nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2010‒11‒27
39 papers chosen by
Steve Ross
University of Connecticut

  1. Search, Migration, and Urban Land Use: The Case of Transportation Policies By Zenou, Yves
  2. A History of Housing Prices in Australia 1880-2010 By Nigel Stapledon
  3. The Economic Effects of Slum Clearance and Urban Renewal in the United States By William J. Collins; Katharine Shester
  4. An agenda for research on urbanization in developing countries : a summary of findings from a scoping exercise By Annez , Patricia Clarke; Linn, Johannes F.
  5. Understanding permanent black-white earnings inequality By Alejandro Badel
  6. The Influence of Role Models on Immigrant Self-Employment: A Spatial Analysis for Switzerland By Giuliano Guerra; Roberto Patuelli
  7. Home Equity, Mobility, and Macroeconomic Fluctuations By Vincent Sterk
  8. Working with the market : a new approach to reducing urban slums in India By Annez, Patricia; Bertaud, Alain; Patel, Bimal; Phatak, V. K.
  9. Why Are East Germans Not More Mobile?: Analyzing the Impact of Local Networks on Migration Intentions By Peter Boenisch; Lutz Schneider
  10. The agglomeration of R&D labs By Gerald A. Carlino; Jake Carr; Robert M. Hunt; Tony E. Smith
  11. Mortgage contract choice in subprime mortgage markets By Gregory Elliehausen; Min Hwang
  12. The mechanisms of agglomeration: Evidence from the effect of inter-industry relations on the location of new firms By Jordi Jofre-Monseny; Raquel Marín-López; Elisabet Viladecans-Marsal
  13. Can rising housing prices explain China’s high household saving rate? By Xin Wang; Yi Wen
  14. Macroeconomic Effects of Over-investment in Housing in an Aggregative Model of Economic Activity By Hian Teck Hoon
  15. The Identification of Agglomeration Economies By Pierre-Philippe Combes; Gilles Duranton; Laurent Gobillon
  16. A Nonparametric Estimation of the Local Zipf Exponent for all US Cities By González-Val, Rafael
  17. The empirics of economic geography: How to draw policy implications? By Pierre-Philippe Combes
  18. Can We Trust Cluster-Corrected Standard Errors? An Application of Spatial Autocorrelation with Exact Locations Known By John Gibson; Bonggeun Kim; Susan Olivia
  19. Incentives, resources and the organization of the school system By Fernando Albornoz; Samuel Berlinski; Antonio Cabrales
  20. Financing Indian cities : opportunities and constraints in an Nth best world By Annez, Patricia Clarke
  21. An inquiry into the development of science and technology parks in China By Zhang, Haiyang; Sonobe, Tetsushi
  22. On the road to prosperity ? The economic geography of China's national expressway network By Roberts, Mark; Deichmann, Uwe; Fingleton, Bernard; Shi, Tuo
  23. Risk Aversion and the Effect of Family Background on Student Effort By Pedro Landeras
  24. Random–Walk–Based Segregation Measures By Marc Vorsatz; Pablo Coralio Ballester
  25. The role of schools in the production of achievement By Maria E. Canon
  26. Tax Decentralisation and local Government size By Paolo Liberati; Agnese Sacchi
  27. Issues in Real Estate and Urban Management – A Note By Sebastian Morris
  28. Real Estate, the External Finance Premium and Business Investment: A Quantitative Dynamic General Equilibrium Analysis By Jin, Yi; Leung, Charles Ka Yui; Zeng, Zhixiong
  29. Internal Migration and Wage Differentials among Italian University Graduates By Di Cintio, Marco; Grassi, Emanuele
  30. Regional Knowledge and the Emergence of an Industry: Laser Systems Production in West Germany, 1975-2005 By Guido Bünstorf; Michael Fritsch; Luis F. Medrano
  31. Social Identity and Inequality--The Impact of China’s Hukou System By Farzana Afridi; Sherry Xin Li; Yufei Ren
  32. Bias-Corrected Estimation for Spatial Autocorrelation By Zhenlin Yang
  33. Cost-Benefit Analysis in Transport: A UK Perspective By Peter MacKie
  34. Standardized LM Tests for Spatial Error Dependence in Linear or Panel Regressions By Badi H. Baltagi; Zhenlin Yang
  35. Heterogeneous Exits: Evidence from New Firms By Masatoshi Kato; Yuji Honjo
  36. Closing the Gap between Absolute and Relative Measures of Localization, Concentration or Specialization By Frank Bickenbach; Eckhardt Bode; Christiane Krieger-Boden
  37. Local Exposure to Toxic Releases: Does Ethnic Diversity Matter? By Matthew A Cole; Robert J R Elliott; Khemrutai Khemmarat
  38. Voluntary contributing in a neighborhood public good game: An experimental study By Berninghaus, Siegfried; Güth, Werner; Schosser, Stephan
  39. The Practice of Cost-Benefit Analysis in the Transport Sector: A Mexican Perspective By Vladimir Ramirez Soberanis

  1. By: Zenou, Yves (Stockholm University)
    Abstract: We develop a search-matching model with rural-urban migration and an explicit land market. Wages, job creation, urban housing prices are endogenous and we characterize the steady-state equilibrium. We then consider three different policies: a transportation policy that improves the public transport system in the city, an entry-cost policy that encourages investment in the city and a restricting-migration policy that imposes some costs on migrants. We show that all these policies can increase urban employment but the transportation policy has much more drastic effects. This is because a decrease in commuting costs has both a direct positive effect on land rents, which discourages migrants to move to the city, and a direct negative effect on urban wages, which reduces job creation and thus migration. When these two effects are combined with search frictions, the interactions between the land and the labor markets have amplifying positive effects on urban employment. Thus, improving the transport infrastructure in cities can increase urban employment despite the induced migration from rural areas.
