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on Urban and Real Estate Economics |
| By: | Andrzej Cieślik (Faculty of Economic Sciences, University of Warsaw); Sadananda Prusty (Institute of Management Technology) |
| Abstract: | In this paper, we examine the spatial relationship between wages and consumer purchasing power across Indian states to see whether regional demand linkages contribute to spatial agglomeration. We estimate a variety of the market-potential functions derived from the Harris model as well as more recent models of the New Economic Geography. Besides market-potential, we consider housing stock, density of roadways, density of telecom, and dummies to capture cyclical fluctuations as parameters of consumer purchasing power and demand to explore the importance of scale economies and transport costs. The estimation results suggest that all the above factors influence demand linkages between states, which are strong and growing over the period from 1999-2000 to 2007-2008. |
| Keywords: | Spatial agglomeration, Scale economies, Wage differentials, Regional studies |
| JEL: | R12 F12 J31 P48 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:war:wpaper:2011-04&r=ure |
| By: | Fitriani, Rahma; Harris, Michael |
| Abstract: | The Jakarta Metropolitan area has experienced urban sprawl. Existing planning processes do not appear to manage sprawl effectively. The aim of this study is to empirically analyse the contribution of spatial externalities on sprawl, and its effect on proximate agricultural land and conservation areas. A residential location choice model incorporating externalities is constructed, and a Tobit panel data analysis is conducted using grid-based land use data. The analysis finds significant empirical evidence regarding the contribution of neighbourhood development externalities to sprawl. Implications for policy are discussed. |
| Keywords: | sprawl, Jakarta, urban development, spatial externalities, International Development, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aare11:100700&r=ure |
| By: | Sa, Filipa (fgs22@cam.ac.uk); Towbin, Pascal (Banque de France); wieladek, tomasz (Bank of England) |
| Abstract: | A number of OECD countries experienced an environment of low interest rates and a rapid increase in housing market activity during the last decade. Previous work suggests three potential explanations for these events: expansionary monetary policy, capital inflows due to a global savings glut and excessive financial innovation combined with inappropriately lax financial regulation. In this study we examine the effects of these three factors on the housing market. We estimate a panel VAR for a sample of OECD countries and identify monetary policy and capital inflows shocks using sign restrictions. To explore how these effects change with the structure of the mortgage market and the degree of securitisation, we augment the VAR to let the coefficients vary with mortgage market characteristics. Our results suggest that both types of shocks have a significant and positive effect on real house prices, real credit to the private sector and real residential investment. The responses of housing variables to both types of shocks are stronger in countries with more developed mortgage markets, roughly doubling the responses to a monetary policy shock. The amplification effect of mortgage-backed securitisation is particularly strong for capital inflows shocks, increasing the response of real house prices, residential investment and real credit by a factor of two, three and five, respectively. |
| Keywords: | House prices; capital flows; financial innovation; monetary policy |
| JEL: | C33 E51 F32 G21 |
| Date: | 2011–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0411&r=ure |
| By: | Francesca Modena; Concetta Rondinelli |
| Abstract: | This paper provides an explanation for the postponement of the youth emancipa- tion in the Italian context mainly characterized by a sharp increase in both house and rent prices together with a stagnant disposable income over the last decade. We first assemble a unique database related to the housing and rental market value which is then matched with household characteristics. We find a significant effect of the real estate market: the probability of moving out decreases by about 0.45% and 1.18% for males and females respectively for a one-standard-deviation increase in house prices. Together with property prices, local labour markets play a prominent role in determin- ing unemployed youth decisions to postpone the transition. The youngest cohort was mainly affected by the real estate market evolution occurred in the last decade |
| Keywords: | coresidence, moving out, real estate market, discrete time duration model |
| JEL: | C41 D1 J12 R2 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpde:1101&r=ure |
| By: | Carlos Pestana Barros; Zhongfei Chen; Luis A. Gil-Alana |
| Abstract: | In the housing market, new properties sometimes experience delays before they are sold. Such delays reflect the preferences of buyers in respect of the homes’ characteristics. Therefore, it is important for managerial purposes to identify the causes of housing sales delays. After analyzing the delays in sales of housing in Beijing City, China, the principal finding of this study is that delays are largely explained by the dwellings’ characteristics and location. Policy implications of the research findings, particularly those related to means of reducing the delays, are discussed. |
| Keywords: | Duration models, survival models, Beijing, China. |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp062011&r=ure |
