nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2012‒10‒13
28 papers chosen by
Steve Ross
University of Connecticut

  1. The Rise of Skills: Human Capital, the Creative Class and Regional Development By Mellander, Charlotta; Florida, Richard
  2. Competition in Public School Districts: Charter School Entry, Student Sorting, and School Input Determination By Nirav Mehta
  3. Spatial Organization of Firms: Internal and External Agglomeration Economies and Location Choices Through the Value Chain By Juan Alcacer; Mercedes Delgado
  4. The neighbor is king: Customer discrimination in the housing market By Combes, Pierre-Philippe; Decreuse, Bruno; Schmutz, Benoît; Trannoy, Alain
  5. The headmaster ritual: the importance of management for school outcomes By Böhlmark, Anders; Grönqvist, Erik; Vlachos, Jonas
  6. Housing Dynamics over the Business Cycle By Finn E. Kydland; Peter Rupert; Roman Sustek
  7. Path dependence research in regional economic development: Cacophony or knowledge accumulation? By Martin Henning; Erik Stam; Rik Wenting
  8. Student Networks and Long-Run Educational Outcomes: The Strength of Strong Ties By Patacchini, Eleonora; Rainone, Edoardo; Zenou, Yves
  9. What multipliers don’t tell you: A spatial analysis of farm household linkages By Pangbourne, Kate; Roberts, Deborah
  10. Spin-off: Individual, Firm, Industry and Regional Determinants By Baltzopoulos, Apostolos; Braunerhjelm, Pontus; Tikoudis, Ioannis
  11. Multivariate Choice and Identification of Social Interactions By Cohen-Cole, Ethan; Liu, Xiaodong; Zenou, Yves
  12. Achieving political acceptability for new transport infrastructure in congested urban regions By Westin , Jonas; Basck, Pierre; Franklin, Joel P.; Proost , Stef; Raux , Charles
  13. Up in the Air: The Role of Airports for Regional Economic Development By Florida, Richard; Mellander, Charlotta; Holgersson, Thomas
  14. A Choice Experiments Application in Transport Infrastructure: A Case Study on Travel Time Savings, Accidents and Pollution Reduction By Koundouri, Phoebe; Kountouris, Yannis; Stithou, Mavra
  15. The Persistence of (Subnational) Fortune: Geography, Agglomeration, and Institutions in the New World By William F. Maloney; Felipe Valencia Caicedo
  16. Do Labor Market Networks Have An Important Spatial Dimension? By Judith K. Hellerstein; Mark J. Kutzbach; David Neumark
  17. The Impact of Supply Constraints on House Prices in England By Wouter Vermeulen; Christian A.L. Hilber
  18. Incentive Strength and Teacher Productivity: Evidence from a Group-Based Teacher Incentive Pay System By Scott A. Imberman; Michael F. Lovenheim
  19. House prices, credit growth, and excess volatility: Implications for monetary and macroprudential policy By Paolo Gelain; Kevin J. Lansing; Caterina Mendicino
  20. Unemployment in Greece: evidence from Greek regions By Evangelia Papapetrou; Dimitrios Bakas
  21. Central School Exit Exams and Labor-Market Outcomes By Piopiunik, Marc; Schwerdt, Guido; Woessmann, Ludger
  22. Nuclear Power Plants Shutdown and Alternative Power Plants Installation–A Nine-region Spatial Equilibrium Analysis for the Electric Power Market in Japan By Nobuhiro Hosoe
  23. The White/Black Educational Gap, Stalled Progress, and the Long Term Consequences of the Emergence of Crack Cocaine Markets By William N. Evans; Craig Garthwaite; Timothy J. Moore
  24. Borders, Geography, and Oligopoly: Evidence from the Wind Turbine Industry By A. Kerem Cosar; Paul L. E. Grieco; Felix Tintelnot
  25. Monopolistic Location Choice in Two-Sided Industries By Böhme, Enrico; Müller, Christopher
  26. Quasi-experimental Methods in Empirical Regional Science and Policy Analysis – Is there a Scope for Application? By Timo Mitze; Alfredo R. Paloyo; Björn Alecke
  27. Mobility Barriers and the Speed of Market Selection By Werner Hölzl
  28. Size and Density Economies in Refuse Collection By Graziano Abrate; Fabrizio Erbetta; Giovanni Fraquelli; Davide Vannoni

  1. By: Mellander, Charlotta (Jönköping International Business School); Florida, Richard (University of Toronto)
    Abstract: The past couple of decades have seen what amounts to skills revolution in urban and regional economic research. From industrial location theory and Alfred Marshall’s concern for agglomeration to more recent research on high-tech districts and industrial clusters firms and industries has been the dominant unit of analysis. But since the 1990s there has been a growing focus on skills. This broad research thrust includes studies of human capital; the creative class and occupational class more broadly; and physical, cognitive and social skills, among others. This research highlights the growing geographic divergence of skills across cities and metros and their effects on regional innovation, wages, incomes and development broadly. A growing literature notes the growing importance of place in organizing and mobilizing these skills. Studies have focused on the role of amenities, universities, diversity and other place-related factor in accounting for the growing divergence of skills across locations. This article summarizes the key lines of research that constitute the skills revolution in urban and regional research.