    Keywords: rural-urban migration, transportation policies, entry costs, restricting migration
    JEL: D83 J61 O18 R14
    Date: 2010–11
  2. By: Nigel Stapledon (School of Economics, The University of New South Wales)
    Abstract: This paper introduces series of house and land prices for Australia’s major capital cities for the period 1880-1970 which, spliced to modern data, give series spanning 1880-2010. The broad trends in prices for houses, land and rents highlight no significant movement in real prices for the first seventy years followed by a persistent and significant trend rise in prices. Cycles in house prices and housing activity played a major part in each of the seven major economic cycles in this period, the first associated with the 1880s boom/1890s depression and finishing with a major cycle which commenced in the mid-1990s.
    Keywords: Australia; house prices; land prices; gross dwelling rents; price and rent controls; housing cycles; economic cycles.
    JEL: G12 N97 R21 R31 R38
    Date: 2010–11
  3. By: William J. Collins (Department of Economics, Vanderbilt University); Katharine Shester (Department of Economics, Vanderbilt University)
    Abstract: The Housing Act of 1949 established a federally subsidized program that helped cities clear areas of existing buildings for redevelopment, rehabilitate deteriorating structures, complete comprehensive city plans, and enforce building codes. The program ended in 1974, but not before financing over 2,100 urban renewal projects and generating great controversy. We use an instrumental variable strategy to estimate the program’s effects on city-level outcomes. The estimates are generally positive and economically significant and are not driven by differential changes in cities’ demographic composition. We caution that the results do not imply that the program was an equitable or optimal approach to dealing with central-city problems.
    Keywords: City growth, Redevelopment, Residential Segregation, Eminent Domain
    JEL: N92 R30 J15 K11
    Date: 2010–10
  4. By: Annez , Patricia Clarke; Linn, Johannes F.
    Abstract: This paper assesses the state of research and examines priorities for future work in the area of urbanization and growth. This is done by reviewing and summarizing the findings of five scoping papers covering the following topics: urban poverty, the political economy of urban poverty, urban real estate and housing, urban infrastructure finance, and external assistance for urban development.
    Keywords: Urban Poverty,Urban Housing and Land Settlements,National Urban Development Policies&Strategies,City Development Strategies,Banks&Banking Reform
    Date: 2010–11–01
  5. By: Alejandro Badel
    Abstract: Average annual earnings of black US households have remained at around half the average earnings of white households for more than 30 years. Why are the earnings of black households so low compared to those of white households? Why can blackwhite earnings inequality of such magnitude be permanent? This paper provides a quantitative answer based on neighborhood effects. The economic and demographic characteristics of neighborhoods and the distribution of earnings are determined endogenously from the location and investment decisions of altruistic parents. Permanent racial inequality arises from residential segregation by race and earnings coupled with neighborhood effects that impact the productivity of parental investments. The model is calibrated by targeting observed segregation by race, segregation by earnings, housing price differences across neighborhoods, intergenerational earnings mobility, and the magnitude of parental investments in children. The benchmark steady state earnings distribution accounts for .72 of the observed black-white percent difference in household earnings. The paper argues that local housing markets, local human capital externalities and racial neighborhood preferences are necessary ingredients in explaining permanent black white inequality.>
    Keywords: Income distribution ; Wages -- Social aspects -- United States
    Date: 2010
  6. By: Giuliano Guerra (Institute for Economic Research (IRE), University of Lugano, Switzerland); Roberto Patuelli (Institute for Economic Research (IRE), University of Lugano, Switzerland; The Rimini Centre for Economic Analysis, Italy)
    Abstract: Theoretical and empirical research suggests a connection between the presence of role models and the emergence of entrepreneurs. Existing entrepreneurs may act as role models for self-employment candidates by providing successful examples. By explicitly considering the self-employment rates of the natives, which may influence locally the decisions of immigrants towards entrepreneurship, we develop a simple model that explains immigrant self-employment rates for a sample of 2,490 Swiss municipalities. In addition, we accommodate for the presence of spatial spillovers in the distribution of rates, and test a spatial autoregressive model which takes into account the average self-employment rates of immigrants living in nearby municipalities. Our evidence shows a significant (positive) effect of such spatial network effects, which are characterized by a quick distance decay, suggesting spatial spillovers at the household and social network level. Additionally, we show that local conditions and immigrant pool characteristics differ, with respect to self-employment choices, when examining separately urban and rural contexts.
