nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2011‒09‒05
35 papers chosen by
Steve Ross
University of Connecticut

  1. Tiebout Sorting and Neighborhood Stratification By Patrick Bayer; Robert McMillan
  2. Spatial Density and Productivity – an analysis on one-by-one kilometer squares By Andersson, Martin; Klaesson, Johan; P Larsson, Johan
  3. Application of convergence theories and new economic geography in Portugal. An alternative analysis By Martinho, Vítor João Pereira Domingues
  4. Anatomy of the Beginning of the Housing Boom: U.S. Neighborhoods and Metropolitan Areas, 1993-2009 By Fernando Ferreira; Joseph Gyourko
  5. Geographic concentration and firm survival By De Silva, Dakshina G.; McComb, Robert P.
  6. Culture and Taxes: Towards Identifying Tax Competition By Beatrix Eugster; Raphaël Parchet
  7. Application of Keynesian theory and new economic geography in Portugal. An alternative analysis By Martinho, Vítor João Pereira Domingues
  8. The Effects of Housing and Neighborhood Conditions on Child Mortality By Brian A. Jacob; Jens Ludwig; Douglas L. Miller
  9. The importance of real and nominal shocks on the UK housing market By Paresh Kumar Narayan; Seema Narayan
  10. Classroom Grade Composition and Pupil Achievement By Leuven, Edwin; Rønning, Marte
  11. Consumption and Initial Mortgage Conditions: Evidence From Survey Data By Giacomo Masier; Ernesto Villanueva
  12. A Note on the Size Distribution of Irish Mortgages By Morgan Kelly
  13. OECD Extended Regional Typology: The Economic Performance of Remote Rural Regions By Monica Brezzi; Lewis Dijkstra; Vicente Ruiz
  14. How impact fees and local planning regulation can influence deployment of telecoms infrastructure By Gorecki, Paul K.; Hennessy, Hugh; Lyons, Seán
  15. Analysis of net migration between the Portuguese regions By Vítor João Pereira Domingues Martinho
  16. Innovation performance and embeddedness in networks: evidence from the Ethiopian footwear cluster By Gebreeyesus, Mulu; Mohnen, Pierre
  17. Romes without Empires: Urban Concentration,Political Competition, and Economic Growth By Cem Karayalcin; Mehmet Ali Ulubasoglu
  18. Teacher Pension Systems, the Composition of the Teaching Workforce, and Teacher Quality By Cory Koedel
  19. ATTENTION AND SCHOOL SUCCESS: The Long-Term Implications of Attention for School Success among Low-Income Children By Rachel A. Razza; Anne Martin; Jeanne Brooks-Gunn
  20. Social Ties and User-Generated Content: Evidence from an Online Social Network By Shriver, Scott K.; Nair, Harikesh S.; Hofstetter, Reto
  21. Friends’ networks and job finding rates By Cappellari, Lorenzo; Tatsiramos, Konstantinos
  22. Fiscal Decentralization and Peasants' Financial Burden in China By Jing Jin; Chunli Shen; Heng-fu Zou
  23. Social Interactions in the Labor Market By Grodner, Andrew; Kniesner, Thomas J.; Bishop, John A.
  24. Minimum Wages and Teen Employment: A Spatial Panel Approach By Kalenkoski, Charlene M.; Lacombe, Donald J.
  25. Explaining Spatial Convergence of China’s Industrial Productivity By Paul Deng; Gary Jefferson
  26. Creative Destruction and Productivity – entrepreneurship by type, sector and sequence By Andersson, Martin; Braunerhjelm, Pontus; Thulin, Per
  27. Entrepreneurship within Urban and Rural Areas. Individual Creativity and Social Network By Lucio Carlos Friere-Gibb; Nielsen Kristian
  28. New insights on the role of location advantages in international innovation By Narula, Rajneesh; Santangelo, Grazia D.
  29. Electoral Competition as a Determinant of Fiscal Decentralization By Mario Jametti; Marcelin Joanis
  30. Regional spillover effects of renewable energy generation in Italy By Natalia Magnani; Andrea Vaona
  31. Who Borrows and Who May Not Repay? By Alena Bicakova; Zuzana Prelcova; Renata Pasalicova
  32. A Dynamic Model of Demand for Houses and Neighborhoods By Patrick J. Bayer; Robert McMillan; Alvin Murphy; Christopher Timmins
  33. Public Infrastructure Investment, Output Dynamics, and Balanced Budget Fiscal Rules By Bom, P.R.D.; Ligthart, J.E.
  34. Are credit default swaps a sideshow? Evidence that information flows from equity to CDS markets By Jens Hilscher; Joshua M. Pollet; Mungo Wilson
  35. Spatial Competition in Quality, Demand-Induced Innovation, and Schumpeterian Growth By Raphael Anton Auer; Philip Ulrich Sauré

  1. By: Patrick Bayer; Robert McMillan
    Abstract: Tiebout’s classic 1956 paper has strong implications regarding stratification across and within jurisdictions, predicting in the simplest instance a hierarchy of internally homogeneous communities ordered by income. Typically, urban areas are less than fully stratified, and the question arises how much departures from standard Tiebout assumptions contribute to observed within-neighborhood mixing. This paper quantifies the separate effects on neighborhood stratification of employment geography (via costly commuting) and preferences for housing attributes. It does so using an equilibrium sorting model, estimated with rich Census micro-data. Simulations based on the model using credible preference estimates show that counterfactual reductions in commuting costs lead to marked increases in racial and education segregation and, to a lesser degree, increases in income segregation, given that households now find it easier to locate in neighborhoods with like households. While turning off preferences for housing characteristics increases racial segregation, especially for blacks, doing so reduces income segregation, indicating that heterogeneity in the housing stock serves to stratify households based on ability-to-pay. Further, we show that differences in housing also help accentuate differences in the consumption of local amenities.
