nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2010‒07‒24
33 papers chosen by
Steve Ross
University of Connecticut

  1. Interjurisdictional Capitalization of a New Metro Line on Housing Values By Claudio Agostini; Gastón Palmucci
  2. The effect of gasoline prices on household location By Raven Molloy; Hui Shan
  3. The housing bust and housing affordability in New England By Robert Clifford
  4. The Neighbor is King: Customer Discrimination in the Housing Market By Pierre-Philippe Combes; Bruno Decreuse; Benoît Schmutz; Alain Trannoy
  5. Unaffordable housing and local employment growth By Ritashree Chakrabarti; Junfu Zhang
  6. The untold costs of subprime lending: examining the links among higher-priced lending, foreclosures and race in California By Carolina Reid; Elizabeth Laderman
  7. The Role of Specific Subjects in Education Production Functions: Evidence from Morning Classes in Chicago Public High Schools By Cortes, Kalena E.; Bricker, Jesse; Rohlfs, Chris
  8. The relative effectiveness and costs of contract and regular teachers in India By Paul Atherton; Geeta Kingdon
  9. Evaluating Conditions in Major Chinese Housing Markets By Jing Wu; Joseph Gyourko; Yongheng Deng
  10. A cross-national analysis of the relations between school choice and effectiveness differences between private-dependent and public schools By Dronkers, Jaap; Avram, S
  11. Discordant city employment cycles By Michael T. Owyang; Jeremy M. Piger; Howard J. Wall
  12. Does the Rotten Child Spoil His Companion? Spatial Peer Effects Among Children in Rural India By Christian Helmers; Manasa Patnam
  13. Econometric methods for research in education By Costas Meghir; Steven Rivkin
  14. Convergence analysis as distribution dynamics when data are spatially dependent By Margherita Gerolimetto; Stefano Magrini;
  15. Juvenile Delinquency and Conformism By Eleonora Patacchini; Yves Zenou
  16. The Significance of Identifying Industrial Clusters; The Case of Scotland By Gerald Munyoro; John H. Ll Dewhurst
  17. A political economy model of road pricing By De Borger B.; Proost S.
  18. Dictator games in the lab and in nature: External validity tested and investigated in Ugandan primary schools By Abigail Barr; Andrew Zeitlin
  19. Some Students are Bigger than Others, Some Students’ Peers are Bigger than Other Students’ Peers By Joan Gil; Toni Mora
  20. Residential Location and Youth Unemployment: The Economic Geography of School-To-Work By Regina T. Riphahn
  21. Overview of School Education in Delhi By Soumya Gupta
  22. Housing default: theory works and so does policy By Allen C. Goodman; Brent C. Smith
  23. Spillovers in Space: Does Geography Matter? By Sergey Lychagin; Joris Pinkse; Margaret E. Slade; John Van Reenen
  24. The depth of negative equity and mortgage default decisions By Neil Bhutta; Jane Dokko; Hui Shan
  25. When you are born matters: the impact of date of birth on educational outcomes in England By Claire Crawford; Lorraine Dearden; Costas Meghir
  26. Do clusters generate greater innovation and growth? An analysis of European regions By Andrés Rodríguez-Pose; Fabrice Comptour
  27. Adolescent Drug Use and the Deterrent Effect of School-Imposed Penalties By Waddell, Glen R.
  28. Dynamic models of residential ségrégation: an analytical solution By Sébastian Grauwin; Florence Goffette-Nagot; Pablo Jensen
  29. The structure of the labour market, telecommuting, and optimal peak period congestion tolls: a numerical optimisation model By De Borger B.; Wuyts B.