| By: | de Haan, Monique (University of Amsterdam); Leuven, Edwin (CREST (ENSAE)); Oosterbeek, Hessel (University of Amsterdam) |
| Abstract: | A large school consolidation reform in the Netherlands changed minimum school size rules underlying public funding. The supply of schools decreased by 15 percent, but this varied considerably across municipalities. We find that reducing the number of schools by 10 percent increases pupils' achievement by 3 percent of a standard deviation. A reduction in the supply of schools implies, for a given number of pupils, an increase in average school size. We present evidence that in our context scale economies dominated the effects of choice and competition. This points to an often ignored trade-off between scale and competition. |
| Keywords: | school choice, competition, school consolidation, achievement, economies of scale |
| JEL: | I21 I22 H75 D40 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5528&r=ure |
| By: | Leung, Charles Ka Yui; Zhang, Jun |
| Abstract: | Three striking empirical regularities have been repeatedly reported: the positive correlation between housing prices and trading volume, between housing price and the time-on-the-market (TOM), and the existence of price dispersion. This short paper provides perhaps the first unifying framework which mimics these phenomena in a simple competitive search framework. In the equilibrium, sellers with heterogeneous waiting cost and buyers are endogenously segregated into different submarkets, each with distinct market tightness and prices. With endogenous search effort, our model also reproduces the well-documented price-volume correlation. Directions for future research are also discussed. |
| Keywords: | housing market; competitive search; price dispersion; trading volume; time on the market |
| JEL: | E30 D83 R21 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29127&r=ure |
| By: | Andrew Jenkins; Dylan Kneale; Ruth Lupton; Rebecca Tunstall |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:sticar:casereport64&r=ure |
| By: | Sumit Agarwal; Gene Amromin; Itzhak Ben-David; Souphala Chomsisengphet; Douglas D. Evanoff |
| Abstract: | The meltdown in residential real-estate prices that commenced in 2006 resulted in unprecedented mortgage delinquency rates. Until mid-2009, lenders and servicers pursued their own individual loss mitigation practices without being significantly influenced by government intervention. Using a unique dataset that precisely identifies loss mitigation actions, we study these methods—liquidation, repayment plans, loan modification, and refinancing—and analyze their effectiveness. We show that the majority of delinquent mortgages do not enter any loss mitigation program or become a part of foreclosure proceedings within 6 months of becoming distressed. We also find that it takes longer to complete foreclosures over time, potentially due to congestion. We further document large heterogeneity in practices across servicers, which is not accounted for by differences in borrower population. ; Consistent with the idea that securitization induces agency conflicts, we confirm that the likelihood of modification of securitized loans is up to 70% lower relative to portfolio loans. Finally, we find evidence that affordability (as opposed to strategic default due to negative equity) is the prime reason for redefault following modifications. While modification terms are more favorable for weaker borrowers, greater reductions in mortgage payments and/or interest rates are associated with lower redefault rates. Our regression estimates suggest that a 1 percentage point decline in mortgage interest rate is associated with a nearly 4 percentage point decline in default probability. This finding is consistent with the Home Affordable Modification Program (HAMP) focus on improving mortgage affordability. |
| Keywords: | Asset-backed financing ; Financial crises ; Securities ; Mortgages |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2011-03&r=ure |
| By: | Berliant, Marcus |
| Abstract: | We examine commuting in a game-theoretic setting with a continuum of commuters. Commuters' home and work locations can be heterogeneous. The exogenous transport network is arbitrary. Traffic speed is determined by link capacity and by local congestion at a time and place along a link, where local congestion at a time and place is endogenous. After formulating a static model, where consumers choose only routes to work, and a dynamic model, where they also choose departure times, we describe and examine existence of Nash equilibrium in both models and show that they differ, so the static model is not a steady state representation of the dynamic model. Then it is shown via the folk theorem that for sufficiently large discount factors the repeated dynamic model has as equilibrium any strategy that is achievable in the one shot game with choice of departure times, including the efficient ones. A similar result holds for the static model. Our results pose a challenge to congestion pricing. Finally, we examine evidence from St. Louis to determine what equilibrium strategies are actually played in the repeated commuting game. |
| Keywords: | commuting; folk theorem |
| JEL: | R41 |
| Date: | 2011–02–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:28979&r=ure |
| By: | Rolf Schenker (City of Zurich, Statistik, Switzerland); Martin Straub (KOF Swiss Economic Institute, ETH Zurich, Switzerland) |