    Keywords: immigrants, self-employment, role models, Switzerland, spatial lag
    JEL: C21 J24 J61 O15 R23
    Date: 2010–01
  7. By: Vincent Sterk
    Abstract: How does a fall in house prices affect real activity? This paper presents a business cycle model in which a decline in house prices reduces geographical mobility, creating distortions in the labor market. This happens because homeowners face declines in their home equity levels, after which it becomes more difficult to provide the down-payment required for a new mortgage loan. Unemployed homeowners therefore turn down job offers that would require them to move. The model explains joint cyclical patterns in housing and labor market aggregates, as well as the puzzling breakdown of the U.S. Beveridge curve that occurred during 2009.
    Keywords: Housing Markets; Labor Markets; Refinancing Constraints
    JEL: E24 E44 R21
    Date: 2010–10
  8. By: Annez, Patricia; Bertaud, Alain; Patel, Bimal; Phatak, V. K.
    Abstract: This paper examines the policy options for India as it seeks to improve living conditions of the poor on a large scale and reduce the population in slums. Addressing the problem requires first a diagnosis of the market at the city level and a recognition that government interventions, rather than thwarting the operations of the market, should seek to make it operate better. This can substantially reduce the subsidies required to assist low income households to attain decent living standards. The authors show that government programs that directly provide housing would cost, in conservative estimates, about of 20 to 30 percent of GDP, and cannot solve a problem on the scale of India's. Using two case studies, for Mumbai and Ahmedabad, the paper offers a critical examination of government policies that shape the real estate market and make formal housing unaffordable for a large part of the population. It illustrates how simple city level market diagnostics can be used to identify policy changes and design smaller assistance programs that can reach the poor. The linkage between chronic infrastructure backlogs and policies makes housing unnecessarily expensive. Increasing the carrying capacity of cities is essential for gaining acceptance of real estate policies suited to Indian cities. The authors propose approaches for funding major investments to achieve this.
    Keywords: Housing&Human Habitats,Urban Housing,Public Sector Management and Reform,Regional Governance,Urban Governance and Management
    Date: 2010–11–01
  9. By: Peter Boenisch; Lutz Schneider
    Abstract: Despite poor regional labour market conditions East Germans exhibit a rather limited willing-ness of leaving their home region. Applying an IV ordered probit approach and using the German Socio Economic Panel (SOEP), we test a local network explanation of lower spatial mobility. Firstly, we find that membership in locally bounded social networks reduces regional mobility. Secondly, we show that native East Germans are more invested in this type of social networks than West Germans. Thirdly, after controlling for the social network effect the mobility gap between East and West substantially reduces. Thus, low regional labour mobility of East Germans is for a significant part attributable to local ties binding people to their home region.
    Keywords: Social networks, labour mobility
    JEL: Z13 R23 J61
    Date: 2010
  10. By: Gerald A. Carlino; Jake Carr; Robert M. Hunt; Tony E. Smith
    Abstract: The authors document the spatial concentration of more than 1,000 research and development (R&D) labs located in the Northeast corridor of the U.S. using point pattern methods. These methods allow systematic examination of clustering at different spatial scales. In particular, Monte Carlo tests based on Ripley's (1976) K-functions are used to identify clusters of labs — at varying spatial scales — that represent statistically significant departures from random locations reflecting the underlying distribution of economic activity (employment). Using global K-functions, they first identify significant clustering of R&D labs at two different spatial scales. This clustering is by far most significant at very small spatial scales (a quarter of a mile), with significance attenuating rapidly during the first half mile. The authors also observe statistically significant clustering at distances of about 40 miles. This corresponds roughly to the size of the four major R&D clusters identified in the second stage of their analysis — one each in Boston, New York-Northern New Jersey, Philadelphia-Wilmington, and Virginia (including the District of Columbia). In this second stage of the analysis, explicit clusters are identified by a new procedure based on local K-functions, which they designate as the multiscale core-cluster approach. This new approach yields a natural nesting of clusters at different scales. The authors' global finding of clustering at two spatial scales suggests the possibility of two distinct forms of spillovers. First, the rapid attenuation of significant clustering at small spatial scales is consistent with the view that knowledge spillovers are highly localized. Second, the scale at which larger clusters are found is roughly comparable to that of local labor markets, suggesting that such markets may be the source of additional spillovers (e.g., input sharing or labor market matching externalities).
