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on Urban and Real Estate Economics |
| By: | Daniel A. Hartley |
| Abstract: | Despite popular accounts that link public housing demolitions to spatial redistribution of crime, and possible increases in crime, little systematic research has analyzed the neighborhood or citywide impact of demolitions on crime. In Chicago, which has conducted the largest public housing demolition program in the United States, I find that public housing demolitions are associated with a 10 percent to 20 percent reduction in murder, assault, and robbery in neighborhoods where the demolitions occurred. Furthermore, violent crime rates fell by about the same amount in neighborhoods that received the most displaced public housing households relative to neighborhoods that received fewer displaced public housing households, during the period when these developments were being demolished. This suggests violent crime was not simply displaced from the neighborhoods where demolitions occurred to neighborhoods that received the former public housing residents. However, it is impossible to know what would have happened to violent crime in the receiving neighborhoods had the demolitions not occurred. Finally, using a panel of cities that demolished public housing, I find that the mean public housing demolition is associated with a drop of about 3 percent in a city’s murder rate and about 2 percent in a city’s assault rate. I interpret these findings as evidence that while public housing demolitions may push crime into other parts of a city, crime reductions in neighborhoods where public housing is demolished are larger than crime increases in other neighborhoods. A caveat is that while the citywide reduction in the assault rate appears to be permanent, the citywide reduction in murder rate seems to last for only a few years. |
| Keywords: | Crime ; Public housing |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1022&r=ure |
| By: | Morris A. Davis; Jonas D. M. Fisher; Marcelo Veracierto |
| Abstract: | This paper builds a dynamic general equilibrium model of cities and uses it to analyze the role of local housing markets and moving costs in determining the character and extent of labor reallocation in the US economy. Labor reallocation in the model is driven by idiosyncratic city-specific productivity shocks, which we measure using a dataset that we compile using more than 350 U.S. cities for the years 1984 to 2008. Based on this measurement, we find that our model is broadly consistent with the city-level evidence on net and gross population flows, employment, wages and residential investment. We also find that the location-specific nature of housing is more important than moving costs in determining labor reallocation. Absent this quasi-fixity of housing, and under various assumptions governing population flows, population and employment would be much more volatile than observed. |
| Keywords: | Housing - Econometric models ; Labor market |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2010-18&r=ure |
| By: | Marvin M. Smith; Chrisy Chung Hevener |
| Abstract: | Analyzes the racial gap in subprime mortgages over time. The study estimates a portion of the gap that cannot be attributed to such characteristics as income, credit score, loan amount, degree of documentation, denial rate, residence in a minority tract, and debt-to-income ratio. It concludes that the unexplained portion suggests that bias in mortgage lending cannot be ruled out. |
| Keywords: | Subprime market ; Predatory lending ; Discrimination in housing |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpcd:10-02&r=ure |
| By: | Klaus Desmet (Universidad Carlos III); Esteban Rossi-Hansberg (Princeton University) |
| Abstract: | This paper proposes a simple theory of a system of cities that decomposes the determinants of the city size distribution into three main components: efficiency, amenities, and frictions. Higher efficiency and better amenities lead to larger cities, but also to greater frictions through congestion and other negative effects of agglomeration. Using data on MSAs in the United States, we parametrize the model and empirically estimate efficiency, amenities and frictions. Counterfactual exercises show that all three characteristics are important in that eliminating any of them leads to large population reallocations, though the welfare effects from these reallocations are small. Overall, we find that the gains from worker mobility across cities are modest. When allowing for externalities, we find an important city selection effect: eliminating differences in any of the city characteristics causes many cities to exit. We apply the same methodology to Chinese cities and find welfare effects that are many times larger than in the U.S. |
| Date: | 2010–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:imd:wpaper:wp2010-24&r=ure |
| By: | Jacek Zaucha (Institute for Development, Sopot, Poland); Krzysztof Najman (Dept. of Statistics, University of Gdansk, Sopot, Poland) |
| Abstract: | Spatial development policies are frequently elaborated without sufficient economics concern. This paper aims at testing possibilities opened by concepts of the “new economic geography” to verify assumptions of decision makers from the Baltic Sea Region (BSR) countries on the negative impacts of the still existing transport barriers on regional (i.e. Baltic) integration and cohesion. For that purpose the analysis of relative concentration of the employment in regional and sector disaggregation. has been used. The research has shown how great the difficulties, piling up before an economist willing to examine issues of spatial development in the setting of pan-European regions are. Therefore it was hardly possible to reject the hypotheses on positive influence of development of transport infrastructure on regional integration and cohesion in the BSR. |
| Keywords: | absolute concentration, entropy indices of concentration, Gini coefficients of concentration, new economic geography, relative concentration |
| JEL: | R12 R14 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iro:wpaper:1003&r=ure |
| By: | Jacek Zaucha (Institute for Development, Sopot, Poland) |
| Abstract: | At the regional (subnational) level spatial planning has remained firm mainly in its land use aspects. Despite of pretty advanced legislation in Poland requiring each self-government region to prepare spatial planning outlines based on regional-socio economic strategies (both of indicative nature) the regional governments have gradually moved (in terms of human resources, interest of regional politicians) from think-tank (strategy making) position to bodies managing structural funds for given territories. More efficient communication of spatial planning messages, making spatial planning concepts better understood by those who shape the space by their routine decisions is only the first step towards combating the so-called stalemate of spatial planning. Despite of being very interdisciplinary spatial planning must become more opened to the co-operation and use the results from different fields of science. |
