal services, resulting in periods dominated by governance compared to other stages dominated by private management. In order to illustrate this cyclical trend at local level, this paper intends to analyze the evolution of the governance of the Spanish water supply since the mid-nineteenth century to the present day. Recent evidence from the industry suggests the possibility that we may currently be witnessing a further change in the trend.
    Keywords: : Local Government, urban water supply, privatization, municipalization
    Date: 2009–10–10
  28. By: Gilberto M. Llanto; Enrico L. Basilio; Leilanie Basilio (Philippine Institute for Development Studies)
    Abstract: The Philippines is an archipelago of approximately 7,107 islands. It has a long coastline extending to 235,973 square kilometers which is longer than that of the United States (UNESCAP 2002b). The country’s archipelagic configuration requires an efficient maritime transport infrastructure composed of ports and shipping for growth and socioeconomic integration. The integration of peripheral islands to the urban economic nodes such as Metro Manila, Cebu, Davao and General Santos and the diffusion of investments and economic activities fundamentally count on an efficient road and maritime transport network. This paper examines competition policy and the regulatory framework of the port and shipping sectors. It assesses the policies and programs of the government in promoting competition in these sectors and recommends areas for policy and regulatory reform. After a brief description of the analytical underpinnings of competition policy and regulation the paper reviews the present state of competition and regulation in Philippine ports and interisland shipping to identify emerging issues that call for policy action. It provides specific recommendations for policy and regulatory reform.
    Keywords: maritime transport, ports and inter-island shipping, competition policy, regulatory framework, market contestability, landlord port model
    JEL: L51 L90 O19
    Date: 2010–01
  29. By: Asep Suryahadi; Daniel Suryadarma; Sudarno Sumarto (SMERU Research Institute)
    Abstract: This study extends the literature on the relationship between economic growth and poverty reduction by differentiating growth and poverty into their sectoral compositions and locations. We find that growth in the rural services sector reduces poverty in all sectors and locations. However, in terms of elasticity of poverty, urban services growth has the largest for all sectors except urban agriculture. We also find that rural agriculture growth strongly reduces poverty in the rural agriculture sector, the largest contributor to poverty in Indonesia. This implies that the most effective way to accelerate poverty reduction is by focusing on rural agriculture and urban services growth. In the long run, however, the focus should be shifted to achieving robust overall growth in the services sector.
    Keywords: economic growth, poverty, urban, rural, Indonesia
    JEL: I32 O18 O49
    Date: 2010–01
  30. By: Barry Scholnick (School of Business, University of Alberta Edmonton, Alberta, Canada, T6G 2R6.)
    Abstract: We test the hypothesis that consumption smoothing occurs after large, but not small, expected future income shocks. Even though this hypothesis has often been discussed, formal evidence in support of it is rare. We use individual level, monthly, bank account data to examine how expected income shocks from final mortgage payments impact credit card consumption, and the repayment of credit card debt. Our data allows us to identify the exact magnitude and date of final mortgage payments, and also to exploit the random timing of these expected income shocks across individuals. Our results are consistent with the magnitude hypothesis.
    Date: 2009–12
  31. By: Pedro Albarrán; Raquel Carrasco; Adelheid Holl
    Abstract: Transport infrastructure investment reduces the cost of distance and enables firms to establish contacts over larger distances. We study the impact of transport-cost reductions on firms’ export behaviour, accounting for the role of entry costs and other firms’ characteristics. Using Spanish data we estimate dynamic probability models controlling for firms’ unobserved heterogeneity and for the simultaneity of firms’ export and location decisions. Our results provide support for a positive effect of domestic transport improvements on firms’ exporting probability for small and medium sized firms. We find a strong effect of previous export experience, suggesting high entry costs into export markets.
    Keywords: Export decision, Transport infrastructure, Accessibility, Dynamic panel data
    JEL: F14 R1 R4
    Date: 2009–06
  32. By: Daniel Suryadarma; Adri Poesoro; Sri Budiyati; Akhmadi; Meuthia Rosfadhila (SMERU Research Institute)
    Abstract: This study measures the impact of supermarkets on traditional markets in urban centers in Indonesia quantitatively using difference-in-difference and econometric methods as well as qualitatively using in-depth interviews. The quantitative methods find no statistically significant impact on earnings and profit but a statistically significant impact of supermarkets on the number of employees in traditional markets. The qualitative findings suggest that the decline in traditional markets is mostly caused by internal problems from which supermarkets benefit. Therefore, ensuring the sustainability of traditional markets would require an overhaul of the traditional market management system, enabling them to compete with and survive alongside supermarkets.
    Keywords: impact evaluation, traditional market, supermarket, urban, Indonesia
    JEL: L81
    Date: 2010–01

This nep-ure issue is ©2010 by Steve Ross. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.