    JEL: H41 I20 R21
    Date: 2011–08
  2. By: Andersson, Martin (CIRCLE, Lund University and BTH); Klaesson, Johan (CENSE, Jönköping International Business School); P Larsson, Johan (CENSE, Jönköping International Business School)
    Abstract: This paper reassesses the relationship between density and productivity by using detailed geo-coded data on wages and employment in Sweden. The contribution is empirical and builds on an analysis of spatial units of exactly the same size in terms of geographic surface. The data divide Sweden into areas of one square kilometer, and describe each area in terms of wages, worker characteristics and industry structure. Since the geographic areas are of constant size, the sheer number of employees in an area is an ‘exact’ measure of employment density. We find a significant relationship between density and productivity across squares. The estimated elasticity is in the 9-10 percent interval, and is insensitive to whether we employ a standard OLS estimator or a panel fixed effects estimator. Neighbor characteristics also matter in ways consistent with the idea of positive agglomeration externalities, where a location in a square with high density neighbors reflects proximity to (or a location in) a larger agglomeration. Moreover, the estimated relationship between productivity and density is insensitive to the chosen spatial scale.
    Keywords: density; productivity; spatial dependence; geo-coded data; external scale economies; agglomeration externalities; Sweden; Modifiable Areal Unit Problem (MAUP)
    JEL: C21 R11 R12
    Date: 2011–08–25
  3. By: Martinho, Vítor João Pereira Domingues
    Abstract: The aim of this paper is to present a further contribution to the analysis of absolute convergence, associated with the neoclassical theory, of the sectoral productivity at regional level. Presenting some empirical evidence of absolute convergence of productivity for each of the economic sectors in each of the regions of mainland Portugal (NUTS II) in the period 1986 to 1994. This work aims, also, to study the Portuguese regional agglomeration process (NUTs II), using the linear form the New Economic Geography models that emphasize the importance of spatial factors (distance, costs of transport and communication) in explaining of the concentration of economic activity in certain locations.
    Keywords: convergence; agglomeration; Portuguese regions; linear models panel data
    JEL: C23 R12 O14
    Date: 2011
  4. By: Fernando Ferreira; Joseph Gyourko
    Abstract: We provide novel estimates of the timing, magnitudes, and potential determinants of the start of the last housing boom across American neighborhoods and metropolitan areas (MSAs) using a rich new micro data set containing 23 million housing transactions in 94 metropolitan areas between 1993 and 2009. We also match transactions data with loan information, enabling us to observe household income and other demographics for each neighborhood. Five major findings are reported. First, the start of the boom was not a single, national event. Booms, which are defined by the global breakpoint in an area’s price appreciation series, begin at different times over a decade-long period from 1995-2006. Second, the magnitude of the initial jump in house price appreciation at the start of the boom is economically, not just statistically, significant. On average, log house prices are over four points higher during the first year of the boom relative to the previous twelve month period for both MSAs and neighborhoods. There is no evidence that price growth was trending up prior to the start of the boom. Third, local income is the only potential demand shifter found that also had an economically and statistically significant change around the time that local housing booms began. Contemporaneous local income growth is large enough to account for half or more of the initial jump in house price appreciation. While these estimates indicate that the beginning of the boom was fundamentally justified on average, they do not imply that what followed was rational. Fourth, there is important heterogeneity in that result. Income growth is large and jumps at the same time as house price appreciation in areas that boomed early and have inelastic supplies of housing, but not in late booming areas and those with elastic supply sides. Fifth and finally, none of the demand-shifters analyzed show positive pre-trends, but some such as the share of subprime lending, do lag the beginning of the boom. This suggests that key players in the lending market more responded to the boom, rather than caused it to start.
    JEL: R11 R21 R31
    Date: 2011–08
  5. By: De Silva, Dakshina G.; McComb, Robert P.
    Abstract: If localization economies are present, firms within denser industry concentrations should exhibit higher levels of performance than more isolated firms. Nevertheless, research in industrial organization that has focused on the influences on firm survival has largely ignored the potential effects from agglomeration. Recent studies in urban and regional economics suggests that agglomeration effects may be very localized. Analyses of industry concentration at the MSA or county-level may fail to detect important elements of intra-industry firm interaction that occur at the sub-MSA level. Using a highly detailed dataset on firm locations and characteristics for Texas, this paper analyses agglomeration effects on firm survival over geographic areas as small as a single mile radius. We find that greater firm density within very close proximity (within 1 mile) of firms in the same industry increases mortality rates while greater concentration over larger distances reduces mortality rates.