| Keywords: | regional policy, spatial development, Poland |
| JEL: | R10 R58 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iro:wpaper:1002&r=ure |
| By: | B. Sudhakara Reddy; P. Balachandra (Indira Gandhi Institute of Development Research) |
| Abstract: | This paper aims to analyse urban mobility patterns and consequent impacts on energy and environment in India. We investigate the quantity of energy use in 23 metropolitan regions for the period 1981–2005 and present empirical results obtained using national and urban data sets. It explores the underlying relationship among three dependent variables—energy intensity, type of mode and passenger km. Patterns of energy consumption and CO2 emissions in private and public transport are examined. Some policy recommendations are outlined to reduce urban transport energy use and greenhouse gases and provide suggestions to achieve sustainable urban mobility. |
| Keywords: | Energy, Environment, Intensity, Transport, Urban |
| JEL: | Q4 L94 L95 L98 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:2465&r=ure |
| By: | Gene Amromin; Jennifer Huang; Clemens Sialm; Edward Zhong |
| Abstract: | Complex mortgages became a popular borrowing instrument during the bullish housing market of the early 2000s but vanished rapidly during the subsequent downturn. These non-traditional loans (interest only, negative amortization, and teaser mortgages) enable households to postpone loan repayment compared to traditional mortgages and hence relax borrowing constraints. At the same time, they increase household leverage and heighten dependence on mortgage refinancing to escape changes in contract terms. We document that complex mortgages were chosen by prime borrowers with high income levels seeking to purchase expensive houses relative to their incomes. Borrowers with complex mortgages experience substantially higher ex post default rates than borrowers with traditional mortgages with similar characteristics. |
| Keywords: | Mortgages ; Mortgage loans |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2010-17&r=ure |
| By: | Erniel B. Barrios; Rouselle F. Lavado (Philippine Institute for Development Studies) |
| Abstract: | The stochastic frontier model with heterogeneous technical efficiency explained by exogenous variables is augmented with a sparse spatial autoregressive component for a cross-section data, and a spatial-temporal component for a panel data. An estimation procedure that takes advantage of the additivity of the model is proposed, computational advantages over simultaneous maximum likelihood estimation of all parameters is exhibited. The technical efficiency estimates are comparable to existing models and estimation procedures based on maximum likelihood methods. A spatial or spatial-temporal component can improve estimates of technical efficiency in a production frontier that is usually biased downwards. |
| Keywords: | stochastic frontier models, technical efficiency, spatial externalities, spatial-temporal model, backfitting |
| JEL: | C01 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:eab:microe:2434&r=ure |
| By: | Olympia Bover (Banco de España) |
| Abstract: | I model the purchase behavior of main and secondary housing by Spanish households using the panel sample from the first two waves of the Spanish household finance survey (EFF). I estimate discrete hazard models using retrospective and within-period purchase sequences. I also estimate an (S,s) model combining transactions data with longitudinal information on household wealth and housing stock values. I look at the role of adaptive expectations about the rate of return on housing and find they have a positive and signifi cant effect on the demand for houses. This is true for historical and within-period purchase probabilities as well as for the target ratio of housing wealth to total wealth. The volatility of house price growth has a negative effect on purchases for investment but a positive one on purchases for consumption. |
| Keywords: | Household finance, house purchases, secondary homes, housing returns, adaptive expectations, (S,s) rule |
| JEL: | D14 G11 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1036&r=ure |
| By: | Charles Kenny |
| Abstract: | There has been considerable progress in school construction and enrollment worldwide. Paying kids to go to school can help overcome remaining demand-side barriers to enrollment. Nonetheless, the quality of education appears very poor across the developing world, limiting development impact. Thus we should measure and promote learning not schooling. Conditional cash transfers to students on the basis of attendance and scores, school choice, decentralization combined with published test results, and teacher pay based on attendance and performance may help. But learning outcomes are primarily affected by the broader environment in which students live, suggesting a learning agenda that stretches far beyond education ministries. [Working paper no. 236]. |
| Keywords: | teachers, enrollment, conditional transfers, developing world, ministries, performance, students, education, decentralization, learning, schooling, attendance, environment, Education policy, development, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:3386&r=ure |
| By: | Song, In Ho |
| Abstract: | I study the consumption responses of heterogeneous households following changes in both house prices and interest rates. I show the common assumption that household period utility is separable in housing and consumption can be consistent with the observed co-movement between these two series only in the absence of housing transaction costs. When these costs are introduced into dynamic stochastic general equilibrium (DSGE) models characterized by separable preferences, consumption no longer increases after a rise in house prices. As it is well known, transaction costs are an important ingredient in house sales. I address this issue by developing a model that allows for non-separable preferences in housing and consumption alongside housing transaction costs. The results of my model closely match the aggregate data. Furthermore, it predicts that credit-constrained households will be substantially more responsive to changes in both house prices and interest rates than unconstrained households. Following a rise in house prices, consumption among constrained households increases by far more than the consumption of unconstrained households. Following a rise in interest rates, constrained households' consumption falls by more than that of unconstrained households. I trace this differing responsiveness in consumption to the house loan-to-value ratio of credit-constrained households. Higher loan-to-value ratios imply larger differences in their elasticity of response relative to unconstrained households. I also find that these differences widen with the degree of complementarity between housing and consumption. These predictions of my model are confirmed by household data from the Consumer Expenditure Surveys. |