  30. Health, Nutrition and Academic Achievement: New Evidence from India By Geeta Kingdon
  31. The bank lending channel of monetary policy and its effect on mortgage lending By Lamont K. Black; Diana Hancock; Wayne Passmore
  32. Tobin Meets Oates: Solidarity and the Optimal Fiscal Federal Structure By Xavier Calsamiglia; Teresa Garcia-Milà; Therese J. McGuire
  33. Risk Pooling, Risk preferences, and Social Networks By Orazio Attansio; Abigail Barr; Juan Camilo Cardenas; Garance Genicot; Costas Mehgir

  1. By: Claudio Agostini (ILADES-Georgetown University, Universidad Alberto Hurtado); Gastón Palmucci (Department of Economics, University of Wisconsin, Madison)
    Abstract: Many governments continue constructing new subway lines with the goal of reducing congestion and pollution in large cities. Besides the potential global effects on reducing negative externalities in the city, there are some local positive effects in terms of lower commuting time and distance for residents living close to the subway stations. These benets of the public transport services should capitalize totally or partially on housing prices. Most of the empirical work has estimated the effects on housing prices after the public transit infrastructure is operating and implicitly assumed homogeneous capitalization across jurisdictions. However, due to differences on local public goods provision and residents' characteristics across jurisdictions, two identical housing units located at the same distance to the nearest metro station but in different local markets would not necessarily have the same degree of capitalization. Using parametric and non-parametric methods and transaction data for Santiago, Chile, we estimate the anticipated capitalization of a new metro line across counties in the city. The results show signicant anticipated effects, between 3.6% and 5.3%, and also large interjurisdictional differences in capitalization degrees, ranging between -6% and 40%.
    Keywords: Metro, Capitalization, Housing Prices
    JEL: H73 H54 R21 R53
    Date: 2010–01
  2. By: Raven Molloy; Hui Shan
    Abstract: Gasoline prices influence where households decide to locate by changing the cost of commuting. Consequently, the substantial increase in gas prices since 2003 may have reduced the demand for housing in areas far from employment centers, leading to a decrease in the price and/or quantity of housing in those locations relative to locations closer to jobs. Using annual panel data on ZIP codes and municipalities in a large number of metropolitan areas of the United States from 1981 to 2008, we find that a 10 percent increase in gas prices leads to a 10 percent decrease in construction after 4 years in locations with a long average commute relative to locations closer to jobs, but to no significant change in house prices. Thus, the supply response may prevent the change in housing demand from capitalizing in house prices. Because housing is durable, the resulting change in construction has a long-lived impact on the spatial distribution of housing units.
    Date: 2010
  3. By: Robert Clifford
    Abstract: This discussion paper updates the Center's 2006 housing affordability working paper, drawing on housing market data through 2008 to provide an in-depth analysis of housing affordability after the recent housing market bust. The paper looks at affordability in the New England states, their largest metropolitan areas, competitor metropolitan areas, and for the nation. The results show that as New England's housing prices have declined, affordability has been returning to the pre-housing crisis levels of the early 2000s. However, declining prices nationwide continue to make owner-occupied housing in most New England states less affordable than in the nation. At the same time more of the region's households are becoming cost-burdened, particularly low- and middle-income homeowners. In contrast, New England has maintained its advantage in rental affordability relative to the nation and renters in the region are far less likely than their national counterparts to face cost burdens.
    Keywords: Housing - New England ; Housing - Prices ; Rental housing - Prices ; Rental housing - New England
    Date: 2010
  4. By: Pierre-Philippe Combes (Greqam-Aix-Marseille Université); Bruno Decreuse (Greqam-Aix-Marseille Université); Benoît Schmutz (Greqam-Aix-Marseille Université); Alain Trannoy (Greqam-Aix-Marseille Université)
    Abstract: This paper provides a way to detect customer-based discrimination in the housing market using survey data. We build a matching model with ethnic externalities where landlords differ in the number of housing units they own within the same neighborhood. In the event of customers’ prejudice against the minority group, landlords who own several apartments discriminate more often than single-dwelling landlords because they internalize a higher negative externality on their probability to fill their other vacancies. Using the French National Housing Survey, we show that tenants with non-European origin are less likely to rent from a multiple-dwelling landlord than other tenants. We then show that the proportion of multiple-dwelling landlords at the local level is positively correlated with the probability of non-Europeans to be living in public housing while this is not the case of other ethnic groups.
    Keywords: Customer Discrimination, Neighborhood Externalities, Housing Market.
    JEL: R21 J71
    Date: 2010–06
  5. By: Ritashree Chakrabarti; Junfu Zhang
    Abstract: High housing prices have caused concerns among policy makers as well as the public in many U.S. regions. There is a general belief that unaffordable housing could drive businesses away and thus impede job growth. However, there has been little empirical evidence that supports this view. In this paper, we clarify how housing affordability is linked to employment growth and why unaffordable housing could negatively affect employment growth. We empirically measure this effect using data on California municipalities and U.S. metropolitan areas and counties. It is argued that for various reasons a simple correlation between unaffordable housing and employment growth should not be interpreted as causal. We therefore develop some empirical strategies and employ statistical techniques to estimate the causal effect of unaffordable housing on employment growth. Our results provide consistent evidence that indeed unaffordable housing slows growth in local employment. We discuss policy implications of these findings.