    Keywords: Human capital; creative class; regional development
    JEL: O15 O30
    Date: 2012–03–13
  2. By: Nirav Mehta (University of Western Ontario)
    Abstract: The model successfully fits key endogenous outcomes as observed in the data: 1) charter schools enter larger markets and markets where they would have higher per-pupil resources, 2) charter schools and public schools in markets in which charter schools are present both choose higher input levels than public schools in markets where there are no charters, and 3) charter schools have the highest average test scores, followed by public schools in markets with charter school competition, followed by public schools in monopoly markets. I use the estimated model to simulate changes in the test score distribution for three counterfactual scenarios: 1) ban charter schools, 2) lift the currently binding statewide cap on the number of charter schools, and 3) equate charter and public school per-pupil resources. In the first and second counterfactuals, charter school entry increases test scores for students who would attend charters by one fifth of a standard deviation. Test scores for public school students in markets with charter schools increase marginally. Equating charter and public school capital triples the fraction of markets with charters and increases the test scores of students attending charters over the monopoly outcome by an even larger amount.
    Date: 2012
  3. By: Juan Alcacer; Mercedes Delgado
    Abstract: We explore the impact of geographically bounded intra-firm spillovers (internal agglomeration economies) and geographically bounded inter-firm spillovers (external agglomeration economies) on firms’ location strategies. Using data from the Census Bureau’s Longitudinal Business Database and the U.S. Cluster Mapping Project, we analyze organic expansions of biopharmaceutical firms (by both new establishments and employment increase in existing establishments) in the U.S. in 1993-2005. We consider all activities in the value chain and allow location choices to vary by R&D, manufacturing, and sales. Our findings suggest that (1) internal and external agglomeration economies have separate, positive impacts on location, with relevant differences by activity; (2) internal economies of agglomeration arise within an activity (e.g., among plants) and across activities (e.g., between manufacturing and sales); (3) the effects of internal economies across and within activities vary by activity and type of organic expansion; and (4) across-activity internal economies are asymmetric.
    Keywords: Location choices, agglomeration economies, value chain, organization theory
    Date: 2012–09
  4. By: Combes, Pierre-Philippe; Decreuse, Bruno; Schmutz, Benoît; Trannoy, Alain
    Abstract: This paper provides a method to single out customer-based discrimination in the housing market. We build a matching model with ethnic externalities where landlords differ in the number of housing units they own within the same building. Multiple-dwelling landlords discriminate more often than single-dwelling landlords only if some tenants are prejudiced against the minority group. By testing the null hypothesis whereby minority tenants are equally likely to have a multiple-dwelling landlord, we can test whether there is customer discrimination or not. We run the test on French data and show evidence of customer discrimination in the rental market.