    Keywords: Research and development ; Cities and towns ; Industrial location
    Date: 2010
  11. By: Gregory Elliehausen; Min Hwang
    Abstract: The boom in the subprime mortgage market yielded many loans with high LTV ratios. From a large proprietary database on subprime mortgages, we find that choice of mortgage rate type is not linear in loan sizes. A fixed rate mortgage contract is a popular choice when loan size, measured by LTV ratio, is small. As LTV ratio increases, borrowers become more likely to choose adjustable rate mortgage contracts. However, when LTV reaches a certain level, borrowers start to switch back to fixed rate contracts. For these high LTV loans, fixed rate mortgages dominate borrowers' choices. We present a very simple model that explains this "nonlinear" pattern in mortgage instrument choice. The model shows that the choice of mortgage rate type depends on two opposing effects: a "term structure" effect and an "interest rate volatility" effect. When the loan size is small, the term structure effect dominates: rising LTV ratios making ARM loans less costly, and more attractive. However, when the loan size is large enough, the interest volatility effect dominates: rising LTV ratios making FRM loans less costly and preferable. We present strong empirical evidence in support of the model predictions.
    Date: 2010
  12. By: Jordi Jofre-Monseny (Universitat de Barcelona & IEB); Raquel Marín-López (Universitat de Barcelona & IEB); Elisabet Viladecans-Marsal (Universitat de Barcelona & IEB)
    Abstract: The objective of this paper is to explore the relative importance of each of Marshall’s agglomeration mechanisms by examining the location of new manufacturing firms in Spain. In particular, we estimate the count of new firms by industry and location as a function of (pre-determined) local employment levels in industries that: 1) use similar workers (labor market pooling); 2) have a customer-supplier relationship (input sharing); and 3) use similar technologies (knowledge spillovers). We examine the variation in the creation of new firms across cities and across municipalities within large cities to shed light on the geographical scope of each of the three agglomeration mechanisms. We find evidence of all three agglomeration mechanisms, although their incidence differs depending on the geographical scale of the analysis.
    Keywords: Agglomeration economies, coagglomeration, labor market pooling, input sharing, knowledge spillovers
    JEL: L25 L60 R12 R30
    Date: 2010
  13. By: Xin Wang; Yi Wen
    Abstract: China’s average household saving rate is one of the highest in the world. One popular view attributes the high saving rate to fast rising housing prices and other costs of living in China. This article uses simple economic logic to show that rising housing prices and living costs per se cannot explain China’s high household saving rate. Although borrowing constraints and demographic changes can help translate housing prices to the aggregate saving rate, quantitative simulations using Chinese data on household income, housing prices, and demographics indicate that rising mortgage costs contribute at most 5 percentage points to the Chinese aggregate household saving rate, given the down-payment structure of China’s mortgage markets.
    Date: 2010
  14. By: Hian Teck Hoon (School of Economics, Singapore Management University)
    Abstract: Is there a theoretical basis for the view that the end of a period of over-investment necessarily leads to a period of below-normal employment as the excess capital stock is run down? We study the repercussions of a false boom in housing driven by prior expectations of future housing prices not justified by fundamentals. When these expectations are corrected, the result is a precipitous drop in housing prices and, on that account alone, some drop in employment. There is also a bulge in the housing stock. In the closed economy case, the downward shift of the term structure of interest rates due to the excess housing stock props up housing prices above the normal steady-state level, so the drop of housing prices “undershoots.” Although this transient elevation of housing prices has a positive demand-wage effect on employment, we show that the wealth effect from owning a higher housing stock and a negative Hicks-Lucas-Rapping effect of lower interest rates dominate, so employment drops initially to a below-normal level. The slump gradually subsides as the housing overhang wears off. In the case of a small open economy that faces a world of perfect capital mobility and takes as given the world interest rate, there are two possibilities. If housing services are instantaneously tradeable and perfect substitutes for foreign ones, so purchasing power parity holds, the end of the bubble causes housing prices to drop precisely to the steady-state level. Since there is no undershooting, the wealth effect of the housing overhang is unopposed and the slump is deeper. If domestic and foreign housing services are imperfect substitutes, the country will suffer a period with a weak real exchange rate, thus to a drop of housing prices that “overshoots” the normal level. Here the slump in employment is worsened by the exaggerated fall in housing prices below the steady-state level.
    Keywords: Housing stock, housing prices, over-investment, employment
    JEL: E13 E22 E23 E24 R21 R31
    Date: 2010–10
  15. By: Pierre-Philippe Combes (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Gilles Duranton (Department of Economics - University of Toronto); Laurent Gobillon (INED - INED)
    Abstract: Measures of urban productivity are typically positively associated with city population. But is this relationship causal? We discuss the main sources of bias in the proper identification of agglomeration effects. We also assess a variety of solutions that have been proposed in the literature to deal with them.