    Keywords: Firm Survival; Agglomeration; Localization; and Knowledge Externalities
    JEL: O18 R12
    Date: 2011–08–19
  6. By: Beatrix Eugster; Raphaël Parchet
    Abstract: We propose a new strategy to identify the existence of interjurisdictional tax competition and to estimate its spatial reach. Our strategy rests on differences between desired tax levels, determined by culture-specific preferences, and equilibrium tax levels, determined by interjurisdictional fiscal externalities as well as by preferences. While fiscal preferences differ systematically and demonstrably between French-speaking and German-speaking Swiss regions, we find that local income tax burdens do not change discretely at the language border but exhibit smooth spatial gradients. The slope of these gradients implies that tax competition constrains tax choices of jurisdictions with a preference for higher taxes at a distance of up to 20 kilometres. Hence, tax competition does constrain income taxation by local governments. When, as in the Swiss system, local jurisdictions are constrained to decide on a single shifter of an exogenously given tax schedule, the effect of tax competition are confined to a small spatial scale.
    Keywords: tax competition; fiscal federalism; culture
    JEL: H31 H71 Z10
    Date: 2011–08
  7. By: Martinho, Vítor João Pereira Domingues
    Abstract: This work aims to test the Verdoorn Law, with the alternative specifications of (1)Kaldor (1966), for five Portuguese regions (NUTS II) from 1986 to 1994. It is intended to test, even in this work, the alternative interpretation of (2)Rowthorn (1975) of the Verdoorn's Law for the same regions and periods. The results of this work will be complemented with estimates of these relationships to other sectors of the economy than the industry (agriculture and services sectors) and for the total economy of each region. This work aims, yet, to study the Portuguese regional agglomeration process, using the linear form the New Economic Geography models that emphasize the importance of spatial factors (distance, costs of transport and communication) in explaining of the concentration of economic activity in certain locations. In a theoretical context, it is intended, also, to explain the complementarily of clustering models, associated with the New Economic Geography, and polarization associated with the Keynesian tradition, describing the mechanisms by which these processes are based.
    Keywords: agglomeration; polarization; Portuguese regions; linear models
    JEL: C23 R12 O14
    Date: 2011
  8. By: Brian A. Jacob; Jens Ludwig; Douglas L. Miller
    Abstract: In this paper we estimate the causal effects on child mortality from moving into less distressed neighborhood environments. We match mortality data to information on every child in public housing that applied for a housing voucher in Chicago in 1997 (N=11,848). Families were randomly assigned to the voucher wait list, and only some families were offered vouchers. The odds ratio for the effects of being offered a housing voucher on overall mortality rates is equal to 1.11 for all children (95% CI 0.54 to 2.10), 1.50 for boys (95% CI 0.72 to 2.89) and 0.00 for girls – that is, the voucher offer is perfectly protective for mortality for girls (95% CI 0 to 0.79). Our paper also addresses a methodological issue that may arise in studies of low-probability outcomes – perfect prediction by key explanatory variables.
    JEL: H75 I12 R38
    Date: 2011–08
  9. By: Paresh Kumar Narayan; Seema Narayan
    Abstract: The goal of this paper is to examine the responsiveness of the UK housing market to real and nominal shocks. To achieve this goal, we use a structural VAR model, based on quarterly data for the period 1957:1-2009:4. We find that in response to an interest rate shock, house prices (aggregate house price and modern house price) fall sharply over the first 4 years and do not recover to their pre-shock level. In response to a real GDP shock, both house prices react in a positive inverted U-shaped manner. Finally, we find that an inflation shock has a U-shaped negative impact on aggregate and modern house prices in the UK.
    Keywords: real shock, nominal shock, UK housing market, VAR model
    Date: 2011–08–29
  10. By: Leuven, Edwin (University of Oslo); Rønning, Marte (Statistics Norway)
    Abstract: This paper exploits discontinuous grade mixing rules in Norwegian junior high schools to estimate how classroom grade composition affects pupil achievement. Pupils in mixed grade classrooms are found to outperform pupils in single grade classrooms on high stake central exit tests and teacher set and graded tests. This effect is driven by pupils benefiting from sharing the classroom with more mature peers from higher grades. The presence of lower grade peers is detrimental for achievement. Pupils can therefore benefit from de-tracking by grade, but the effects depend crucially on how the classroom is balanced in terms of lower and higher grades. These results reconcile the contradictory findings in the literature.
    Keywords: educational production, combination classes, class size, peer effects
    JEL: I2
    Date: 2011–08
  11. By: Giacomo Masier; Ernesto Villanueva
    Abstract: Economic theory predicts that the consumption path of unconstrained homeowners responds to the interest rate, while the consumption path of credit constrained homeowners is determined by the size and timing of payments (mortgage maturity). We exploit the rapid expansion of mortgage markets during the last decade in Spain and a very detailed survey on household .nances to estimate group-speci.c consumption responses to changes in the credit conditions. Our estimates suggest that the consumption of households headed by an individual with high school responds more to mortgage maturity than to the interest rate spread. The consumption of the rest of indebted households is insensitive to loan maturity. Those results are con.rmed when we instrument loan maturity exploiting the fact that banks are reluctant to o¤er contracts with age at maturity above 65. An interpretation of those results is that households headed by middle education individuals, 8% of our sample, behave as credit constrained.