| Keywords: | DSGE; House Prices; Heterogeneous Households; Elasticity of Intra-Temporal Substitution (EIS); Complementarity; Credit |
| JEL: | D50 E44 C10 G12 E30 E52 R21 G10 |
| Date: | 2010–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27481&r=ure |
| By: | Laura Crispin; Subhra B. Saha; Bruce A. Weinberg |
| Abstract: | Older, industrial cities have suffered with the shift from manufacturing to services, but the increased importance of innovation as an economic driver may help industrial cities, which are often rich in the institutions that generate innovation. This paper studies how innovation is related to wages for different types of workers (e.g., more-educated versus less, and younger versus older) and to real estate prices for cities. We also study industrial and occupational employment shares. Our estimates indicate that innovation and aggregate education are associated with greater productivity in cities. They indicate that innovation and aggregate education impact wages less in industrial cities, but that they impact real estate prices more. We also find greater effects of innovation and aggregate education for more-educated and prime-aged workers. We pay particular attention to controlling for causality and adjustments of factor inputs. |
| Keywords: | Cities and towns ; Education - Economic aspects |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1025&r=ure |
| By: | TENIKUE Michel |
| Abstract: | In Cameroon, only 1/3 of children progress to secondary education. This paper estimates a sequential model of school attainment to investigate the role played by family background and individual characteristics in keeping children at school up to the end of secondary school. Using data of the 2001 Cameroon Household survey, we find that while parental wealth has no effect on the probability to enter primary school. It is however a good predictor of completing primary and secondary education. The lack of schools supply reduces school progression, particularly the lack of secondary schools hinders primary school entry. Finally, we find that male children are more likely to stay at school up to the end of secondary education. |
| Keywords: | Schooling; Sequential |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:irs:cepswp:2010-45&r=ure |
| By: | Benjamin Montmartin (Université de Lyon, Lyon, F-69003, France ; Université Jean Monnet ; CNRS, GATE Lyon St Etienne, Saint-Etienne, F-42000, France) |
| Abstract: | Since the Lisbon Agenda (2000), the European Union policies are increasingly oriented towards innovation as attested to by the deep change of the new Regional Policy. This paper proposes an analysis of an innovation subsidy policy in an agglomeration and growth model à la Martin and Ottaviano (1999). In this two-regions model, we assume that the policy is implemented by a central authority that taxes the profit of industrial firms to subsidy employment in innovative activities. We show that the positive effects on growth and equity of such a policy, as highlighted by Martin (1999), hold in the case where the policy is not geographically differentiated. In the case where the government however grants larger subsidies to the poorer region in order to reduce the concentration of the innovative sector, we show that the policy can be inefficient if it is not of sufficient magnitude. |
| Keywords: | economic geography, endogenous growth, public policy, subsidies,Regional Policy |
| JEL: | F43 H50 O30 R12 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1031&r=ure |
| By: | Ivaldi, Marc; Mccullough, Gerard |
| Abstract: | The renegotiation of regulatory contracts is known to prevent regulators from achieving the full commitment efficient outcome in dynamic contexts. However, assessing the cost of such renegotiation remains an open issue from an empirical viewpoint. To address this question, we fit a structural principal-agent model with renegotiation on a set of urban transport service contracts. The model captures two important features of the industry. First, only two types of contracts are used in practice (fixed-price and cost-plus). Second, subsidies increase over time. We compare a scenario with renegotiation and a hypothetical situation with full commitment. We conclude that the welfare gains from improving commitment would be significant but would accrue mostly to operators. |
| JEL: | L11 L13 L41 L92 |
| Date: | 2010–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:23459&r=ure |
| By: | Beck, Jason; Scott, Frank; Yelowitz, Aaron |
| Abstract: | The persistence of the standard six percent real estate sales commission across markets and over time calls into question the competitiveness of the residential real estate brokerage industry. While there is anecdotal evidence that some local real estate markets are fairly concentrated, no systematic study of market structures has been conducted. We have collected primary data on the number and market shares of real estate brokers in a variety of small, medium, and large real estate markets across the U.S. for 2007 and 2009. In addition to these cross sectional data, we have also collected longitudinal data on the size distribution of firms for Louisville, KY for a nine-year period. In our cross-sectional analysis of medium and large markets, we find no evidence that market concentration might create problems for competition. We do find that small markets on average have higher HHI’s than medium and large markets. The longitudinal analysis reveals that many small brokers are in and out of the market, selling a house or two one year and selling zero houses the next year. |
| Keywords: | HHI; real estate brokerage competition; Herfindahl-Hirschman Index |
| JEL: | L85 |
| Date: | 2010–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27531&r=ure |
| By: | Tsegai, Daniel; Le, Quang Bao |