    Keywords: agglomeration economies; instrumental variables; structural estimation; natural experiments
    Date: 2010–11–12
  16. By: González-Val, Rafael
    Abstract: In this short paper we apply the methodology proposed by Ioannides and Overman (2003) to estimate a local Zipf exponent using data for the entire twentieth century of the complete distribution of cities (incorporated places) without any size restrictions in the US. The results reject Zipf’s Law from a long term perspective, as the estimated values are close to zero. However, decade by decade we find evidence in favour of Zipf’s Law. We also see how periods in which the Zipf exponent grows with city size are interspersed with others in which the relationship between the exponent and city shares is negative.
    Keywords: Zipf’s Law; Gibrat’s Law; urban growth
    JEL: C14 R00
    Date: 2010–11–15
  17. By: Pierre-Philippe Combes (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)
    Abstract: Using both reduced-form and structural approaches, the spectrum of policy recommendations that can be drawn from empirical economic geography is pretty large. Reduced-form approaches allow the researchers to consider many variables that impact on regional disparities, as long as they are careful about interpretation and endogeneity issues. Structural approaches have the opposite advantages. Less issues can be simultaneously addressed, but one can be more precise in terms of which intuitions are considered and the underlying mechanisms and effects at work. Many regional policy issues remain unanswered, opening some interesting future lines of research.
    Keywords: agglomeration economies; regional policy; structural estimation; instrumental variables
    Date: 2010
  18. By: John Gibson (University of Waikato); Bonggeun Kim (Seoul National University); Susan Olivia (Monash University)
    Abstract: Standard error corrections for clustered samples impose untested restrictions on spatial correlations. Our example shows these are too conservative, compared with a spatial error model that exploits information on exact locations of observations, causing inference errors when cluster corrections are used.
    Keywords: clustered samples; GPS; spatial correlation
    JEL: C31 C81
    Date: 2011–08–18
  19. By: Fernando Albornoz; Samuel Berlinski; Antonio Cabrales
    Abstract: We study a model where student effort and talent interact with parental and teachers' investments, as well as with school system resources. The model is rich, yet sufficiently stylized to provide novel implications. We can show, for example, that an improvement in parental outside options will reduce parental and school effort, which are partially compensated through school resources. In this way we provide a rationale for the ambiguous existing empirical evidence on the effect of school resources. We also provide a novel microfoundation for peer effects, with empirical implications on welfare and on preferences for sorting across schools.
    Date: 2010–11
  20. By: Annez, Patricia Clarke
    Abstract: This paper examines international experience with mobilizing funding for both capital and recurrent costs for municipal infrastructure with a view to identifying areas where India could improve its system of financing infrastructure in cities. Based on international data, the analysis shows that there is indeed a wide range of models for funding municipal infrastructure across a group even as relatively homogeneous as the European Union. Although a number of different models operate in countries with very good services, important features of India’s municipal finance system stand out. The spending per capita is exceptionally low, even when compared with local governments with few functions. The real estate sector generates meager tax revenues, but transfers from higher levels of government are also meager. Turning to cost recovery models for services, the paper examines international evidence on cost recovery. In practice, a surprisingly large number of countries, including high-income countries, subsidize basic municipal services, particularly in water supply and sanitation. Analysis shows that these subsidies often have perverse distributional effects. Likewise, pricing schemes designed to skew subsidies to low-income households often have unintended distributional effects. Again, evidence from urban India suggests that cost recovery is exceptionally low, not only in absolute terms but relative to the experience of other low and middle-income countries. The paper concludes with a discussion of some of the measures that should be considered for improving finances in Indian cities, includingland monetization and capital grants systems designed specifically for reaching secondary cities and towns.
    Keywords: Transport Economics Policy&Planning,Public Sector Economics,Banks&Banking Reform,Public Sector Management and Reform,Municipal Financial Management
    Date: 2010–11–01
  21. By: Zhang, Haiyang; Sonobe, Tetsushi
    Abstract: In order to investigate the effectiveness of science and technology industrial parks (STIPs), this study examines data on high-tech firms within and outside the STIPs in China, while paying special attention to the issues related to agglomeration and congestion. The main finding is that the negative effect of congestion on productivity is highly likely to outweigh the positive productivity effect of agglomeration economies within the STIPs but not among high-tech firms outside the STIPs. The paper also finds that the productivity of high-tech firms, whether within or outside the STIPs, are positively associated with foreign direct investment and the academic activities of local universities in the same city. --
    Keywords: science and technology parks,agglomeration,congestion,China
    JEL: O3 O4
    Date: 2010
  22. By: Roberts, Mark; Deichmann, Uwe; Fingleton, Bernard; Shi, Tuo
    Abstract: Over the past two decades, China has embarked on an ambitious program of expressway network expansion. By facilitating market integration, this program aims both to promote efficiency at the national level and to contribute to the catch-up of lagging inland regions with prosperous Eastern ones. This paper evaluates the aggregate and spatial economic impacts of China's newly constructed National Expressway Network, focussing, in particular, on its short-run impacts. To achieve this aim, the authors adopt a counterfactual approach based on the estimation and simulation of a structural"new economic geography"model. Overall, they find that aggregate Chinese real income was approximately 6 percent higher than it would have been in 2007 had the expressway network not been built. Although there is considerable heterogeneity in the results, the authors do not find evidence of a significant reduction in disparities across prefectural level regions or of a reduction in urban-rural disparities. If anything, the expressway network appears to have reinforced existing patterns of spatial inequality, although, over time, these will likely be reduced by enhanced migration.