    Keywords: Credit constraints, mortgages, household consumption
    JEL: D91
    Date: 2011–02
  12. By: Morgan Kelly
    Abstract: Using Department of Environment data on number of mortgages by size category we find that the Weibull distribution accurately models the distribution of loans under €300,000 but severely underestimates the number of larger loans. We therefore use a a Pareto distribution for loans above this level. We estimate that from 2006 to 2008 there were fewer than 2,000 loans over €1 million with total value of €3 billion; and that there were 11,000 loans over €500,000 with estimated value of €9 billion. While the number of people taking out these mortgages is unknown, the conjecture that the largest 10,000 mortgage borrowers owe around €10 billion, largely for buy to let mortgages, does not appear implausible given these results. More tentatively, an ecological inference procedure suggests that interest only mortgages went almost exclusively to property investors.
    Date: 2011–08–25
  13. By: Monica Brezzi; Lewis Dijkstra; Vicente Ruiz
    Abstract: To account for differences among rural and urban regions, the OECD s established a regional typology, classifying TL3 regions as predominantly urban (PU), intermediate (IN) or predominantly rural (PR) (OECD, 2009). This typology, based essentially on the percentage of regional population living in urban or rural communities, has proved to be meaningful to better explain regional differences in economic and labour market performance. However this typology does not take into account the presence of economic agglomerations if they happen to be in neighbouring regions. For example, a region is classified as rural or intermediate regardless its distance from a large urban centre where labour market, access to services, education opportunities and logistics for firms can be wider. Previous work reveals great heterogeneity in economic growth among rural regions and the distance from a populated centre could be a significant factor explaining these differences. For the latter, the OECD regional typology is extended to include an accessibility criterion. This criterion is based on the driving time needed for at least half of the population in a region to reach a populated centre of with 50 000 or more inhabitants. The resulting classification consists of four types of regions: Predominantly Urban (PU), Intermediate (IN), Predominantly Rural Close to a city (PRC) and Predominantly Rural Remote (PRR). For the time being, the extended typology has only been computed for regions in North America (Canada, Mexico and the United States) and Europe. The extended typology is used to compare the dynamics of population and labour markets. Remote rural regions show a stronger decline in population and a faster ageing process than rural regions close to a city. The remoteness of rural regions is in fact a significant factor explaining regional outflows of working age population, confirming that this extended typology captures the economic distance from market and services. Remote rural regions appear economically more fragile: lower employment rates (Canada and Mexico) and economic output (Europe).<BR>Afin de prendre en compte les différences entre les régions rurales et urbaines, l’OCDE a établi une typologie régionale qui classe les régions TL3 en 3 catégories : régions majoritairement urbaines (PU), intermédiaires (IN) ou à prédominance rurale (PR), (OCDE, 2009). Cette typologie, qui repose essentiellement sur le pourcentage de la population régionale vivant dans des communautés urbaines ou rurales, s'est révélée significative pour mieux expliquer les différences régionales au niveau de la performance économique et du marché du travail. Toutefois, cette typologie ne tient pas compte de la présence de grandes agglomérations, si celles-ci se trouvent dans des régions voisines. Par exemple, une région est considérée comme rurale ou intermédiaire indépendamment de sa distance d'un grand centre urbain, où le marché du travail, l'accès aux services, les possibilités d'éducation et l’offre logistique pour les entreprises peuvent être meilleurs. Des travaux antérieurs révèlent une grande hétérogénéité de croissance économique entre les régions rurales, et la distance d'un centre fortement peuplé pourrait être un facteur important pour expliquer ces différences. C’est pour cette raison que la typologie régionale de l'OCDE a été élargie afin d’y inclure un critère d'accessibilité. Ce critère est basé sur le temps de trajet que doit réaliser au moins la moitié de la population d’une région pour atteindre un centre urbain de 50 000 habitants ou plus. La classification qui en résulte se compose de quatre types de régions: Majoritairement Urbaines (PU), Intermédiaires (IN), à prédominance rurale proches d'une ville (RPC) et à prédominance rurale éloignées (PRR). Pour l'heure, la typologie élargie n'a été calculée que pour les régions en Amérique du Nord (Canada, Mexique, États-Unis) et en Europe. La typologie élargie est utilisée pour comparer la dynamique de la population et celle des marchés du travail. Elle montre que les régions rurales éloignées ont une baisse plus importante de leur population et un processus de vieillissement plus rapide que les régions rurales proches d'une ville. L'éloignement des régions rurales est en effet un facteur important pour expliquer les migrations régionales de la population en âge de travailler, ce qui confirme que cette typologie élargie prend bien en compte la distance économique du marché et des services. Les régions rurales éloignées apparaissent plus fragiles au niveau économique : des taux d'emploi inférieurs (Canada et Mexique) et une production économique moindre (Europe).
    Keywords: ageing, rural regions, distance to markets, OECD regional typology, labour market mobility, road networks
    JEL: C80 J61 R1 R4
    Date: 2011–08–02
  14. By: Gorecki, Paul K.; Hennessy, Hugh; Lyons, Seán
    Abstract: This paper examines how local government planning regulations and charges affect the deployment of telecommunications infrastructure. We explore the economic rationale for local government regulation of such infrastructure, which we suggest should be based on managing negative externalities. Using data from Ireland, we find that the observed geographical pattern of impact fees is inconsistent with the economic rationale for them. A simple econometric model of the number of telecoms masts in each county also suggests that the level of impact fees is negatively associated with mast deployment. This paper also examines other regulatory factors that affect the provision of new infrastructure. We find wide regional variation in these regulations but are unable to quantify their impact on infrastructure provision. Such regulatory complexity places extra compliance burdens on private operators, which may in turn distort the level and regional pattern of network investment. We suggest further regional harmonisation of development policy towards telecoms infrastructure to avoid exacerbating regional disparities in rollout of services.