| Abstract: | It is generally accepted that regional labor markets are characterized by strong interdependencies. However, only few studies include spatial elements to their estimations. Using the model framework proposed by Cliff and Ord (1973, 1981) and the estimation technique proposed by Kelejian and Prucha (1998), we estimate a spatial time series model for the Swiss cantonal unemployment rates on a quarterly level. Our model contains a spatial lag in the level and in the error term, as well as further exogenous explanatory variables. While both spatial lags turn out to be significant in our estimations, the dependency in the error term seems to be even stronger than the one in the level. |
| Keywords: | Regional Unemployment, Spatial Econometrics, Switzerland |
| JEL: | C31 C32 E24 R11 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:kof:wpskof:11-274&r=ure |
| By: | Sumit Agarwal; Gene Amromin; Itzhak Ben-David; Souphala Chomsisengphet; Douglas D. Evanoff |
| Abstract: | We study the effects of securitization on renegotiation of distressed residential mortgages over the current financial crisis. Unlike prior studies, we employ unique data that directly observe lender renegotiation actions and cover more than 60% of the U.S. mortgage market. Exploiting within-servicer variation in these data, we find that bank-held loans are 26% to 36% more likely to be renegotiated than comparable securitized mortgages (4.2 to 5.7% in absolute terms). Also, modifications of bank-held loans are more efficient: conditional on a modification, bank-held loans have lower post-modification default rates by 9% (3.5% in absolute terms). Our findings support the view that frictions introduced by securitization create a significant challenge to effective renegotiation of residential loans. |
| Keywords: | Mortgage loans ; Asset-backed financing ; Securities ; Mortgages |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2011-02&r=ure |
| By: | Nathan B. Anderson; Jane K. Dokko |
| Abstract: | The lack of property tax escrow accounts among subprime mortgages causes borrowers to make large lump-sum tax payments that reduce liquidity. Different property tax collection dates across states and counties create exogenous variation in the time between loan origination and the first property tax due date, affording the opportunity to estimate the causal effect of loan-level exposure to liquidity reductions on mortgage default. We find that a nine-month delay in owing property taxes reduces the probability of first-year default by about 4 percent, or about one-third of the effect of a reduction in equity from 10 percent to negative 20 percent. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2011-09&r=ure |
| By: | Karl E. Case (Wellesley College); John M. Quigley (University of California, Los Angeles); Robert J. Shiller (Cowles Foundation, Yale University) |
| Abstract: | We re-examine the link between changes in housing wealth, financial wealth, and consumer spending. We extend a panel of U.S. states observed quarterly during the seventeen-year period, 1982 through 1999, to the thirty-one year period, 1978 through 2009. Using techniques reported previously, we impute the aggregate value of owner-occupied housing, the value of financial assets, and measures of aggregate consumption for each of the geographic units over time. We estimate regression models in levels, first differences and in error-correction form, relating per capita consumption to per capita income and wealth. We find a statistically significant and rather large effect of housing wealth upon household consumption. This effect is consistently larger than the effect of stock market wealth upon consumption. This reinforces the conclusions reported in our previous analysis. In contrast to our previous analysis, however, we do find -- based on data which include the recent volatility in asset markets -- that the effects of declines in housing wealth in reducing consumption are at least as large as the effects of increases in housing wealth in increasing the course of household consumption. |
| Keywords: | Consumption, Nonfinancial wealth, Housing market, Real estate |
| JEL: | E2 G1 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1784&r=ure |
| By: | Higgins, Eric; Calomiris, Charles |
| Abstract: | The United States faces a foreclosure crisis. The Mortgage Bankers Association reported that slightly more than four percent of the loans in the United States are in the foreclosure process as of the third quarter of 2010. RealtyTrac reported in January 2011 that nearly three million homes received foreclosure filings in 2010. In addition to the current foreclosures, there exist a substantial number of potential foreclosures that will occur in the next several years. Goodman (2010) estimates that there may be another seven million homes that will face foreclosure. CoreLogic estimated that nearly 23 percent of all mortgages are underwater as of the third quarter of 2010. This number spikes in the areas hardest hit by the mortgage crisis. The sheer volume of actual and pending foreclosures coupled with a slowdown in the foreclosure process due to legal and political wrangling has increased the time that a home is in foreclosure. The purpose of this policy briefing is to analyze the economics of delaying the resolution of the foreclosure process. We review the literature relating to the macroeconomic effects of delaying foreclosures. We begin by identifying four types of potential costs of delay. First, foreclosure delays inject uncertainty in the consumer balance sheet, which leads to unnecessary and economically damaging delays in consumption. This reverse-stimulus alone could dwarf any further plausible price effects of delaying foreclosures at this stage of the business cycle. Second, delaying foreclosures could impede new housing construction. Housing construction is predicated upon a positive and consistent upward price gradient in the housing market, which will not be established until the market is cleared of delinquent homes. Third, and similar to a consumer’s balance sheet, delaying foreclosures creates uncertainty in banks’ balance sheets, potentially blocking channels of credit and undermining lending. Fourth, delinquent homes that are heading to foreclosure have been shown to aggravate neighborhood blight. |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:reg:wpaper:641&r=ure |