    Keywords: Housing - Prices ; Employment
    Date: 2010
  6. By: Carolina Reid; Elizabeth Laderman
    Abstract: This paper explores the relationship between race, subprime lending, and foreclosure in California in an effort to understand what happened during the subprime lending boom. The paper finds that communities of color have been disproportionately affected by the foreclosure crisis, and that these disparities stem from a series of complicated and interrelated factors, including borrower credit profiles, the ‘boom and bust’ housing market, and rising unemployment. However, the paper also shows that Blacks and Hispanics in California had access to very different mortgage markets, and that mortgage market channels played an important role in the likelihood of receiving a higher-priced loan. Once we control for the probability of obtaining a higher-priced loan, the differences in foreclosure rates among minorities and whites shrink considerably. This paper provides compelling evidence for the need to revisit consumer protection regulations and fair lending laws to ensure that minority borrowers aren’t unfairly being steered into different mortgage market channels. ; Paper presented at “Challenges and Opportunities for Homeownership in a Changing Financial Environment,” sponsored by the Federal Reserve Bank of San Francisco in cooperation with The Greenlining Institute, May 6, 2009.
    Keywords: Mortgage loans ; Mortgage loans - California ; Subprime mortgage ; Foreclosure - California
    Date: 2009
  7. By: Cortes, Kalena E. (Syracuse University); Bricker, Jesse (Federal Reserve Board); Rohlfs, Chris (Syracuse University)
    Abstract: Absences in Chicago Public High Schools are 3-7 days per year higher in first period than at other times of the day. This study exploits this empirical regularity and the essentially random variation between students in the ordering of classes over the day to measure how the returns to classroom learning vary by course subject, and how much attendance in one class spills over into learning in other subjects. We find that having a class in first period reduces grades in that course and has little effect on long-term grades or grades in related subjects. We also find moderately-sized negative effects of having a class in first period on test scores in that subject and in related subjects, particularly for math classes.
    Keywords: education production, subject-specific, math, English, morning classes, first period, course schedule, quasi-experimental, attendance, absenteeism, Chicago, high school
    JEL: I20 I21 J13
    Date: 2010–06
  8. By: Paul Atherton; Geeta Kingdon
    Abstract: While use of contract teachers provides a low-cost way to increase teacher numbers, it raises the quality concern that these less trained teachers may be less effective. We estimate the causal contract-teacher effect on student achievement using school fixed effects and value-added models of the education production function, using Indian data. We allow for both homogenous and heterogeneous treatment effects, to highlight the mechanisms through which the contract teacher effect works. We also present school fixed effects teacher pay equations and predict achievement marks per Rupee spent on regular and contract teachers. We find that despite being paid just a third of the salary of regular teachers with similar observed characteristics, contract teachers produce higher student learning.
    Keywords: Student achievement, contract teachers, India
    JEL: I21
    Date: 2010
  9. By: Jing Wu; Joseph Gyourko; Yongheng Deng
    Abstract: High and rising prices in Chinese housing markets have attracted global attention, as well as the interest of the Chinese government and its regulators. Housing markets look very risky based on the stylized facts we document. Price-to-rent ratios in Beijing and seven other large markets across the country have increased from 30% to 70% since the beginning of 2007. Current price-to-rent ratios imply very low user costs of no more than 2%-3% of house value. Very high expected capital gains appear necessary to justify such low user costs of owning. Our calculations suggest that even modest declines in expected appreciation would lead to large price declines of over 40% in markets such as Beijing, absent offsetting rent increases or other countervailing factors. Price-to-income ratios also are at their highest levels ever in Beijing and select other markets. Much of the increase in prices is occurring in land values. Using data from the local land auction market in Beijing, we are able to produce a constant quality land price index for that city. Real, constant quality land values have increased by nearly 800% since the first quarter of 2003, with half that rise occurring over the past two years. State-owned enterprises controlled by the central government have played an important role in this increase, as our analysis shows they paid 27% more than other bidders for an otherwise equivalent land parcel.