    Keywords: data/Econometric model/investment/Ireland/Policy/Regional disparities/regulation
    Date: 2011–08
  15. By: Vítor João Pereira Domingues Martinho (Polytechnic Agricultural School of Viseu)
    Abstract: This work aims mainly to present a project of research about the identification of the determinants that affect the mobility of labor. The empirical part of the work will be performed for the NUTS II and NUTS III of Portugal, from 1996 to 2002 and for 1991 and 2001, respectively (given the availability of statistical data). As main conclusion it can be said, for the NUTS II (1996-2002), which is confirmed the existence of some labor mobility in Portugal and that regional mobility is mainly influenced positively by the output growth and negatively by the unemployment rates and by the weight of the agricultural sector. NUTS III level (1991 and 2001) is something similar, but with this level of spatial disaggregation (and in this period) the basic equipment (amenities), particularly in terms of availability of housing, are the main determinants of migration.
    Keywords: net migration; Portuguese regions; panel and cross-section estimations
    JEL: J0 J1 J2
    Date: 2011–01
  16. By: Gebreeyesus, Mulu (UNU-MERIT); Mohnen, Pierre (UNU-MERIT, Maastricht University)
    Abstract: This study focuses on innovation in a cluster of informal shoemaking firms in Ethiopia - namely the Mercato footwear cluster. It examines how differently those firms are embedded in networks and how heterogeneous they are in absorptive capacity, and how this heterogeneity affects their innovation performance. Business interactions with buyers, suppliers and other producers are the major channels through which knowledge flows into the cluster. These business networks are mainly built on trust and long-term relationships and tend to be selective. The study reveals that despite homogeneity in social background the firms in the cluster behave and perform differently. Based on econometric analysis we document a positive and strong effect of local network position and absorptive capacity on innovation performance.
    Keywords: industrial clusters, networks, innovation performance, informal sector, Africa, Ethiopia
    JEL: O17 O31 O33
    Date: 2011
  17. By: Cem Karayalcin (Department of Economics, Florida International University); Mehmet Ali Ulubasoglu (Faculty of Business and Law, Deakin University, Victoria 3125, Australia)
    Abstract: Many developing economies are characterized by the dominance of a super metropolis. Taking historical Rome as the archetype of a city that centralizes political power to extract resources from the rest of the country, we develop two models of rent-seeking and expropriation which illustrate di?erent mechanisms that relate political competition to economic outcomes. The "voice" model shows that rent-seeking by different interest groups (localized in di?erent specialized cities/regions) will lead to low investment and growth when the number of such groups is small. The "exit" model allows political competition among those with political power (to tax or expropriate from citizens) over a footloose tax base. It shows that when this power is centralized in relatively few urban nodes, tax rates would be higher and growth rates lower. Our empirical work exploits the connection between urban wealth (with the political power it affords) and national soccer championships. By using a cross-country data set for 103 countries for the period 1960-99, we ?nd strong and robust evidence that countries with higher concentrations in urban wealth¨Cas proxied by the number of di?erent cities with championships in national soccer leagues¨Ctend to have lower long-run growth rates.
    Date: 2011–08
  18. By: Cory Koedel (Department of Economics, University of Missouri-Columbia; Department of Economics, University of Missouri-Columbia)
    Abstract: Teacher pension systems impose large penalties on individuals who separate too soon or remain employed too long. The penalties result in the retention of some teachers who would otherwise choose to leave, and the premature exit of some teachers who would otherwise choose to stay. We examine how these compositional effects of teacher pension systems influence the quality of the teaching workforce, conditional on individuals who initially select into teaching. We find no evidence that the pull and push incentives raise teacher quality, and if anything, we find modest negative effects. Our results support future experimentation with compensation schemes for educators that are not so heavily backloaded.
    Keywords: Educator Pensions, Teacher Pensions, Backloaded Compensation, Teacher Pensions and Teacher Quality, Teacher Compensation, Selection into Teaching
    JEL: I20 J30 J45
    Date: 2011–08–31
  19. By: Rachel A. Razza (Syracuse University); Anne Martin (Columbia University); Jeanne Brooks-Gunn (Columbia University)
    Abstract: This study examined the longitudinal associations between sustained attention in preschool and children’s school success in later elementary school within a low-income sample (N = 2,403). Specifically, two facets of sustained attention (focused attention and lack of impulsivity) at age 5 were explored as independent predictors of children’s academic and behavioral competence across eight measures at age 9. Overall, the pattern of results indicates specificity between the facets of attention and school success, such that focused attention was primarily predictive of academic outcomes while impulsivity was mainly predictive of behavioral outcomes. Both facets of attention predicted teacher ratings of children’s academic skills and approaches to learning, which suggests that they jointly influence outcomes that span both domains of school success. Patterns of association were similar for children above and below the poverty line. Implications of these findings for interventions targeting school readiness and success among at-risk children are discussed.