| Abstract: | The present study investigates the determinants of inter-district migration flows over the 1995-2000 period in Ghana. A combination of socio-economic, natural and spatial âdistrict-levelâ attributes are considered as potential variables explaining the direction of migration flows. In addition to the ânetâ migration model, âinâ and âoutâ migration models are also employed within the context of the gravity model. Results in the three models consistently show that people move out of districts with less employment and choose districts with high employment rate as destinations. While shorter distance to roads encourages out-migration, districts with better water access seem to attract migrants. Generally, people move out of predominantly agrarian districts to relatively more urbanized districts. |
| Keywords: | Gross migration, Net migration, Inter-district migration flows, spatial analysis, Ghana, Africa, Community/Rural/Urban Development, Labor and Human Capital, |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:ags:ubzefd:98131&r=ure |
| By: | Julapa Jagtiani; William W. Lang |
| Abstract: | Strategic default behavior suggests that the default process is not only a matter of inability to pay. Economic costs and benefits affect the incidence and timing of defaults. As with prior research, the authors find that people default strategically as their home value falls below the mortgage value (exercise the put option to default on their first mortgage). While some of these homeowners default on both first mortgages and second lien home equity lines, a large portion of the delinquent borrowers have kept their second lien current during the recent financial crisis. These second liens, which are current but stand behind a seriously delinquent first mortgage, are subject to a high risk of default. On the other hand, relatively few borrowers default on their second liens while remaining current on their first. This paper explores the strategic factors that may affect borrower decisions to default on first vs. second lien mortgages. The authors find that borrowers are more likely to remain current on their second lien if it is a home equity line of credit (HELOC) as compared to a closed-end home equity loan. Moreover, the size of the unused line of credit is an important factor. Interestingly, they find evidence that the various mortgage loss mitigation programs also play a role in providing incentives for homeowners to default on their first mortgages. |
| Keywords: | Mortgage loans ; Default (Finance) ; Home equity loans |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:11-3&r=ure |
| By: | Chaminade, Cristina (CIRCLE, Lund University) |
| Abstract: | This paper focuses on the organization and geography of interactions between firms and other organizations in two industries: software and autoparts. In contrast to most recent literature in economic geography that argues that industries differ in their knowledge bases and that consequently different industries show different patterns of local-global interactions, our results show stronger differences between regions in the same industry than between industries in the same region, thus pointing out to other factors explaining the geography of innovation in that particular industry. |
| Keywords: | internationalization; innovation; Pune; Beijing; region |
| JEL: | O30 |
| Date: | 2010–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2010_013&r=ure |
| By: | Emanuela Marrocu; Raffaele Paci |
| Abstract: | There is a large consensus among researchers on the positive role played by human capital on economic performances although the debate on its measurement (education or creativity) is still open. This paper aims to disentangle this issue by proposing a disaggregation of human capital into three non-overlapping categories. Using a spatial error model to account for spatial dependence, we assess the concurrent effect of the human capital indicators on total factor productivity for the EU27 regions. Our results indicate that the highly educated creative group is the most relevant one in explaining production efficiency while the other two categories - non creative graduates and bohemians - exhibit negligible effects. Moreover, a relevant influence is exerted by technological capital and by the level of tolerance providing robust evidence that a highly educated, innovative, open and culturally diverse environment is becoming more and more central for productivity enhancements. |
| Keywords: | human capital; creativity; education; TFP; European regions |
| JEL: | R10 O30 J24 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:201031&r=ure |
| By: | Patrizia Tumbarello; Shengzu Wang |
| Abstract: | This paper analyzes the factors driving house prices in Australia from a cross-country perspective using several approaches. It uses a cointegration technique to estimate the long-run equilibrium house prices in Australia, New Zealand, and Canada and assesses the extent of a possible disequilibrium. It also presents an event analysis to shed some light on the link between house prices, capital inflows and the terms of trade. The econometric analysis suggests an overvaluation of 5-10 percent depending on the model specification. Event analysis indicates that terms of trade shocks were associated with larger increases in house prices in Australia, than in the case of strong capital inflow episodes. |
| Keywords: | Australia , Capital inflows , Cross country analysis , Economic models , Housing prices , Terms of trade , |
| Date: | 2010–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/291&r=ure |
| By: | Chaton, Corinne (Laboratoire de Finance des Marchés d'Energies); Gasmi, Farid (Toulouse School of Economics (ARQADE & IDEI)); Guillerminet, Marie-Laure (Hamburg University (FNU)); Oviedo, Juan Daniel (Universidad del Rosario) |
| Abstract: | Motivated by recent policy events experienced by the European natural gas industry, this paper develops a simple model for analyzing the interaction between gas release and capacity investment programs as tools to improve the performance of imperfectly competitive markets. We consider a regional market in which a measure that has an incumbent release part of its gas to a marketer complements a program of investment in transport capacity dedicated to imports by the marketer, at a regulated transport charge, of competitively-priced gas. First, we examine the case where transport capacity is regulated while gas release is not, i.e., the volume of gas released is determined by the incumbent. We then analyze the effect of the "artifcial" duopoly created by the regulator when the latter regulates both gas release and transport capacity. Finally, using information on the French industry, we calibrate the basic demand and cost elements of the model and perform some simulations of these two scenarios. Besides allowing us to analyze the economic properties of these scenarios, a policy implication that comes out of the empirical analysis is that, when combined with network expansion investments, gas-release measures applied under regulatory control are indeed effective short-term policies for promoting gas-to-gas competition. |