    JEL: P22 P25 R10 R21 R31
    Date: 2010–07
  10. By: Dronkers, Jaap; Avram, S
    Abstract: We apply propensity score matching to the estimation of differential school effectiveness between the publicly funded private sector and the public one, in a sample of 26 countries. This technique allows us to distinguish between school choice and school effectiveness processes and thus, to account for selectivity issues involved in the comparison of the two. Concerning school choice, we found two patterns: a choice of the upwardly mobile parents for private schools and a preference for segregation by (lower-) middle class parents. As regards school effectiveness, our results indicate that, after controlling for selectivity, a substantial advantage in reading achievement remains among students in publicly funded private schools in ten out of the 26 countries.
    Keywords: school choice; school effectiveness; private-dependent and public schools; international comparison; PISA data
    JEL: D71 I21 J24 L33
    Date: 2009–11
  11. By: Michael T. Owyang; Jeremy M. Piger; Howard J. Wall
    Abstract: The national economy is often described as having a business cycle over which aggregate output enters and exits distinct expansion and recession phases. Analogously, national employment cycles in and out of its own expansion and contraction phases, which are closely related to the business cycle. This paper estimates city-level employment cycles for 58 large U.S. cities and documents the substantial cross-city variation in the timing, lengths, and frequencies of their employment contractions. It also shows how the spread of city-level contractions associated with U.S. recessions has tended to follow recession-specific geographic patterns. In addition, cities within the same state or region have tended to have similar employment cycles. There is no evidence, however, that similarities in employment cycles are related to similarities in industry mix. This suggests that the U.S. employment and business cycles has a spatial dimension that is independent of broad industry-level fluctuations.
    Keywords: Employment (Economic theory) ; Business cycles
    Date: 2010
  12. By: Christian Helmers; Manasa Patnam
    Abstract: This paper identifies the effect of neighborhood peer groups on childhood skill acquisition using observational data. We incorporate spatial peer interaction, defined as a child’s nearest geographical neighbors, into a production function of child cognitive development in Andhra Pradesh, India. Our peer group construction takes the form of directed networks, whose structure allows us to identify peer effects and enables us to disentangle endogenous effects from contextual effects. We exploit variation over time to avoid confounding correlated with social effects. Our results suggest that spatial peer and neighborhood effects are strongly positively associated with a child’s cognitive skill formation. These peer effects hold even when we consider an alternative IV-based identification strategy and different variations to network size. Further, we find that the presence of peer groups helps provide insurance against the negative impact of idiosyncratic shocks to child learning.
    Keywords: Children, peer effects, cognitive skills, India
    JEL: C21 O15 R23
    Date: 2010
  13. By: Costas Meghir (Institute for Fiscal Studies and University College London); Steven Rivkin
    Abstract: <p>This paper reviews some of the econometric methods that have been used in the economics of education. The focus is on understanding how the assumptions made to justify and implement such methods relate to the underlying economic model and the interpretation of the results. We start by considering the estimation of the returns to education both within the context of a dynamic discrete choice model inspired byWillis and Rosen (1979) and in the context of the Mincer model. We discuss the relationship between the econometric assumptions and economic behaviour. We then discuss methods that have been used in the context of assessing the impact of education quality, the teacher contribution to pupils' achievement and the effect of school quality on housing prices. In the process we also provide a summary of some of the main results in this literature.</p>
    Date: 2010–05
  14. By: Margherita Gerolimetto (Department of Statistics, University Of Venice Cà Foscari); Stefano Magrini (Department of Economics, University Of Venice Cà Foscari);
    Abstract: Conditional distributions for the analysis of convergence are usually estimated using a standard kernel smoother but this is known to be biased. Hyndman et al. (1996) thus suggest a conditional density estimator with a mean function specified by a local polynomial smoother, i.e. one with better bias properties. However, even in this case, the estimated conditional mean might be incorrect when observations are spatially dependent. Consequently, in this paper we study per capita income inequalities among European Functional Regions and U.S. Metropolitan Statistical Areas through a distribution dynamics approach in which the conditional mean is estimated via a procedure that allows for spatial dependence (Gerolimetto and Magrini, 2009).