    Keywords: sustained attention, academic achievement, behavioral competence, low-income children
    JEL: D19 D69 I21 I32 J13
    Date: 2011–08
  20. By: Shriver, Scott K. (Columbia University); Nair, Harikesh S. (Stanford University); Hofstetter, Reto (University of St Gallen)
    Abstract: We use variation in wind speeds at surfing locations in Switzerland as exogenous shifters of users' propensity to post content about their surfing activity onto an online social network. We exploit this variation to test whether users' online content generation activity has a causal effect on their social ties. Under weak monotonicity assumptions, we also estimate nonparametric bounds on the causal effect of user's social ties in turn on their content generation activity. Economically significant causal effects of the type above can produce positive feedback that generates local network effects in content generation. We find evidence for such network effects. We argue this feedback generates a multiplier effect on interventions that subsidize tie formation. We use our estimates to measure the ROI from such interventions and discuss implications for the site's monetization strategy. Our empirical strategy provides one way to address a significant identification challenge with online social network data that the observed network structure is endogenous to the actions taken by agents on the network. Augmenting the model of agent's actions with a model for the network structure requires solving a formidable network formation game. Our approach to this problem is to conduct inference with an incomplete model of network formation under weak assumptions that deliver informative bounds on the causal effects of interest, while avoiding taking a strong stand on a specific model of network formation.
    Date: 2011–08
  21. By: Cappellari, Lorenzo; Tatsiramos, Konstantinos
    Abstract: Social interactions have important consequences for labour market outcomes. Yet the growing literature has relied on indirect definitions of networks. We present the first evidence based on direct information on friends networks. We address issues of correlated effects with instrumental variables and panel data. We find large network effects, which persist even after controlling for family networks. One additional employed friend increases a persons job finding probability by approximately 13 percent. This is a result of endogenous social interactions. We also provide the first evidence that network effects operate through information transmission rather than through social norms or leisure complementarities.
    Date: 2011–08–19
  22. By: Jing Jin (Central University of Finance and Economics); Chunli Shen (University of Maryland); Heng-fu Zou (Development Research Group, the World Bank)
    Abstract: This paper sheds light on the heavy financial burden on peasants in China's fiscal decentralization system. Using a political economy framework, this paper explores the tax-farming nature of China's fiscally decentralized system and examines why the system incurs a particularly heavy financial burden on peasants. Specifically, it points out that a political hierarchy financed by a tax-farming system in China, fails to contain the exploitative behavior of local officials, which results in the expenditure devolution and revenue centralization within the hierarchy. Ultimately, peasants bear the brunt of the tax burden. As the financial pressure of excessive levies and fees reaches a perilous point, peasants are resorting to violent protests. Unless a fiscally decentralized system with horizontal accountability mechanisms evolves, the country¡¯s ability to sustain a centralized polity may become increasingly undermined. A case study of township finance is used to exemplify the exploitative nature of China¡¯s fiscal decentralization system.
    Date: 2011
  23. By: Grodner, Andrew (East Carolina University); Kniesner, Thomas J. (Syracuse University); Bishop, John A. (East Carolina University)
    Abstract: We examine theoretically and empirically social interactions in labor markets and how policy prescriptions can change dramatically when there are social interactions present. Spillover effects increase labor supply and conformity effects make labor supply perfectly inelastic at a reference group average. The demand for a good may also be influenced by either a spillover effect or a conformity effect. Positive spillover increases the demand for the good with interactions, and a conformity effect makes the demand curve pivot to become less price sensitive. Similar social interactions effects appear in the associated derived demands for labor. Individual and community factors may influence the average length of poverty spells. We measure local economic conditions by the county unemployment rate and neighborhood spillover effects by the racial makeup and poverty rate of the county. We find that moving an individual from one standard deviation above the mean poverty rate to one standard deviation below the mean poverty rate (from the inner city to the suburbs) lowers the average poverty spell by 20–25 percent. We further consider overall labor market outcomes by examining theoretically the socially optimal wealth distribution. Interdependence in utility can mitigate the need to transfer wealth to low-wage individuals and may require them to be poorer by all objective measures. Finally, we quantify how labor market policy changes when there are household social interactions. Labor supply estimates indicate positive economically important spillovers for adult U.S. men. Ignoring or incorrectly considering social interactions can mis-estimate the labor supply response of tax reform in the United States by as much as 60 percent.
    Keywords: social interactions, spillover, conformity, inequality, poverty, labor supply, reference group, social multiplier, income tax, PSID
    JEL: D11 J22 Z13 D31 D63
    Date: 2011–08
  24. By: Kalenkoski, Charlene M. (Ohio University); Lacombe, Donald J. (West Virginia University)
    Abstract: The authors employ spatial econometrics techniques and Annual Averages data from the U.S. Bureau of Labor Statistics for 1990-2004 to examine how changes in the minimum wage affect teen employment. Spatial econometrics techniques account for the fact that employment is correlated across states. Such correlation may exist if a change in the minimum wage in a state affects employment not only in its own state but also in other, neighboring states. The authors show that state minimum wages negatively affect teen employment to a larger degree than is found in studies that do not account for this correlation. Their results show a combined direct and indirect effect of minimum wages on teen employment to be -2.1% for a 10% increase in the real effective minimum wage. Ignoring spatial correlation underestimates the magnitude of the effect of minimum wages on teen employment.