| By: | Jorge Martinez-Vazquez (International Studies Program. Andrew Young School of Policy Studies, Georgia State University); Andrey Timofeev (International Studies Program. Andrew Young School of Policy Studies, Georgia State University) |
| Abstract: | Until 2009, the Russian economy had been enjoying above 5% annual growth since it hit bottom along with the oil prices in 1998. However, the dynamics of the economic recovery have been very uneven across Russian regions. Thus, the determinants of regional economic growth are likely to have a strong sub-national level component. In this paper we examine the potential role played by the fiscal relations between regional governments and their constituent localities. Our empirical results strongly suggest that intra-regional fiscal inequality across local governments and inter-jurisdictional equalization policies pursued by the regional governments have a substantial impact on regional growth. Specifically, we find the following policy tradeoff: one standard deviation higher level of regional equalization translates into half a standard deviation lower rate of regional growth. One question for future research is whether decentralization designs into a hierarchical system result in more local government equalization in comparison to other inter-governmental design, such as a bifurcated system, where the central government is in charge of local equalization. |
| Date: | 2010–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1011&r=ure |
| By: | Peter McHenry (Department of Economics, College of William and Mary) |
| Abstract: | This paper provides new empirical evidence about how workers’ locations affect measurements of earnings inequality (and their changes over time) in the United States. Part of the inequality observed in any given U.S. sample is due to the fact that workers with different skills (and therefore earnings) are not distributed symmetrically across locations that are more and less productive (and therefore pay higher and lower wages). In particular, I estimate that a significant and rising proportion of the college wage premium is due to college graduates living in and moving toward higher-paying locations than high school graduates. Furthermore, I assess the impact of location on real wage inequality (adjusting for local costs of living). The higher wages that college graduates enjoy as a result of their location choices are mostly counterbalanced by higher costs of living. From this, I infer that college graduates choose to live in more economically productive labor markets than do workers with less education, but college graduates are not necessarily more capable of exploiting locational wage differences for their own advantage. |
| Keywords: | Earnings inequality, Migration, Regional labor markets |
| JEL: | J31 R23 J61 |
| Date: | 2011–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:cwm:wpaper:112&r=ure |
| By: | Christian Daude |
| Abstract: | Income is very unequally distributed in Latin America - but so too are opportunities for upward mobility. Early childhood development is a powerful mechanism to level the social playing field. More and better secondary education is key. Better administration of schools, combining greater flexibility with more accountability, a modern system of evaluation and incentives for school administrators and teachers are important ingredients for reforms. |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:oec:devaac:92-en&r=ure |
| By: | Sang-Wook (Stanley) Cho (School of Economics, The University of New South Wales); Renuka Sane (School of Economics, The University of New South Wales) |
| Abstract: | Several targeted welfare programs across the world have made owner-occupied housing exempt from the means test, such as the Supplementary Social Income (SSI) in the US and the age pension scheme in Australia. Relatively little is known about the impact of such exemption on household portfolio choice. We study the case of the Australian age pension scheme, and argue that current uncapped exemption may lead to distortionary incentives for very high levels of housing wealth to be sheltered from the means test. We set up a quantitative lifecycle framework, with business and housing investment, borrowing constraints, and wealth inequality, that is able to match a number of key features in the Australian economy. We find that abolishing the current exemption of owner-occupied housing in the assets test increases aggregate output, capital accumulation, and welfare, while lowering housing investment and homeownership. However, removing such distortions, however, does not necessarily imply that all households would be better off. The lowering of other taxes to maintain fiscal balance would result in households at the top of the wealth distribution experiencing a large welfare loss, however the majority of the population would benefit. |
| Keywords: | means-tested age pension; homeownership; lifecycle model; portfolio choice |
| JEL: | D31 E21 E62 H3 H55 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:swe:wpaper:2011-02&r=ure |
| By: | Janne Tukiainen; Tuukka Saarimaa |