    Keywords: Regional convergence, Distribution dynamics, Nonparametric smoothing, Spatial dependence
    JEL: R10 O40 C14 C21
    Date: 2010
  15. By: Eleonora Patacchini (Università di Roma “La Sapienza” and IZA); Yves Zenou (Stockholm University and Research Institute of Industrial Economics (IFN), IZA, GAINS and CEPR)
    Abstract: This paper studies whether conformism behavior affects individual outcomes in crime. We present a social network model of peer effects with ex-ante heterogeneous agents and show how conformism and deterrence affect criminal activities. We then bring the model to the data by using a very detailed dataset of adolescent friendship networks. A novel social network-based empirical strategy allows us to identify peer effects for different types of crimes. We find that conformity plays an important role for all crimes, especially for petty crimes. This suggests that, for juvenile crime, an effective policy should not only be measured by the possible crime reduction it implies but also by the group interactions it engenders.
    Keywords: Social Networks, Linear-in-means Model, Spatial Autoregressive Model, Social Norms
    JEL: A14 C21 D85 K42 Z13
    Date: 2010–05
  16. By: Gerald Munyoro; John H. Ll Dewhurst
    Abstract: Industrial clustering policy is now an integral part of economic development planning in most advanced economies. However, there have been concerns in some quarters over the ability of an industrial cluster-based development strategy to deliver its promised economic benefits and this has been increasingly been blamed on the failure by governments to identify industrial clusters. In a study published in 2001, the DTI identified clusters across the UK based on the comparative scale and significance of industrial sectors. The study identified thirteen industrial clusters in Scotland. However the clusters identified are not a homogeneous set and they seem to vary in terms of their geographic concentration within Scotland. This paper examines the spatial distribution of industries within Scotland, thereby identifying more localised clusters. The study follows as closely as possible the DTI methodology which was used to identify such concentrations of economic activity with particular attention directed towards the thirteen clusters identified by the DTI. The paper concludes with some remarks of the general problem of identifying the existence of industrial clusters.
    Keywords: Industrial Clusters, Scottish economy, Travel-to-work areas
    JEL: L23 R12
    Date: 2010–07
  17. By: De Borger B.; Proost S.
    Abstract: In this paper, we take a political economy approach to study the introduction of urban congestion tolls, using a simple majority voting model. Making users pay for external congestion costs is for an economist an obvious reform, but successful introductions of externality pricing in transport are rare. In the few cases where tolls were actually introduced, implementation was characterized by two salient facts. First, the toll revenues were tied to improvements of public transport. Second, opposition to the introduction of tolling decreased substantially after it was introduced. In most cases, a majority was against ex ante, but a majority favored the introduction of tolling after it was implemented. This paper develops a stylized model with car and public transport, allowing for idiosyncratic uncertainty about modal substitution costs. We show that uncertainty reduces the number of voters that favors road pricing ex ante. The model can explain the presence of a majority that is against road pricing ex ante and in favor ex post. Moreover, uncertainty also implies that, if a majority is against ex ante, there will be no majority for organizing an experiment that would take away the individual uncertainty. Finally, we show that it is easier to obtain a majority when the toll revenues are used to subsidize public transport than when they are used for a tax refund.
    Date: 2010–06
  18. By: Abigail Barr; Andrew Zeitlin
    Abstract: This paper tests the external validity of a simple Dictator Game as a laboratory analogue for a naturally occurring policy-relevant decision-making context. In Uganda, where teacher absenteeism is a problem, primary school teachers’ allocations to parents in a Dictator Game are positively but weakly correlated with their time allocations to teaching and, so, negatively correlated with their absenteeism. Guided by a simple theoretical model, we find that the correlation can be improved by allowing for (a) variations in behavioural reference points across teachers and schools and (b) the positive effect if some School Management Committees on teacher attendance .
    Keywords: Public service, Education, Experiments, Africa, external validity, Methodology
    JEL: C91 D64 I29 O15 O17
    Date: 2010
  19. By: Joan Gil; Toni Mora
    Abstract: This paper analyses the extent to which peer influence on adolescent weight differs in a typical southern European country and in the United States, two geographical areas characterised by different economic, socio-cultural and environmental patterns. Our study is based on a survey of secondary school students containing a rich set of personal data and a wide range of school characteristics and parental backgrounds. After accounting for a large set of control factors and controlling for a combination of school- and neighbourhood-specific fixed effects, instrumental variable estimation and alternative definitions of peers, our results support a more powerful positive and significant effect of friends’ mean BMI on adolescent weight than that reported in previous US-based research.