    Keywords: minimum wage, teen employment, spatial econometrics
    JEL: J08 J21 J38 J48 C31
    Date: 2011–08
  25. By: Paul Deng (Department of Economics, Copenhagen Business School); Gary Jefferson (Department of Economics, Brandeis University)
    Abstract: This paper investigates the conditions that may auger a reversal of China’s increasingly unequal levels of regional industrial productivity during China’s first two decades of economic reform. Using international and Chinese firm and industry data over the period 1995-2004, we estimate a productivity growth-technology gap reaction function. We find that as China’s coastal industry has closed the technology gap with the international frontier relative to interior regions, labor productivity growth in the coastal region has begun to slow in relation to the interior. This may serve as an early indicator of China’s initial movement toward reversing the widespread income inequality.
    Keywords: Inequality, Economic Growth, Productivity Convergence, Regional Disparity, Sustainability, China, International Comparison of Productivity (ICOP)
    JEL: O4 O18 O30 R11
    Date: 2011–08
  26. By: Andersson, Martin (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Braunerhjelm, Pontus (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Thulin, Per (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Schumpeter claimed the entrepreneur to be instrumental for creative destruction and industrial dynamics. Entrepreneurial entry serves to transform and revitalize industries, thereby enhancing their competiveness. This paper investigates if entry of new firms influences productivity amongst incumbent firms, and the extent to which altered productivity can be attributed sector and time specific effects. Implementing a unique dataset we estimate a firm-level production function in which the productivity of incumbent firms is modeled as a function of firm attributes and regional entrepreneurship activity. The analysis finds support for positive productivity effects of entrepreneurship on incumbent firms, albeit the effect varies over time, what we refer to as a delayed entry effect. An immediate negative influence on productivity is followed by a positive effect several years after the initial entry. Moreover, the productivity of incumbent firms in services sectors appears to be more responsive to regional entrepreneurship, as compared to the productivity of manufacturing firms.
    Keywords: entrepreneurship; entry; business turbulence; incumbent firms; productivity; region; business dynamics
    JEL: D20 L10 L26 O31 R11
    Date: 2011–08–25
  27. By: Lucio Carlos Friere-Gibb; Nielsen Kristian
    Abstract: The entrepreneurial dynamics of urban and rural areas are different, and this paper explores ’individual creativity’ and social network factors in both places. The probabilities of becoming an entrepreneur and of surviving are analyzed. The results are based on longitudinal data combined with a questionnaire, utilizing responses from 1,108 entrepreneurs and 420 non-entrepreneurs. Creativity is only found to be relevant for start-up in urban areas, but it does not influence survival in any of the two areas. The social network matters, in particular in rural areas. By combining the person and the environment, common entrepreneurship beliefs can be questioned and entrepreneurship theory benefited.
    Keywords: Entrepreneurship; Urban; Rural
    JEL: L26 O18
    Date: 2011
  28. By: Narula, Rajneesh (Henley Business School, University of Reading); Santangelo, Grazia D. (Facoltà di Scienze Politiche, University of Catania)
    Abstract: This paper takes a closer look at the role of location advantages in the spatial distribution of MNE R&D activity. In doing so, we have returned to first principles by revisiting our understanding of L and O advantages and their interaction. We revisit the meaning of L advantages, and offer a succinct differentiation of L advantages. We emphasise the importance of institutions, and flesh out the concept of collocation L advantages, which play an important role at the industry and firm levels of analysis. Just because a country possesses certain L advantages when viewed at a macro-level, does not imply that these are available to all industries or all firms in that location without differential cost. When these are linked to the distinction between location-bound and non location-bound O advantages, and we distinguish between MNEs and subsidiaries it allows for a clearer understanding of the MNE's spatially distributed activities. These are discussed here in the context of R&D, which - in addition to the usual uncertainties faced by firms - must deal with the uncertainties associated with innovation. Although prior literature has sometimes framed the centralisation/decentralisation, spatial separation/collocation debates as a paradox facing firms, when viewed within the context of the cognitive limits to resources, the complexities of institutions, and the slow pace of the evolving specialisation of locations, these are in actuality trade-offs firms must make.
    Keywords: FDI, foreign investment, direct investment, multinationals, transnational corporations, MNEs, eclectic paradigm, collocation, locational advantage, country specific advantages
    JEL: F23 L52 O14 O19
    Date: 2011
  29. By: Mario Jametti (University of Lugano); Marcelin Joanis (University of Sherbrooke)
    Abstract: Fiscal decentralization is high on the agenda in policy fora. This paper empirically investigates the underlying causes of Â…scal decentralization, based on the predictions of a simple political economy model. We argue that the likeliness that a central government engages in devolution of powers depends in important ways on the political forces that it faces, the theoryÂ’s main insight being that the central governmentÂ’s electoral strength should, all else being equal, decrease that governmentÂ’s share of spending. Consistent with the modelÂ’s predictions, empirical results from a panel of democracies support the relevance of political factors as determinants of Â…scal decentralization. The relationship between central government electoral strength and both expenditure and revenue centralization emerges as negative and non-linear.