| Keywords: | Natural gas, Gas release, Regulation, Competition |
| JEL: | L51 L95 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:23579&r=ure |
| By: | Andersson, Henrik; Jonsson, Lina; Ögren, Mikael |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:ler:wpaper:10.17.323&r=ure |
| By: | de Janvry, Alain (University of California, Berkeley); Finan, Frederico S (University of California, Berkeley); Sadoulet, Elisabeth (University of California, Berkeley) |
| Abstract: | This paper analyzes how electoral incentives affected the performance of a major decentralized conditional cash transfer program intended on reducing school dropout rates among children of poor households in Brazil. We show that while this federal program successfully reduced school dropout by 8 percentage points, the program's impact was 36 percent larger in municipalities governed by mayors who faced reelection possibilities compared to those with lame-duck mayors. First term mayors with good program performance were much more likely to get re-elected. These mayors adopted program implementation practices that were not only more transparent but also associated with better program outcomes. |
| Keywords: | decentralization, electoral incentives, conditional cash transfer, impact evaluation |
| JEL: | D78 H43 I28 O15 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5382&r=ure |
| By: | Gabor Kertesi (Institute of Economics of the Hungarian Academy of Sciences); Gabor Kezdi (Central European University, Institute of Economics of the Hungarian Academy of Sciences) |
| Abstract: | This paper documents and decomposes the test score gap between Roma and non-Roma 8th graders in Hungary in 2006. Our data connect national standardized test scores to an individual panel survey with detailed data on ethnicity and family background. The test score gap is approximately one standard deviation for both reading and mathematics, which is similar to the gap between African-American and White students of the same age group in the U.S. in the 1980s. After accounting for on health, parenting, school fixed effects and family background, the gap disappears in reading and drops to 0.15 standard deviation in mathematics. Health, parenting and schools explain most of the gap, but ethnic differences in those are almost entirely accounted for by differences in parental education and income. |
| Keywords: | test score gap, Roma minority, Hungary |
| JEL: | J15 I20 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:has:bworkp:1010&r=ure |
| By: | Kenneth P. Brevoort; Cheryl R. Cooper |
| Abstract: | While a substantial literature has examined the causes of mortgage foreclosure, there has been relatively little work on the consequences of foreclosure for the borrowers themselves. Using a large sample of anonymous credit bureau records, observed quarterly from 1999Q1 through 2010Q1, we examine the credit experiences of almost 350,000 borrowers before and after their mortgage foreclosure. Our analysis documents the substantial declines in credit scores that accompany foreclosure and examines the length of time it takes individuals to return their credit scores to pre-delinquency levels. The results suggest that, particularly for prime borrowers, credit score recovery comes slowly, if at all. This appears to be driven by persistently higher levels of delinquency on consumer credit (such as auto and credit card loans) in the years that follow foreclosure. Our results also indicate that the experiences of individuals whose mortgages entered foreclosure from 2007 to 2009 have followed a similar path to borrowers foreclosed earlier in the decade, though post-foreclosure delinquency rates for the recently foreclosed have been higher and, consequently, credit score recovery appears to be taking longer. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2010-59&r=ure |
| By: | Nathaniel John Porter; Ashvin Ahuja; Lillian Cheung; Gaofeng Han; Wenlang Zhang |
| Abstract: | Sharp increase in house prices combined with the extraordinary Chinese lending growth during 2009 has led to concerns of an emerging real estate bubble. We find that, for China as a whole, the current levels of house prices do not seem significantly higher than would be justified by underlying fundamentals. However, there are signs of overvaluation in some cities’ mass-market and luxury segments. Unlike advanced economies before 2007-8, prices have tended to correct frequently in China.Given persistently low real interest rates, lack of alternative investment and mortgage-to-GDP trend, rapid property price growth in China has, and will continue to have,a structural driver. |
| Date: | 2010–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/274&r=ure |
| By: | Michael Dotsey; Wenli Li; Fang Yang |
| Abstract: | The authors incorporate home production in a dynamic general equilibrium model of consumption and saving with illiquid housing and a collateralized borrowing constraint. They show that the model is capable of explaining life-cycle patterns of households' time use and consumption of different categories. Specifically, households' market hours and home hours are fairly stable early in the life cycle. Market hours start to decline sharply at age 50, while home hours begin to increase at age 55. Households' consumption of the market good, home input, and housing services all exhibit hump shapes over the life cycle, with the market good having the most pronounced hump, followed by the home input, and then housing services. A plausibly parameterized version of the authors' model predicts that the interaction of the labor efficiency profile and the availability of home production technology explain households' time use over the life cycle. The resulting income profiles, the endogenous borrowing constraint and the presence of home production account for the initial hump in all three consumption goods. The consumption profiles in the second half of the life cycle are mostly driven by the complementarity of home hours, home input, and housing in home production. |
| Keywords: | Consumption (Economics) ; Production (Economic theory) |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:10-37&r=ure |
| By: | Doan, Tinh; Gibson, John; Holmes, Mark |