    Date: 2010–06
  20. By: Regina T. Riphahn
    Abstract: In response to increased international policy attention to youth unemployment this study investigates post-secondary school transitions of school leavers. Multinomial log it models are estimated for male and female German youth. The models control for individual, parent, and household characteristics, for those of the youth’s region of residence and local labor markets. The findings suggest that immigrant youth has particularly low participation rates in continued education, and that youth unemployment is centered in high unemployment states and metropolitan areas. Recent changes in academic benefit policies do not seem to be correlated with changes in academic enrollment, whereas men’s transitions to the military do reflect recent changes in defense policies. [IZA DP No. 99]
    Keywords: School-to-Work, youth unemployment, local labor markets
    Date: 2010
  21. By: Soumya Gupta
    Abstract: This paper presents an overview of school education in Delhi. [Working Paper No. 0068]
    Keywords: School, Education, Delhi, literacy, Census, classroom, Fundamental rights
    Date: 2010
  22. By: Allen C. Goodman; Brent C. Smith
    Abstract: Using a national loan level data set we examine loan default as explained by local demographic characteristics and state level legislation that regulates foreclosure procedures and predatory lending through a hierarchical linear model. We observe significant variation in the default rate across states, with lower default levels in states with higher temporal and financial costs to lenders when controlling for loan and location conditions. The results are notable given that many of the observed loans were sold to investors in national and international markets. State level legislative influences provide a foundation for discussion of national level policy that further regulates predatory lending and financial institution foreclosure activities.
    Date: 2010
  23. By: Sergey Lychagin; Joris Pinkse; Margaret E. Slade; John Van Reenen
    Abstract: We simultaneously assess the contributions to productivity of three sources of research and development spillovers: geographic, technology and product–market proximity. To do this, we construct a new measure of geographic proximity that is based on the distribution of a firm’s inventor locations rather than its headquarters, and we report both parametric and semiparametric estimates of our geographic– distance functions. We find that: i) Geographic space matters even after conditioning on horizontal and technological spillovers; ii) Technological proximity matters; iii) Product–market proximity is less important; iv) Locations of researchers are more important than headquarters but both have explanatory power; and v) Geographic markets are very local.
    JEL: C23 L60 O33
    Date: 2010–07
  24. By: Neil Bhutta; Jane Dokko; Hui Shan
    Abstract: A central question in the literature on mortgage default is at what point underwater homeowners walk away from their homes even if they can afford to pay. We study borrowers from Arizona, California, Florida, and Nevada who purchased homes in 2006 using non-prime mortgages with 100 percent financing. Almost 80 percent of these borrowers default by the end of the observation period in September 2009. After distinguishing between defaults induced by job losses and other income shocks from those induced purely by negative equity, we find that the median borrower does not strategically default until equity falls to -62 percent of their home's value. This result suggests that borrowers face high default and transaction costs. Our estimates show that about 80 percent of defaults in our sample are the result of income shocks combined with negative equity. However, when equity falls below -50 percent, half of the defaults are driven purely by negative equity. Therefore, our findings lend support to both the "double-trigger" theory of default and the view that mortgage borrowers exercise the implicit put option when it is in their interest.
    Date: 2010
  25. By: Claire Crawford (Institute for Fiscal Studies); Lorraine Dearden (Institute for Fiscal Studies and Bedford Group, Institute of Education, University of London); Costas Meghir (Institute for Fiscal Studies and University College London)
    Abstract: <p>This paper examines the impact of month of birth on national achievement test scores in England whilst children are in school, and on subsequent further and higher education participation. Using geographical variation in school admissions policies, we are able to split this difference into an age of starting school or length of schooling effect, and an age of sitting the test effect. We find that the month in which you are born matters for test scores at ages 7, 11, 14 and 16, with younger children performing significantly worse, on average, than their older peers. Furthermore, almost all of this difference is due to the fact that younger children sit exams up to one year earlier than older cohort members. The difference in test scores at age 16 potentially affects the number of pupils who stay on beyond compulsory schooling, with predictable labour market consequences. Indeed, we find that the impact of month of birth persists into higher education (college) decisions, with age 19/20 participation declining monotonically with month of birth. The fact that being young in your school year affects outcomes after the completion of compulsory schooling points to the need for urgent policy reform, to ensure that future cohorts of children are not adversely affected by the month of birth lottery inherent in the English education system.</p>
    JEL: I21 I28
    Date: 2010–05
  26. By: Andrés Rodríguez-Pose (IMDEA Social Sciences Institute); Fabrice Comptour (College of Europe, Bruges)
    Abstract: The analysis of clusters has attracted considerable interest over the last few decades. The articulation of clusters into complex networks and systems of innovation – generally known as regional innovation systems – has, in particular, been associated with the delivery of greater innovation and growth. However, despite the growing economic and policy relevance of clusters, little systematic research has been conducted into their association with other factors promoting innovation and economic growth. This paper addresses this issue by looking at the relationship between innovation and economic growth in 152 regions of Europe during the period between 1995 and 2006. Using an econometric model with a static and a dynamic dimension, the results of the analysis highlight that: a) regional growth through innovation in Europe is fundamentally connected to the presence of an adequate socioeconomic environment and, in particular, to the existence of a well-trained and educated pool of workers; b) the presence of clusters matters for regional growth, but only in combination with a good ‘social filter’, and this association wanes in time; c) more traditional R&D variables have a weak initial connection to economic development, but this connection increases over time and, is, once again, contingent on the existence of adequate socioeconomic conditions.