| Abstract: | This paper analyzes empirically the coalition formation of local governments. We introduce a novel econometric strategy involving choice based sampling from a spatial network to allow for multi-partner mergers in our empirical analysis. We apply our method to recent municipality mergers in Finland. The mergers were decided voluntarily by municipal councils but the central government promoted mergers through a subsidy scheme. Our main interest lies on the association of local politics with the merger decisions. Moreover, we are able to estimate the causal effect of the subsidy scheme on the merger decisions using a regression discontinuity design. We find that the local political environment is relevant for the merger decision making. The results are consistent with politicians? strategic behavior concerning private incentives on municipal employment possibilities and re-election. Furthermore, more concentrated political power at the local level seems to promote merging and different political parties hold different views concerning merging. The central government merger subsidy scheme has an effect on the type of mergers that took place. Overall, the results imply that local politics may hinder optimal coalition formation and that the central government may act as a corrective force by using an appropriate subsidy scheme. |
| Keywords: | Coalition formation, Local politics, Merger subsidy, Choice based sampling, Regression discontinuity design |
| JEL: | H72 H71 C35 H77 |
| Date: | 2010–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:19&r=ure |
| By: | Jorge Martinez-Vazquez (International Studies Program. Andrew Young School of Policy Studies, Georgia State University); Andrey Timofeev (International Studies Program. Andrew Young School of Policy Studies, Georgia State University) |
| Abstract: | Outside the United States, fiscal equity is a common explicit objective for intergovernmental transfers at the central and regional levels, with transfers often having specific equalization targets. In contrast, the United States does not have a comprehensive federal transfer scheme for explicit fiscal equalization but rather employs an array of categorical and block grants, some of which are formula-based while others are project-driven. However, the allocation of many of these grants has equalization effects resulting in the narrowing of fiscal disparities among jurisdictions. Indeed, almost half of federal grants in the United States are allocated to healthcare and another quarter to income security programs. In addition, the largest category of state grants is allocated to school districts using formulae similar to those used in other countries for fiscal equalization by the central government, including the measurement of fiscal capacity and expenditure needs. Few studies have attempted to quantify the extent of equalization achieved with federal and state grants in a manner that would allow comparisons across states and over time. While recently several important studies have been published on fiscal inequities between and within states (e.g., Murray et al., AER 1998), their focus has been narrowed to school districts. In this study we set out to take this literature further by measuring the extent of equalization across local governments in the United States that is implicit in the federal grants system and more explicit in the grants implemented by the individual states. Rather than focusing on specific types of local services, we look at the evolution of per capita resources available to all types of local governments combined. The extent of equalization is measured by the ratio of inequality indices before and after the allocation of grants, following the methodology used in Martinez-Vazquez and Timofeev (JCE 2008). We find that, on average, state grants tend to considerably reduce the within-state inequality but tend to slightly increase the between-state inequality. States showing more equalization are those with less socio-political fractionalization, higher income inequality, less decentralization of revenue, and court-ordered reforms of school financing. The equalizing impact of direct federal grants to local governments has fluctuated over time but all in all it has been much smaller than that of the state grants. Overall, federal grants tend to slightly reduce the between-state inequality but slightly increase the within-state inequality. Because the within-state disparities in own-source revenues have become dominant, the overall level of inequality across local jurisdictions has tended to increase with the allocation of federal grants. |
| Date: | 2010–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1027&r=ure |
| By: | Marcotte, Dave E. (University of Maryland, Baltimore County) |
| Abstract: | In this paper, I consider the impact of the expansion of exams students must pass in order to graduate high school on dropout rates. "Exit exams," as these tests are known, have become more common, and more difficult. These exams are controversial, with opponents claiming they drive marginal students out of school, and proponents arguing they align student interests with those of the school and encourage teachers and administrators to provide effort and resources on the students' behalf. I make use of the fact that when states implement exit exams, they first affect a specific graduating class. So in some states, some students in high school are required to pass these exams, while students in the grade above are not. Using a state-grade panel constructed from the Common Core of Data I find evidence that the recent expansion of exit exams has resulted in a modest increase in high school dropout rates in the aggregate, but a large increase among students in 12th grade, where additional attempts to pass exams are not possible. I also find that a policy often used to limit the impacts of exit exams on high school completion has only limited effect: Dropout rates in states where students can earn a diploma or credential even when unable to pass exit exams, dropout increases in 12th grade at about the same rate as in other states without such alternative pathways. This suggests that at least some of the impact is due to stop-out on the part of students. |