    Keywords: Customer Discrimination; Housing Market; Matching Frictions; Neighborhood Externalities
    JEL: J71 R21
    Date: 2012–09
  5. By: Böhlmark, Anders (Swedish Institute for Social Research (SOFI)); Grönqvist, Erik (IFAU - Institute for Evaluation of Labour Market and Education Policy); Vlachos, Jonas (Department of Economics, Stockholm University)
    Abstract: The role of school principals largely resembles that of corporate managers and the leadership they provide is often viewed as a crucial component for educational success. We estimate the impact of individual principals on various schooling outcomes, by constructing a principal-school panel data set that allows us to track individual principals as they move between schools. We find that individual principals have a substantive impact on school policies, working conditions and student outcomes. Particularly, students who attend a school with a one standard deviation better principal receive on average 0.12 standard deviations higher test scores. Despite having very rich background information on principals, it is difficult to determine which principal characteristics that form the basis for successful school management. We also find a somewhat mixed picture on what management style characterizes a successful principal. We further show that the scope for principal discretion—for better or for worse—is larger in small schools, in voucher schools and in areas with more school competition.
    Keywords: Principals; School Management
    JEL: I20
    Date: 2012–09–24
  6. By: Finn E. Kydland; Peter Rupert; Roman Sustek
    Abstract: Over the U.S. business cycle, fluctuations in residential investment are well known to systematically lead GDP. These dynamics are documented here to be specific to the U.S. and Canada. In other developed economies residential investment is broadly coincident with GDP. Nonresidential investment has the opposite dynamics, being coincident with or lagging GDP. These observations are in sharp contrast with the properties of nearly all business cycle models with disaggregated investment. Including mortgages and interest rate dynamics aligns the theory more closely with U.S. observations. Longer time to build in housing construction makes residential investment coincident with output.
    JEL: E22 E32 R21 R31
    Date: 2012–10
  7. By: Martin Henning; Erik Stam; Rik Wenting
    Abstract: The concept of path dependence has gained momentum in the social sciences, particularly in economic geography. In this paper, we explore the empirical literature on path dependence and path creation in regional economic development. We offer a critical reflection on these studies and outline commonalities and problems in research designs and empirical testing. Our review suggests that the popularity of the concept of path dependence in regional studies has led to a cacophony of studies rather than a purposeful accumulation of knowledge around the concept. To remedy this situation, we identify gaps and suggest guidelines for future empirical research on the role of path creation and path dependence in uneven regional development.
    Keywords: path dependence, path creation, regional development, economic geography
    Date: 2012–10
  8. By: Patacchini, Eleonora; Rainone, Edoardo; Zenou, Yves
    Abstract: The aim of this paper is to investigate and understand the effect of high-school friends on years of schooling. We develop a simple network model where students first choose their friends and then decide how much effort they put in education. The empirical salience of the model is tested using the four waves of the AddHealth data by looking at the impact of school peers nominated in the first two waves in 1994-1995 and in 1995-1996 on the educational outcome of teenagers reported in the fourth wave in 2007-2008 (when adult). We find that there are strong and persistent peer effects in education but peers tend to be influential only when they are strong ties (friends in both wave I and II) and not when they are weak ties (friend in one wave only). We also find that this is not true in the short run since both weak and strong ties tend to influence current grades.
    Keywords: education; long-term effects; peer effects; Social networks
    JEL: C21 I21 Z13
    Date: 2012–09
  9. By: Pangbourne, Kate; Roberts, Deborah
    Abstract: Agricultural policy and farm lobby groups often stress the role of farm production in sustaining local economies. This paper considers the spatial pattern of the upstream and downstream agricultural transactions of farms in North East Scotland and, in particular, the extent to which they take place within the locality of the farm holding. Three alternative definitions of “local” are considered: a distance based measure; a measure which takes into account the location of the farm in relation to the nearest town; and finally a measure which takes into account the location of input suppliers/output purchasers. The results are shown to vary qualitatively according to the definition of local adopted, highlighting the importance of allowing for context as well as demand-side factors when explaining purchasing and sales decisions. A highly complex pattern of production-related linkages in the region is revealed. Certain towns are found to dominate agriculture-related transactions in the region reflecting the spatial concentration of upstream and downstream agribusinesses. Probit analysis suggests that farm size, farm type and risk attitudes influence output sales patterns. The policy implications of the findings are considered.