    Keywords: clusters; regional innovation systems; innovation; regional economic growth; socioeconomic conditions; regions; European Union
    Date: 2010–07–12
  27. By: Waddell, Glen R. (University of Oregon)
    Abstract: Simple OLS estimates of the effect of school-imposed penalties for drug use on a student's consumption of marijuana are biased if both are determined by unobservable school or individual attributes. The potential reverse causality is also a challenge to retrieving estimates of the causal relationship, as the severity of school sanctions may simply reflect the need for more-severe sanctions. I offer an instrumental-variables approach to retrieving an estimate of the causal response of marijuana use to sanctions and thereby demonstrate the efficacy of school-imposed penalties as a deterrent to adolescent drug use. This is the first evidence of such efficacy and, given what is known about the consequences of drug use, suggests that school sanctions may have important long-run benefits.
    Keywords: drug, crime, adolescent, risky behavior, expulsion
    JEL: I2 K42
    Date: 2010–07
  28. By: Sébastian Grauwin (Phys-ENS - Laboratoire de Physique de l'ENS Lyon - CNRS : UMR5672 - École normale supérieure de Lyon - ENS Lyon, IXXI - Institut Rhône-Alpin des systèmes complexes - INRIA - École normale supérieure de Lyon - ENS Lyon - Institut National des Sciences Appliquées de Lyon - Université Claude Bernard - Lyon I - Ecole Normale Supérieure Lettres et Sciences Humaines - Université Joseph Fourier - Grenoble I - CNRS - IRD); Florence Goffette-Nagot (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Pablo Jensen (Phys-ENS - Laboratoire de Physique de l'ENS Lyon - CNRS : UMR5672 - École normale supérieure de Lyon - ENS Lyon, IXXI - Institut Rhône-Alpin des systèmes complexes - INRIA - École normale supérieure de Lyon - ENS Lyon - Institut National des Sciences Appliquées de Lyon - Université Claude Bernard - Lyon I - Ecole Normale Supérieure Lettres et Sciences Humaines - Université Joseph Fourier - Grenoble I - CNRS - IRD, LET - Laboratoire d'économie des transports - CNRS : UMR5593 - Université Lumière - Lyon II - Ecole Nationale des Travaux Publics de l'Etat)
    Abstract: We propose an analytical resolution of Schelling segregation model for a general class of utility functions. Using evolutionary game theory, we provide conditions under which a potential function, which characterizes the global configuration of the city and is maximized in the stationary state, exists. We use this potential function to analyze the outcome of the model for three utility functions corresponding to different degrees of preference for mixed neighborhoods. Schelling original utility function is shown to drive segregation at the expense of collective utility. If agents have a strict preference for mixed neighborhoods but still prefer being in the majority versus in the minority, the model converges to perfectly segregated configurations, which clearly diverge from the social optimum. Departing from earlier literature, these conclusions are based on analytical results. These results pave the way to the analysis of many structures of preferences, for instance those based on empirical findings concerning racial preferences. As a by-product, our analysis builds a bridge between Schelling model and the Duncan and Duncan segregation index.