    Keywords: Transport Economics Policy&Planning,Economic Theory&Research,Labor Policies,Roads&Highways,Regional Economic Development
    Date: 2010–11–01
  23. By: Pedro Landeras
    Abstract: In this paper, we propose an intuitive way of how to measure residential segregation. Individuals are located in different nodes on a network that are interconnected through links. Each period, an individual either advances to an adjacent node or she stops moving. In this setting, the segregation index is then defined as the probability that a randomly chosen individual meets an individual of the same social group in the neighborhood where her random-walk terminates. It is shown in a dual theorem that the segregation index is as a natural generalization of the isolation index to networks and that it is proportional to the PageRank index applied by Google in order to determine the importance of web-pages. Finally, the segregation index is applied to the Spanish 2009 census tract data and compared with other prominent measures.
    Date: 2010–11
  24. By: Marc Vorsatz; Pablo Coralio Ballester
    Abstract: In this paper, we propose an intuitive way of how to measure residential segregation. Individuals are located in different nodes on a network that are interconnected through links. Each period, an individual either advances to an adjacent node or she stops moving. In this setting, the segregation index is then defined as the probability that a randomly chosen individual meets an individual of the same social group in the neighborhood where her random-walk terminates. It is shown in a dual theorem that the segregation index is as a natural generalization of the isolation index to networks and that it is proportional to the PageRank index applied by Google in order to determine the importance of web-pages. Finally, the segregation index is applied to the Spanish 2009 census tract data and compared with other prominent measures.
    Date: 2010–11
  25. By: Maria E. Canon
    Abstract: What explains differences in pre-market factors? Three types of inputs are believed to determine the skills agents take to the labor market: ability, family inputs and school inputs. Therefore to answer the previous question it is crucial to understand first the importance of each of those inputs. The literature on the production of achievement has not been able to provide an estimation that can take the three factors into account simultaneously at the student level. This paper intends to fill this gap by providing an estimation of the production function of achievement where both types of investments (families and schools) are considered in a framework where the inputs are allowed to be correlated with the unobserved term, ability to learn. I do that by applying Olley and Pakes’ (1996) algorithm which accommodates for endogeneity problems in the choice of inputs for the production of achievement and by using parents’ saving for their child’s postsecondary education to control for the unobserved component (i.e. ability to learn) in the production of skills. The estimates for the role of family inputs are in line to previous findings. Additionally, the estimates of school inputs show that they are also important for the formation of students’ skills even after controlling for ability to learn.>
    Keywords: Education - Economic aspects ; Education
    Date: 2010
  26. By: Paolo Liberati; Agnese Sacchi
    Abstract: The aim of this paper is to re-examine the relationship between fiscal federalism and the size of local governments. Traditionally, the empirical studies have focused on the different accountability power of grants and local taxes, concluding that the former encourages the growth and the latter contributes to contain local public spending. Yet, the existing literature is more silent about the possibility that different types of tax autonomy may still have differential impacts on the expansion of the local public sector. The paper addresses this issue by introducing a new testable hypothesis - the “Tax Separation Hypothesis” (TSH) - according to which tax decentralisation organised on tax bases used only by local governments would favour most the containment of local public expenditures, while that organised on tax base sharing (i.e. piggybacking mechanisms) is not expected to have a significant impact on the local government size. Using an unbalanced panel data set of OECD countries, we adopt the novel approach of disentangling the impact of local taxes - on income, property, and goods and services - on the size of the local public sector. In particular, property taxes only - mostly based on a “tax separation” scheme - seem to have a negative impact on the size of local government. Instead, both income taxes and general taxes on goods and services – often shared with central governments – have uncertain impacts on the size of local governments (and more frequently positive). We conclude that tax decentralisation is a necessary condition to contain local public expenditures, yet it is not sufficient, as a tax separation scheme would in fact be required.
    Keywords: Fiscal decentralisation; Tax sharing; Tax separation; Property taxes; Local government size.