| Abstract: | This paper uses a novel dataset collected by the first author from peri-urban areas of Ho Chi Minh City, Vietnam in 2008 to examine how the poor use their loans, and factors affecting their credit participation and credit constraints. The paper finds the presence of many commercial banks in the areas does not help the poor, but the poor rely heavily on informal credit. Loans in the peri-urban areas are mainly used for non-productive purposes, which stresses the importance of consumption smoothing motives. Further, households in more rural wards have a higher probability of borrowing than more urban households, thanks to better community relationships and higher interpersonal trust. Competition by borrowing neighbours adversely affects the opportunity for borrowing in urban wards where the poor households’ borrowings rely much more on subsidized credit funds. A closer look at specified microcredit sources reveals that household behaviours differ in each market segment. Furthermore, the poor are highly credit-constrained. Wealthier households, in terms of asset holdings and phone possession, among the poor group appear less credit-constrained. However, except in the most rural part of the study area, the likelihood of credit constraints increases with distance to the nearest banks, which suggests that supply-side intervention could help in overcoming credit constraints. Overall, the poor in urban wards are more credit-constrained because of exclusion by commercial banks and weak interpersonal trust. |
| Keywords: | Credit participation; credit constraints; the poor; peri-urban; Vietnam |
| JEL: | R22 C24 H81 C25 |
| Date: | 2010–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27509&r=ure |
| By: | Adriana Di Liberto; Stefano Usai |
| Abstract: | This paper proposes a fixed-effect panel methodology that enables us to simultaneously take into account both TFP and traditional neoclassical convergence. We analyse a sample of 199 regions in EU15 (plus Norway and Switzerland) between 1985 and 2006 and find the absence of an overall process of TFP convergence as we observe that TFP dispersion is virtually constant across the two sub-periods. This result is proved robust to the use of different estimation procedures such as simple LSDV , spatially corrected LSDV , Kiviet-corrected LSDV, and GMM à la Arellano and Bond. However, we also show that this absence of a strong process of global TFP convergence hides interesting dynamic patterns across regions. These patterns are revealed by the use of recent exploratory spatial data techniques that enable us to obtain a complete picture of the complex EU cross-regions dynamics. We find that, between 1985 and 2006, there has been numerous regional miracles and disasters in terms of TFP performance and that polarization patterns have significantly changed along time. Overall, results seem to suggest that a few TFP leaders are emerging and are distancing themselves from the rest, while the cluster of low TFP regions is increasing. |
| Keywords: | TFP; technology catching up; panel data; exploratory spatial data analysis |
| JEL: | C23 O33 O47 R11 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:201030&r=ure |
| By: | Ian Schmutte |
| Abstract: | Referral networks may affect the efficiency and equity of labor market outcomes, but few studies have been able to identify earnings effects empirically. To make progress, I set up a model of on-the-job search in which referral networks channel information about high-paying jobs. I evaluate the model using employer-employee matched data for the U.S. linked to the Census block of residence for each worker. The referral effect is identified by variations in the quality of local referral networks within narrowly defined neighborhoods. I find, consistent with the model, a positive and significant role for local referral networks on the full distribution of earnings outcomes from job search. |
| Keywords: | Social Interactions, Informal Hiring Networks, Wage Variation, Neighborhood Effects |
| JEL: | J31 J64 R23 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:10-40&r=ure |
| By: | Jay Surti |
| Abstract: | This paper considers the case for mortgage covered bonds as an alternative to the originate-to-distribute mortgage funding model. It argues that the economic incentives provided to market participants under the covered bonds model are less susceptible to moral hazard even while retaining the key benefits of securitization such as capital market funding and flexibility in risk allocation. Notwithstanding these advantages, however, limited market size and the greater pro-cyclicality of mortgage loan quality in the United States - potentially reflecting borrower incentives under the personal bankruptcy framework - impose limits on the benefits ensuing from this model. The analysis underscores the need for a comprehensive legal-regulatory framework to underpin market development and discusses a number of ways in which the current draft legislation may be further strengthened. A potential strategy to hasten market development within the current institutional framework is identified. |
| Keywords: | Bankruptcy , Bonds , Capital , Capital markets , Credit risk , Economic models , Financial institutions , Housing , Loans , Risk management , United States , |
| Date: | 2010–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/277&r=ure |
| By: | Matías Tapia |
| Abstract: | This paper develops a one-to-one matching model to analyze how different education funding regimes affect incentives and equilibrium allocations in competitive markets served by heterogeneous private providers. The main result is that alternative funding schemes change the relative incentives faced by schools with different productivities, dramatically altering equilibrium allocations and outcomes. The paper also explicitly characterizes equilibrium in markets served by for-profit and non-profit schools, an analysis that has not been made in previous literature. The basic version of the model is calibrated using data from Chile´s education market and used to simulate the impact of alternative policy scenarios. |
| Keywords: | Education funding, school competition, heterogeneous firms, for-profit and non-profit firms. |
| JEL: | I21 I22 L33 D40 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:387&r=ure |
| By: | Robert B. Avery; Kenneth P. Brevoort; Glenn B. Canner |