    Keywords: Fiscal decentralization; Fiscal federalism; Vertical interactions; Partial Decentralization; Elections
    JEL: H77 D72 H11
    Date: 2011
  30. By: Natalia Magnani (University of Trento, Dipartimento di Sociologia e Ricerca Sociale); Andrea Vaona (Department of Economics (University of Verona))
    Abstract: In a multivariate setting, we document that renewable energy generation has a positive impact on economic growth at the regional level in Italy. We do so by adopting panel data unit-root and cointegration tests as well as Granger non-causality tests relying on the system GMM estimator. Our results are interpreted in three ways. Renewable energy generation alleviates balance-of-payments constraints and reduces the exposure of a regional economy to the volatility of the price of fossil fuels and to negative environmental and health externalities deriving from non-renewable energy generation. Therefore, our evidence supports policies promoting renewable energy generation.
    Keywords: renewable energy generation, economic growth, panel unit root and cointegration tests, Granger causality, Italy, panel error correction model, regions.
    JEL: O13 O18 R11 N70 Q42 Q43
    Date: 2011–08
  31. By: Alena Bicakova; Zuzana Prelcova; Renata Pasalicova
    Abstract: We use Household Budget Survey data to analyze the evolution of the household credit market in the Czech Republic over the period 2000–2008. We next merge our data with the Statistics on Income and Living Conditions in 2005–2008, in order to test the validity of the standard debt burden measure as a predictor of default. We propose an alternative indicator – the adjusted debt burden (ADB), defined as the ratio of loan repayments to discretionary income, constructed as net income minus the living minimum, which turns out to be a superior predictor of default risk. Limited by the data, we use a fairly broad concept of default, namely, the inability to make loan repayments on time. Based on the distribution of default risk across the levels of the adjusted debt burden, we suggest that a 30% ADB threshold should be used as the definition of overindebtedness, with an average default risk of 17%. Finally, we show that overindebtedness and local economic shocks are closely related, suggesting that default risk should be always considered in the context of regional economic conditions.
    Keywords: household credit; debt burden; repayment; regional default risk
    JEL: D12 D14 G21 R29
    Date: 2011–07
  32. By: Patrick J. Bayer; Robert McMillan; Alvin Murphy; Christopher Timmins
    Date: 2011–08–25
  33. By: Bom, P.R.D.; Ligthart, J.E. (Tilburg University, Center for Economic Research)
    Abstract: We study the dynamic output and welfare effects of public infrastructure investment under a balanced budget fiscal rule, using an overlapping generations model of a small open economy. The government finances public investment by employing distortionary labor taxes. We find a negative short-run output multiplier, which (in absolute terms) exceeds the positive long-run output multiplier. In contrast to conventional results regarding public investment shocks, we obtain dampened cycles in output and the labor tax rate. The cyclical dynamics are induced by the interaction of households' finite life spans, the wealth effect on labor supply, and the balanced budget fiscal rule. Finally, we show that, for a plausible calibration of our model, households' lifetime welfare improves.
    Keywords: Infrastructure capital;public investment;distortionary taxation;fiscal policy;Yaari-Blanchard overlapping generations.
    JEL: E62 F41 H54
    Date: 2011
  34. By: Jens Hilscher (International Business School, Brandeis University); Joshua M. Pollet (Broad College of Business, Michigan State University); Mungo Wilson (Saïd Business School, Oxford University)
    Abstract: In this paper we provide evidence that equity returns lead credit protection returns at daily and weekly frequencies, while credit protection returns do not lead equity returns. Our results indicate that informed traders are primarily active in the equity market rather than the CDS market. These findings are consistent with standard theories of market selection by informed traders in which market selection is determined partially by transaction costs. We also find that credit protection returns respond more quickly during salient news events (earnings announcement days) compared to days with similarly volatile equity returns. This evidence regarding the response of credit protection returns to news provides support for explanations related to investor inattention.
    Keywords: CDS, Market Segmentation, Inattention
    JEL: G12
    Date: 2011–07
  35. By: Raphael Anton Auer; Philip Ulrich Sauré
    Abstract: We develop a general equilibrium model of vertical innovation in which multiple firms compete monopolistically in the quality space. The model features many firms, each of which holds the monopoly to produce a unique quality level of an otherwise homogenous good, and consumers who are heterogeneous in their valuation of the good's quality. If the marginal cost of production is convex with respect to quality, multiple rms coexist, and their equilibrium markups are determined by the degree of convexity and the density of quality-competition. To endogenize the latter, we nest this industry setup in a Schumpeterian model of endogenous growth. Each firm enters the industry as the technology leader and successively transits through the product cycle as it is superseded by further innovations. The intrinsic reason that innovation happens in our economy is not one of displacing the incumbent; rather, innovation is a means to di-erentiate oneself from existing firms and target new consumers. Aggregate growth arises if, on the one hand, increasingly wealthy consumers are willing to pay for higher quality and, on the other hand, private firms' innovation generates income growth by enlarging the set of available technologies. Because the frequency of innovation determines the toughness of product market competition, in our framework, the relation between growth and competition is reversed compared to the standard Schumpeterian framework. Our setup does not feature business stealing in the sense that already marginal innovations grant non-negligible prots. Rather, innovators sell to a set of consumers that was served relatively poorly by pre-existing firms. Nevertheless, "creative destruction" prevails as new entrants make the set of available goods more di-erentiated, thereby exerting a pro-competitive e-ect on the entire industry.
    Date: 2011

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