    JEL: H71 H77 H2
    Date: 2010–06
  27. By: Sebastian Morris
    Abstract: This note raise many policy issues related to real estate and the urban sector. Urban issues and the very high cost of real estate in India have deep rooted problems that have their origin in the policy, law and working of government. The potential of high growth to deliver benefits to people but especially the poor have to a large extent been negated by the large perversities that underlie the real estate sector in India. These have been compounded by structural problems in governance. Without correction it is unlikely that India would be able to face to the challenges in rapid urbanisation that lies ahead. [W.P. No. 2010-11-01]
    Keywords: policy, real estate, urban sector, law, working, government, India
    Date: 2010
  28. By: Jin, Yi; Leung, Charles Ka Yui; Zeng, Zhixiong
    Abstract: This paper studies the connection between the capital market and the real estate market. Empirically, we find that positive real house price shocks lower the external finance premium and stimulate nonresidential investment and real GDP. Our theoretical framework is able to mimic the volatility of the external finance premium, the relative price of real estate and capital, and the investment in real estate and capital. It also captures the cyclicality of the external finance premium and of real estate prices. The contribution of real estate price fluctuations to the variability of the external finance premium and the GDP is confirmed to be significant.
    Keywords: External Finance Premium; Residential and Corporate Real Estate; Capital Market Imperfections; Equilibrium Default; Real Estate Price Volatility.
    JEL: E44 D82 R21 R31
    Date: 2010–11
  29. By: Di Cintio, Marco; Grassi, Emanuele
    Abstract: In this paper, we estimate wage differentials among Italian university Graduates three years after graduation due to sequential geographic mobility. By means of a matching procedure we quantify wage premia associated with the choice of studying far from home, moving after graduation and moving back home after graduation. We find evidence of large gains for those who move after graduation, little benefits for those who choose to go back home after having studied in regions different from that of origin. We also assess a “transitivity” result for the estimated treatment effects.
    Keywords: Geographic mobility; wage differentials; kernel matching.
    JEL: J31 J61 J24
    Date: 2010–11–15
  30. By: Guido Bünstorf (University of Kassel, Department of Economics,); Michael Fritsch (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Luis F. Medrano (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: We analyze the emergence and spatial evolution of the German laser systems industry. Regional knowledge in the related field of laser sources, as well as the presence of universities with physics or engineering departments, is conducive to the emergence of laser systems suppliers. The regional presence of source producers is also positively related to entry into laser systems. One important mechanism behind regional entry is the diversification of upstream laser source producers into the downstream systems market. Entry into the materials processing submarket appears to be unrelated to academic knowledge in the region, but the presence of laser source producers and the regional stock of laser knowledge are still highly predictive in this submarket.
    Keywords: Innovation, regional knowledge, laser technology, emerging industries, diversification
    JEL: L22 L69 R11 O52
    Date: 2010–11–15
  31. By: Farzana Afridi (Department of Economics, Delhi School of Economics, Delhi, India); Sherry Xin Li (School of Economic, Political and Policy Sciences (EPPS) University of Texas at Dallas, GR31); Yufei Ren (School of Economic, Political and Policy Sciences (EPPS) University of Texas at Dallas, GR31)
    Abstract: We conduct an experimental study to investigate the causal impact of social identity on individuals? response to economic incentives. We focus on China?s decades old household registration system, or the hukou institution, which categorizes citizens into urban and rural residents, and favors the former over the latter in resource allocation. Our results indicate that making individuals? hukou status salient and public significantly reduces the performance of rural migrant students on an incentivized cognitive task by 10 percent. This leads to a leftward shift of their earnings distribution – the proportion of rural migrants below the 25th earnings percentile increases significantly by almost 19 percentage points. However, among non-migrants the proportion with earnings below the 25th percentile drops by 5 percentage points, and the proportion above the 75th percentile increases by almost 8 percentage points, albeit insignificantly. The results demonstrate the impact of institutionally imposed social identity on individuals? intrinsic response to incentives, and consequently on widening income inequality.
    Keywords: social identity, hukou, inequality, field experiment, China
    JEL: C93 O15 P36
    Date: 2010–10
  32. By: Zhenlin Yang (School of Economics, Singapore Management University)
    Abstract: The biasedness issue arising from the maximum likelihood estimation of the spatial autoregressive model (SAR) is further investigated under a broader set-up than that in Bao and Ullah (2007a). A major difficulty in analytically evaluating the expectations of ratios of quadratic forms is overcome by a simple bootstrap procedure. With that, the corrections on bias and variance of the spatial estimator can easily be made up to third-order, and once this is done, the estimators of other model parameters become nearly unbiased. Compared with the analytical approach, the new approach is much simpler, and can easily be extended to other models of a similar structure. Extensive Monte Carlo results show that the new approach performs excellently in general.
    Keywords: Third-order bias; Third-order variance; Bootstrap; Concentrated estimating equation; Monte Carlo; Quasi-MLE; Spatial layout.