| Keywords: | high school dropout, exit exams, accountability, attainment |
| JEL: | I2 I28 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5527&r=ure |
| By: | Kuo-I CHANG (Department of Applied Economics, National Chung Hsing University, Taiwan); Kazunobu HAYAKAWA (Inter-disciplinary Studies Center, Institute of Developing Economies, Japan); Toshiyuki MATSUURA (Institute of Economic and Industrial Studies, Keio University,Japan) |
| Abstract: | This paper explores the location choice of MNEs in China, shedding special light on the role of agglomeration of same-nationality firms. In particular, we examine how its role differs according to investors’ productivity. Furthermore, we compare the location choice of Japanese and Taiwanese MNEs in China, because Taiwanese MNEs are expected to experience less uncertainty in investing in China than Japanese MNEs, due to Taiwan’s linguistic and cultural advantages in China. We find that, less productive Japanese firms prefer to locate close to larger same-nationality agglomerations, there are no differences in location according to firms’ productivity in the case of Taiwanese firms. |
| Date: | 2011–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:era:wpaper:dp-2011-01&r=ure |
| By: | Ryan R. Brady (United States Naval Academy); Derek Stimel (Menlo College) |
| Abstract: | We measure the “evolution” of the housing and financial wealth effects over time by estimating the dynamic responses of consumption to both forms of wealth in the United States over different time periods from 1952 to 2009. To understand how the housing and financial wealth effects have changed over time, we use a combination of recent time series techniques, including system structural break tests and linear projections to estimate impulse response functions over relatively short sub-samples. Our key results are that the housing wealth effect gets larger over time, with the largest effect apparent after 1998; while the financial wealth effect diminishes over the same sub-samples, even over periods that include the equities boom of the 1990s. Our results provide insight into what mechanisms may explain the differing responses of consumption to wealth. |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:usn:usnawp:31&r=ure |
| By: | Patricio Perez (University of Cantabria); David Cantarero (University of Cantabria) |
| Abstract: | This paper studies the impact of decentralization on the size of regional governments in Spain controlling for economies of scale, interregional heterogeneity and institutional framework, and successfully tests some implications of the model. Firstly, it supports the classic public goods theory of a trade-off-between the economic benefits of size and the costs of heterogeneity. Secondly, it rejects the “Leviathan” hypothesis because of vertical power imbalance and lack of fiscal competition among regions. Thirdly, the paper argues that government size is mediated by financial resources obtained through intergovernmental grants, consistent with welfare economics and positive economic politics. |
| Keywords: | government size, fiscal decentralization, leviathan hypothesis, vertical imbalances, flypaper effect. |
| Date: | 2010–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1032&r=ure |
| By: | Niek J. Schoeman (Department of Economics, University of Pretoria) |
| Abstract: | This paper analyses fiscal performance in terms of own-revenue collection and sustainability of local municipalities in South Africa. Criteria such as gross value added, revenue collected from own sources, debtors outstanding, the ageing of debt and dependency on grants are considered. The conclusion is that a large number of municipalities do not comply with the requirement that a “reasonable” amount of current expenditures be financed by means of own resources. Furthermore, local government finances are featured by substantial variance as far as collection of own income is concerned. While close to half of them finance more than 50 percent of their current expenditures from own resources, about one third are largely dependent on grants from upper spheres of government and generate less than 20 percent of current expenditures from own resources. As a whole, the fiscal sustainability of the local government sector, given the current scenario of flows, is a reason for concern. In order to comply with international criteria for solid fiscal performance, a number of municipalities will have to improve their performance with regard to own-revenue collection. The reason for this phenomenon seems to be the problem of “soft budgets” and an historic dependence on grants to finance not only capital expenditures but also most, if not all of, current expenditures. Due to historical and political factors, local governments in South Africa differ substantially in terms of potential revenue base, but it may be that in many cases potential revenue is not exploited and that the high level of dependency on grants is the result of inefficiency and lack of political will to be more self-reliant. In view of the wide-spread protest actions against poor quality of service delivery at the local government level, fiscal authorities should take a fresh look at the extent to which these governments are accountable for being more financially independent. This would help prevent the accumulation of debt as a result of growing backlogs in service payments. |