| Abstract: | The widespread use of credit scoring in the underwriting and pricing of mortgage and consumer credit has raised concerns that the use of these scores may unfairly disadvantage minority populations. A specific concern has been that the independent variables that comprise these models may have a disparate impact on these demographic groups. By "disparate impact" we mean that a variable's predictive power might arise not from its ability to predict future performance within any demographic group, but rather from acting as a surrogate for group membership. Using a unique source of data that combines a nationally representative sample of credit bureau records with demographic information from the Social Security Administration and a demographic information company, we examine the extent to which credit history scores may have such a disparate impact. Our examination yields no evidence of disparate impact by race (or ethnicity) or gender. However, we do find evidence of limited disparate impact by age, in which the use of variables related to an individual's credit history appear to lower the credit scores of older individuals and increase them for the young. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2010-58&r=ure |
| By: | Carlos Lever Guzmán |
| Abstract: | This paper proposes a model of voting competitions (political campaigns and strategic lobbying) where voters are influenced by the opinion of their neighbors on a social network. In the unique pure strategy nash equilibrium, resources are targeted toward individuals with an influential position in the network. This finding contrasts with previous theories of strategic spending which predict that parties (or lobbies) should spend more on individuals who have a higher probability of being pivotal for the vote. The paper then tests the model using data on campaign contributions by interests groups in the US. House of Representatives. The estimations show that both network influence and pivotality are significant predictors of campaign contributions. |
| Keywords: | Network games, strategic spending, Colonel Blotto games, counteractive lobbying, Bonacich centrality |
| JEL: | D85 D72 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2010-16&r=ure |
| By: | Machin Stephen; Marie Olivier; Vujić Sunčica (METEOR) |
| Abstract: | In this paper, we study the crime reducing potential of education, presenting causal statistical estimates based upon a law that changed the compulsory school leaving age in England and Wales. We frame the analysis in a regression-discontinuity setting and uncover significant decreases in property crime from reductions in the proportion of people with no educational qualifications and increases in the age of leaving school that resulted from the change in the law. The findings show that improving education can yield significant social benefits and can be a key policy tool in the drive to reduce crime. |
| Keywords: | public economics ; |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2010061&r=ure |
| By: | Dufrénot, G.; Malik, S. |
| Abstract: | In this paper, we attempt to analyse the relationship between house price developments and the business cycle. Employing a time-varying transition probability Markov switching framework, we provide empirical evidence that house price growth may prove a useful leading indicator for turning point detection. In focusing on three countries, the US, UK and Spain, we furthermore provide evidence that although potentially informative from an overall perspective in business cycle modelling, the signi.cance of signals contained in house prices may not be symmetric across the identi.ed high growth and low growth states. In addition, we suggest a possible range of values for house price de.ation which may trigger a recession the following period. |
| Keywords: | Business cycles, leading indicators, housing, Markov switching. |
| JEL: | C11 C32 G15 R31 E32 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:309&r=ure |
| By: | Richard J. Rosen |
| Abstract: | The growth of securitization made it easier for banks to sell home mortgage loans that they originated. I explore how mortgage sales affected banks in the years leading up to the financial crisis that began in 2007 and how their pre-crisis mortgage sales affected banks during the crisis. Loan sales are important because most banks sell mortgages as part of the securitization process, but few actually do the securitization. I find that stock returns increase when banks increase sales of mortgages used for refinancing rather than home purchase, suggesting that some banks scale up lending during refi booms. It is this flexibility that is both a plus and a potential minus of this model, since banks profited by scaling up during refi booms, but borrowers during refi booms were riskier than at other times, possibly adding risk to the financial system. I also find that losses during the financial crisis were related to pre-crisis mortgage sales, with the losses being roughly of the same magnitudes as the gains due to mortgage sales from 2001-2006. |
| Keywords: | Financial crises ; Financial crises - United States |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2010-20&r=ure |
| By: | Böckerman, Petri; Haapanen, Mika |
| Abstract: | A polytechnic, higher education reform took place in Finland in the 1990s. It gradually transformed former vocational colleges into polytechnics and expanded higher education to all Finnish regions. We implement instrumental variables estimators that exploit the exogenous variation in the regional availability of polytechnic education together with matriculation exam scores. Our IV results show that polytechnic graduates have a higher migration probability than those of vocational college graduates. However, a master’s degree did not increase migration propensity in comparison with a polytechnic degree. We also find that an increase in the availability of polytechnic education did not reduce migration. |
| Keywords: | Migration; higher education; polytechnic reform; IV estimation |
| JEL: | I20 J10 J61 R23 |
| Date: | 2010–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27629&r=ure |
| By: | James Giesecke; Mark Horridge; Katarzyna Zawalinska |
| Abstract: | On accession to the EU, Poland, one of the most agricultural countries in the region, became eligible for the Common Agricultural Policy (CAP), which it perceived as a chance to develop its rural economy. However, in constructing its 2007-2013 Rural Development Programme, Poland directed the largest funding share to Less Favoured Areas (LFA) -- a controversial measure accused of poor targeting and ineffectiveness. In this paper, we analyse the spatial economic consequences of LFA support for all 16 NUTS2 regions in Poland using a regional computable general equilibrium model called POLTERM. We show that LFA support did help to increase farmers' incomes, but harmed export-oriented sectors and hindered structural change in the Polish economy. |
| Keywords: | Common Agricultural Policy Reform, Rural development, Less Favoured Areas, Spatial Computable General Equilibrium Model, Poland |
| JEL: | C68 O18 O11 O21 Q18 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:cop:wpaper:g-211&r=ure |