    JEL: C10 C21
    Date: 2010–10
  33. By: Peter MacKie
    Abstract: It has always been a controversial tool, generating accusations of unacceptable principle, improper application, inadequate evidence base and bias. One early application was to the appraisal of the proposed third London Airport where a critic labelled the project appraisal as “nonsense on stilts” and the method was defended against accusations of being “bastard science and/or insidious poison in the body politick” (Self 1970, Williams, 1973). Since that time, appraisal has found itself at the centre of public disputes about the road planning system, the treatment of environmental impacts, the socalled “roads generate traffic” issue and the relationship between transport and the economy. The…
    Date: 2010–11
  34. By: Badi H. Baltagi (Department of Economics and Center for Policy Research, Syracuse University); Zhenlin Yang (School of Economics, Singapore Management University)
    Abstract: The robustness of the LM tests for spatial error dependence of Burridge (1980) for the linear regression model and Anselin (1988) for the panel regression model are examined. While both tests are asymptotically robust against distributional misspecification, their finite sample behavior can be sensitive to the spatial layout. To overcome this shortcoming, standardized LM tests are suggested. Monte Carlo results show that the new tests possess good finite sample properties. An important observation made throughout this study is that the LM tests for spatial dependence need to be both mean and variance-adjusted for good finite sample performance to be achieved. The former is, however, often neglected in the literature.
    Keywords: Distributional misspecification; Group interaction; LM test; Moran’s I Test; Robustness; Spatial panel models.
    JEL: C23 C5
    Date: 2010–09
  35. By: Masatoshi Kato (School of Economics, Kwansei Gakuin University); Yuji Honjo (Institute of Economic Research, Hitotsubashi University)
    Abstract: This paper explores heterogeneous exits—bankruptcy, voluntary liquidation, and merger—by focusing on new firms. Using a sample of approximately 16,000 firms founded in Japan during 1997–2004, we examine the determinants of new-firm exit according to forms of exit. Regarding industry-specific characteristics, our findings indicate that new firms in capital-intensive and R&D-intensive industries are less likely to go bankrupt. In industries characterized by large amounts of capital and low price–cost margins, new firms are more likely to exit through voluntary liquidation and merger. Region-specific characteristics, such as regional agglomeration and unemployment rate, have significant effects on the hazards of exit, and their effects vary across different forms of exit. Moreover, we provide evidence that firm-specific characteristics, such as the number of employees, and entrepreneur-specific characteristics, such as educational background and age, play significantly different roles in determining each form of exit.
    Keywords: New firm; exit; bankruptcy; voluntary liquidation; merger; competing risks proportional hazards model.
    Date: 2010–11
  36. By: Frank Bickenbach; Eckhardt Bode; Christiane Krieger-Boden
    Abstract: This paper solves one of the puzzles in the analysis of regional and industrial distributions of economic activity, the discrepancy between absolute and relative measures. It shows that the difference between an absolute and a relative Theil index of localization can be expressed in terms of absolute and relative concentration and specialization measures. This helps understand and explore why absolute and relative measures frequently evolve in opposite directions. The paper shows for the EU-15 and for UK manufacturing that this divergence originates mainly from the industrial dimension and is largely a statistical artifact inherited from the characteristics of industry classifications
    Keywords: Localization, Concentration, Specialization, Theil index
    JEL: C43 R12
    Date: 2010–11
  37. By: Matthew A Cole; Robert J R Elliott; Khemrutai Khemmarat
    Abstract: This paper examines the role played by community characteristics in influencing local environmental quality, focusing specifically on ethnic diversity. In contrast to the previous literature, this study argues that it is the fractionalization and/or polarization of ethnic groups that is the relevant consideration, rather than the population share of ethnic minorities, since such diversity may significantly increase the difficulty of co-ordinating community action. Using toxic release data for the period 1990-1995 and, for the first time, 2000-2005, we find that measures of ethnic diversity do indeed influence local toxic release emissions. This finding persists across a range of robustness exercises.
    Keywords: pollution, ethnic diversity, fractionalization, polarization, community characteristics, environmental justice
    JEL: Q53 Q56 D70
    Date: 2010–11
  38. By: Berninghaus, Siegfried; Güth, Werner; Schosser, Stephan
    Abstract: In repeated Public Good Games contributions might be influenced by different motives. The variety of motives for deciding between (more or less) free-riding probably explains the seemingly endless tradition of theoretical and experimental studies of repeated Public Good Games. To more clearly distinguish the motives, we try to enrich the choice set by allowing players not only to contribute but also to locate their contribution to one of the player positions. The location choice affects what individual players gain, but not the overall efficiency of contributing, and allows for discrimination, e.g., rewarding and sanctioning co-players differently. Our experimental results show that adding location choice promotes voluntary cooperation, although discrimination itself has no signifficant effect on behavior. --
    Keywords: Public Good Game,Neighborhood,Cooperation,Experimental Analysis
    Date: 2010
  39. By: Vladimir Ramirez Soberanis
    Abstract: Mexico´s public investment process is strengthen by an institutional framework that ensures that projects with a high social return are given preference. The Federal Law of Budget and Financial Responsibility establishes as prerequisite for federal investments the obligation to present a Cost-Benefit Analysis (CBA), and to get the Investment Unit approval. This paper describes the use of CBA for the social and economic evaluation of transport infrastructure in Mexico and is made from the point of view of the role of the Ministry of Finance’s Investment Unit in the appraisal process.
    Date: 2010–11

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