| Keywords: | Local government, fiscal sustainability, South Africa |
| JEL: | H71 H72 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201104&r=ure |
| By: | Ben S. Bernanke; Carol Bertaut; Laurie Pounder DeMarco; Steven Kamin |
| Abstract: | A broad array of domestic institutional factors--including problems with the originate-to-distribute model for mortgage loans, deteriorating lending standards, deficiencies in risk management, conflicting incentives for the GSEs, and shortcomings of supervision and regulation--were the primary sources of the U.S. housing boom and bust and the associated financial crisis. In addition, the extended rise in U.S. house prices was likely also supported by long-term interest rates (including mortgage rates) that were surprisingly low, given the level of short-term rates and other macro fundamentals--a development that Greenspan (2005) dubbed a "conundrum." The "global saving glut" (GSG) hypothesis (Bernanke, 2005 and 2007) argues that increased capital inflows to the United States from countries in which desired saving greatly exceeded desired investment--including Asian emerging markets and commodity exporters--were an important reason that U.S. longer-term interest rates during this period were lower than expected. ; This essay investigates further the effects of capital inflows to the United States on U.S. longer-term interest rates; however, we look beyond the overall size of the inflows emphasized by the GSG hypothesis to examine the implications for U.S. yields of the portfolio preferences of foreign creditors. We present evidence that, in the spirit of Caballero and Krishnamurthy (2009), foreign investors during this period tended to prefer U.S. assets perceived to be safe. In particular, foreign investors--especially the GSG countries--acquired a substantial share of the new issues of U.S. Treasuries, Agency debt, and Agency-sponsored mortgage-backed securities. The downward pressure on yields exerted by inflows from the GSG countries was reinforced by the portfolio preferences of other foreign investors. We focus particularly on the case of Europe: Although Europe did not run a large current account surplus as did the GSG countries, we show that it leveraged up its international balance sheet, issuing external liabilities to finance substantial purchases of apparently safe U.S. "private-label" mortgage-backed securities and other fixed-income products. The strong demand for apparently safe assets by both domestic and foreign investors not only served to reduce yields on these assets but also provided additional incentives for the U.S. financial services industry to develop structured investment products that "transformed" risky loans into highly-rated securities. ; Our findings do not challenge the view that domestic factors, including those listed above, were the primary sources of the housing boom and bust in the United States. However, examining how changes in the pattern of international capital flows affected yields on U.S. assets helps provide a deeper understanding of the origins and dynamics of the crisis. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1014&r=ure |
| By: | Neil MacCallum; Thierry Baert; Pierfelice Rosato; Stefano Barbieri |
| Abstract: | This document intends to provide a discussion of issues related to tourism and local development in Apulia region (Italy), an assessment of the strengths and weaknesses of current practices in related policy implementation, and recommendations and guidance on how the Apulia Government can establish and implement a successful sustainable tourism and local development strategy in the Region. |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:oec:cfeaaa:2011/2-en&r=ure |
| By: | Cicala, Steve; Fryer, Roland G.; Spenkuch, Jörg L. |
| Abstract: | We develop a Roy model of social interactions in which individuals sort into peer groups based on comparative advantage. Two key results emerge: First, when comparative advantage is the guiding principle of peer group organization, the effect of moving a student into an environment with higher-achieving peers depends on where in the ability distribution she falls and the effective wages that clear the social market. In this sense our model may rationalize the widely varying estimates of peer effects found in the literature without casting group behavior as an externality in agents’ objective functions. Second, since a student’s comparative advantage is typically unobserved, the theory implies that important determinants of individual choice operate through the error term and may, even under random assignment, be correlated with the regressor of interest. As a result, linear in means estimates of peer effects are not identified. We show that the model’s testable prediction in the presence of this confounding issue–an individual’s ordinal rank predicts her behavior, ceteris paribus–is borne out in two data sets |
| Keywords: | social interactions; peer effects; roy model; idenitification |
| JEL: | I20 J01 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29150&r=ure |
| By: | D. ISEBAERT; F. HEYLEN; C. SMOLDERS |