| By: | Nathaniel John Porter; Ashvin Ahuja |
| Abstract: | Sharp increase in house prices in Hong Kong SAR in 2009-2010 has led to concerns of an emerging real estate bubble. According to our measure of price deviation from fundamentals, which should be taken as an early warning indicator of market exuberance, the current level of house prices in Hong Kong SAR does not seem to be significantly higher than would be justified by underlying fundamentals. Moreover, unlike advanced economies before 2007-8, deviation from fundamentals has not been persistent in Hong Kong.Going forward, low interest rate and improving growth prospects, as well as a tight supply, particularly in the mass market, means that house price growth will continue to be strong.This is the period in which vulnerability may be accumulating, and tight prudential standards and fiscal measures will be required to tame price inflation. |
| Date: | 2010–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:10/273&r=ure |
| By: | Christian Flachsland; Steffen Brunner; Ottmar Edenhofer; Felix Creutzig |
| Abstract: | Current policies in the road transport sector fail to deliver consistent and efficient incentives for greenhouse gas abatement (see companion article by Creutzig et al., 2010a). Market-based instruments such as cap-and-trade systems close this policy gap and are complementary to traditional policies which are required where specific market failures arise. Even in presence of strong existing non-market policies, cap-and-trade delivers additional abatement and efficiency by incentivizing demand side abatement options. This paper analyzes generic design options and economic impacts of including the European road transport sector to the EU ETS. The point of regulation in a road transport cap-and-trade system should be upstream in the fuel chain to ensure effectiveness (cover all life-cycle emissions and avoid double-counting), efficiency (incentivize all abatement options) and low transaction costs. Based on year 2020 marginal abatement cost curves from different models and current EU climate policy objectives we show that in contrast to conventional wisdom road transport inclusion would not change the EU ETS allowance price. This puts concerns over industrial carbon leakage as a consequence of adding road transport to the EU ETS into perspective. |
| Keywords: | Climate Policy, Road Transport, Cap-and-trade |
| JEL: | Z0 Z1 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecc:wpaper:2&r=ure |
| By: | Antipov, Evgeny; Pokryshevskaya, Elena |
| Abstract: | To the best knowledge of authors, the use of Random forest as a potential technique for residential estate mass appraisal has been attempted for the first time. In the empirical study using data on residential apartments the method performed better than such techniques as CHAID, CART, KNN, multiple regression analysis, Artificial Neural Networks (MLP and RBF) and Boosted Trees. An approach for automatic detection of segments where a model significantly underperforms and for detecting segments with systematically under- or overestimated prediction is introduced. This segmentational approach is applicable to various expert systems including, but not limited to, those used for the mass appraisal. |
| Keywords: | Random forest; mass appraisal; CART; model diagnostics; real estate; automatic valuation model |
| JEL: | C14 C45 L85 |
| Date: | 2010–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27645&r=ure |
| By: | Daniel R. Sanches |
| Abstract: | The author studies the terms of credit in a competitive market in which sellers (lenders) are willing to repeatedly finance the purchases of buyers (borrowers) by engaging in a credit relationship. The key frictions are: (i) the lender is unable to observe the borrower's ability to repay a loan; (ii) the borrower cannot commit to any long-term contract; (iii) it is costly for the lender to contact a borrower and to walk away from a contract; and (iv) transactions within each credit relationship are not publicly observable. The lender's optimal contract has two key properties: delayed settlement and debt forgiveness. Asymmetric information gives rise to the property of delayed settlement, which is a contingency in which the lender allows the borrower to defer the repayment of his loan in exchange for more favorable terms of credit within the relationship. This property, together with the borrowers' lack of commitment, gives rise to debt forgiveness. When the borrower's participation constraint binds, the lender needs to "forgive" part of the borrower's debt to keep him in the relationship. Finally, the author studies the impact of the changes in the initial cost of lending on the terms of credit. |
| Keywords: | Credit ; Contracts |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:11-2&r=ure |
| By: | Noblet, Sandrine; Belgodere, Antoine |
| Abstract: | Since 1960, transport costs have been falling, but international exchange did not become less sensitive to distance. We propose the following explanation for this puzzle: in a Dixit-Stiglitz framework, a decrease in transport cost favors trade, which may increase the international specialization (i.e. the number of varieties of intermediate goods used in production). An increased international specialization increases the need for coordination, and makes relatively more important for downstream firms to be close to their suppliers. As a result, trade increases with all partners, but more quickly for neighbors than for distant countries. |
| Keywords: | Transport cost ; coordination cost ; international trade ; distance puzzle |
| JEL: | D23 F12 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27502&r=ure |
| By: | Jiménez-Rubio, D; |
| Abstract: | In this study I use improved data of fiscal decentralization to re-examine the hypothesis that shifts towards more fiscal decentralization would be accompanied by improvements in population health on a panel of 19 OECD countries. The advantage of the new measure of decentralization is that it reflects better than previous measures the existence of autonomy in the decision making authority of lower tiers of government, a crucial issue in the decentralization process. The results based on panel data estimation techniques robust to heteroskedasticity and autocorrelation show that fiscal decentralization has a substantial and positive effect on health outcomes over the period studied. However, I find that conventional measures of decentralization tend to over-estimate the magnitude of the effect. |
| Keywords: | Fiscal decentralization; health outcomes; OECD countries; panel data |
| JEL: | I12 H77 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:yor:hectdg:10/30&r=ure |