    Keywords: Residential segregation ; Schelling ; dynamic model ; potential function ; social preferences
    Date: 2010
  29. By: De Borger B.; Wuyts B.
    Abstract: This paper develops a numerical optimisation model to study optimal labour and peak-period congestion taxes under different assumptions on the structure of the labour market. We consider both a competitive labour market and various wage bargaining models, in which wages are determined via negotiations between firms and labour unions. All models include commuting and non-commuting transport, and they allow for telecommuting. The models are numerically implemented using Belgian data. We find that wage bargaining models may imply higher or lower congestion tolls on peak period car traffic compared to competitive labour markets, depending on the response of unions to transport issues and the composition of the traffic flow. If unions care about the effect of congestion and congestion tolls on their members’ well being, we find the optimal congestion toll for the wage bargaining model to be 15%-20% lower than under competitive labour market conditions. However, if unions do not care about their members’ transport problems when negotiating about wages and employment, then the optimal congestion tax is up to 50% higher under bargaining than under competition. We further find that the optimal tax structure results in substantially more telecommuting for all labour market structures considered. Finally, improving the efficiency of telecommuting results in a considerable reduction in optimal congestion tolls.
    Date: 2010–06
  30. By: Geeta Kingdon
    Abstract: Using new and unique panel data, we investigate the role of long-term health and childhood malnutrition in schooling outcomes for children in rural India, many of whom lack basic numeracy and literacy skills. Using data on students’ performance on mathematics and Hindi tests, we examine the role of the endogeneity of health caused by omitted variables bias and measurement error and correct for these problems using a household fixed effects estimator on a sub-sample of siblings observed in the data. We also present several extensions and robustness checks using instrumental variables and alternative estimators. We find evidence of a positive causal effect of long-term health measured as height-for-age z-score (HAZ) on test scores, and the results are consistent across several different specifications. The results imply that improving childhood nutrition will have benefits that extend beyond health into education.
    Keywords: Health, Nutrition, Schooling, India
    JEL: I12 I21
    Date: 2010
  31. By: Lamont K. Black; Diana Hancock; Wayne Passmore
    Abstract: The bank lending channel of monetary policy suggests that banks play a special role in the transmission of monetary policy. We look for this special role by examining the business strategies of banks as it relates to mortgage funding and mortgage lending. "Traditional banks" have a large supply of excess core deposits and specialize in information-intensive lending to borrowers (which is proxied here using mortgage lending in subprime communities), whereas "market-based banks" are funded with managed liabilities and mainly lend to relatively easy-to-evaluate borrowers. We predict that only "transition banks" operating between these business strategies are likely to increase their loan rate spreads substantially in response to monetary tightening. To fund ongoing mortgage originations, these banks must substitute from core deposits to managed liabilities, which have a large external finance premium due to these banks' information-intensive lending. Consistent with this prediction, we find evidence of a bank lending channel only among transition banks - they significantly reduce mortgage lending in response to monetary contractions.
    Date: 2010
  32. By: Xavier Calsamiglia; Teresa Garcia-Milà; Therese J. McGuire
    Abstract: We explore the implications for the optimal degree of fiscal decentralization when people’s preferences for goods and services, which classic treatments of fiscal federalism (Oates, 1972) place in the purview of local governments, exhibit specific egalitarianism (Tobin, 1970), or solidarity. We find that a system in which the central government provides a common minimum level of the publicly provided good, and local governments are allowed to use their own resources to provide an even higher local level, performs better from an efficiency perspective relative to all other systems analyzed for a relevant range of preferences over solidarity.
    Keywords: fiscal decentralization, specific egalitarianism, solidarity, externalities.
    JEL: H42 H77
    Date: 2010–07
  33. By: Orazio Attansio; Abigail Barr; Juan Camilo Cardenas; Garance Genicot; Costas Mehgir
    Abstract: Using date from a field experiment conducted in seventy Colombian municipalities, we investigate who pools risk with whom when risk pooling arrangements are not formally enforced. We explore the roles played by risk attitudes and network connections both theoretically and empirically. We find that pairs of participants who share a bond of friendship or kinship are more likely to (1) join the same risk pooling group and to (2) group assortatively with respect to risk attitudes. Also, consistent with our theoretical finding that when there is a problem of trust the process of pooling assortativley with respect to risk preferences is perturbed, we find (3) only weak evidence of such assorting among unfamiliar individuals.
    Keywords: Field experiment; risk sharing; social sanctions; Insurance; Group formation: matching.
    JEL: C93 D71 D81 O12
    Date: 2009

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