| Abstract: | In a number of papers A.J. Oswald (1996, 1997) argues that high rates of home ownership may imply inferior labour market outcomes. This paper tests the Oswald hypothesis in a panel of 42 Belgian districts since the 1970s. The use of data going back to 1970 allows us to embed the Oswald hypothesis in a broader model including other key determinants of employment like labour costs and productivity, the skill level of the population, and demography. Considering that ownership may be endogenous to (shocks in) employment, we use IV estimation methods. Overall, we find evidence in favour of the Oswald hypothesis. We observe that a 1 percentage point rise in the rate of home ownership in a district implies a statistically significant fall in the employment rate by about 0.3 percentage points. Our results underscore the importance of including other determinants of employment, of controlling for unobserved fixed regional and time effects, and of appropriately dealing with endogeneity. Disregarding these issues, as is often done in the macro labour literature, may imply very different estimation results. Additional estimation reveals that the size of the Oswald effect falls in the fraction of high skilled in a district. |
| Keywords: | employment, home ownership, Oswald hypothesis, Belgian regions, panel data |
| JEL: | E24 J61 J64 R23 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:10/695&r=ure |
| By: | Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Robert Hierländer; Peter Huber; Anna Iara; Klaus Nowotny; Mary O'Mahony; Fei Peng; Catherine Robinson |
| Abstract: | The literature on international migration has repeatedly emphasized that the extent and structure of migration has an important impact on the competitiveness of regions and countries. This report provides an overview of the extent and the potential effects of high-skill migration to the EU27. It shows how many high-skilled migrants live in the EU, where these migrants come from, and how the European Union is positioned in the international competition for talent. Second, we examine how high-skilled migrants fare in European labour markets. Finally we address the issue of the effects of high-skill migration on multifactor productivity, gross value added and GDP per capita growth as well as patenting activities at the sectoral and regional levels. We find that - despite substantial heterogeneity among individual EU countries - high-skilled foreign-born are an important source for high-skilled labour in the EU27. There was some evidence that - on average - EU OECD economies (EU) had a lower share of highly qualified migrants than the (arithmetic) average of the (high migration) non-EU OECD economies. However, our results also suggest that this increasing selectivity of immigration regimes is countered by a relatively low qualification structure of short-term migrants in the EU. A second important policy relevant finding of this study is that high-skilled migrants in the EU face a number of challenges when entering the European labour market, that make them distinct from other migrant groups such as less skilled migrants. In particular the high-skilled migrants - in contrast to less skilled migrants - have lower labour market participation rates, higher unemployment rates and lower employment rates than comparable natives and face substantially higher risks of being employed in jobs that do not fit their skill structure. Our analysis regarding the impact of migration and of high-skilled migration in particular on sectoral productivity and gross value added (levels and growth) yielded a number of interesting results though still being preliminary. Particularly interesting was the difference of the impact of the share of migrants in levels and growth specifications, as well as the importance of a break-down by different groups of migrants (from EU and RoW). There was also a relatively robust result of a positive impact of the share of high-skill migrants and of an interactive effect of high-skill migrant share and ICT technology. As regards the analysis of migrants and regional growth and regional technological development (proxied by patents per capita) we found a positive relationship between the share of high-skilled employed persons and of high-skilled migrants and the growth rate of regional GDP per capita. |
| Keywords: | migration patterns, high-skill migration, job mismatch, productivity effects |
| JEL: | J61 I21 J11 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:wii:rpaper:rr:365&r=ure |
| By: | Asuyama, Yoko |
| Abstract: | This paper proposes a mechanism that links industry’s technological characteristics (i.e. quality of non-labor inputs, which is proxied by the length of industry production chains), industry-specific skill wage premium, and skill sorting across industries. It is hypothesized that high-skilled workers are sorted into industries where they can receive a higher skill wage premium, by working with better quality non-labor input. The quality of non-labor inputs is assumed to be worse in industries with longer production chains due to the increased involvement of low-skilled labor and poor infrastructure over the sequential production. By examining Indian wage and employment data for 1999-2000, empirical evidence to support this mechanism can be obtained: First, the skill wage premium is lower [higher] in industries with longer [shorter] production chains. Second, the skill wage premium is lower [higher] in industries with a higher [lower] proportion of low-skilled workers producing inputs outside their own industry. Third, the proportion of high-skilled workers is larger in industries with shorter production chains and lower ratio of low-skilled labor involved, i.e., a skill sorting trend can be observed. |
| Keywords: | India, Labor market, Wages, Manufacturing industries, Employment, Labor conditions, Industry wage, Production chains, Sequential production, Skill wage premium, Skill sorting |
| JEL: | J24 J31 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper278&r=ure |