    Keywords: local transactions, spatial tracking, farm households, agribusiness, Agribusiness, R12, Q12, Q13,
    Date: 2012–04
  10. By: Baltzopoulos, Apostolos (The Nordic Centre for Spatial Development); Braunerhjelm, Pontus (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology); Tikoudis, Ioannis (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: The extent and importance of spin-offs for industrial dynamics have been analysed in a number of previous studies, yet knowledge is surprisingly scarce about the determinants that trigger such entrepreneurial ventures. In the current analysis we use unique and detailed Swedish data to comprehensively explore how individual, firm, regional, and industry variables influence spin-offs during 1999-2005. In addition to the expected general positive impact of regional size and entrepreneurial culture, we find specific features for knowledge intensive manufacturing and service production on the propensity of employees to spin off a new venture. Moreover, we use an entropy measure to disentangle unrelated and related variety, and find that the former has a significantly negative impact while the latter a significantly positive effect on the propensity of the individual to start a spin-off.
    Keywords: Spin-offs; entrepreneurship; industries; regions
    JEL: D01 O12 O18 R10
    Date: 2012–01–30
  11. By: Cohen-Cole, Ethan; Liu, Xiaodong; Zenou, Yves
    Abstract: In this paper, we investigate the impact of peers on own outcomes where all agents embedded in a network choose more than one activity. We develop a simple network model that illustrates these issues. We differentiate between the ‘seemingly unrelated’ simultaneous equations model where people are influenced only by others within the same activity, the ‘triangular’ simultaneous equations model, where there is some asymmetry in the peers’ cross effects, and the ‘square’ simultaneous equations model, where all possible cross-choice effects are taken into account. We develop the conditions under which each model is identified, showing that the general ‘square’ simultaneous equations model with both simultaneity effect and cross-choice peer effect cannot be identified without any exclusion restrictions. We then study the impact of peer effects on education and screen activities and show that the estimated within- and cross-choice peer effects both have non-trivial impacts on adolescent behavior. We find, in particular, that, keeping peers’ grades and screen activities fixed, watching more TV could be beneficial to a student’s grade.
    Keywords: identification; peer effects; Social networks
    JEL: C21 C3 I21 Z13
    Date: 2012–09
  12. By: Westin , Jonas (KTH); Basck, Pierre (LET, Université de Lyon); Franklin, Joel P. (KTH); Proost , Stef (CES, KU Leuven); Raux , Charles (LET, Université de Lyon)
    Abstract: The paper analyzes the political acceptability of policies targeted at relieving urban congestion. The paper combines a stylized model of an urban transport network with a somewhat more detailed model of the political process that incorporates interactions between voters, special interest groups and politicians to explore the possibilities to reach political acceptability for efficient transport policies. In a case study of a proposed bypass in Lyon, France, the paper compares a set of potential policies in terms of efficiency, equity and political acceptability. A possible explanation for the difficulty of achieving political support for efficient transport policies is that since urban road pricing policies are characterized by conflicting interest, the political decision making process must balance different interests against each other to reach an efficient outcome. The analysis suggest that the difficulty to achieve political support for efficient road pricing policies is not a lack of political acceptability; instead the difficulty arises because of low political feasibility for efficient transport pricing since non-efficient transport policies are seen as more attractive to the decision makers.
    Keywords: User charges; Political economy; Transport infrastructure; Welfare effects; Acceptability of transport pricing
    JEL: H76 R42 R48 R48 R53
    Date: 2012–10–02
  13. By: Florida, Richard (University of Toronto); Mellander, Charlotta (Jönköping International Business School); Holgersson, Thomas (Jönköping International Business School)
    Abstract: Short on the role of airports in for regional development in earlier work, our research examines two things: (1) the likelihood for the region to have an airport in the first place and (2) the effects of airports for regional economic development. Based on multiple regression analysis for US metros, we find that airports are more likely in larger metros with higher shares of more cultural workers and warmer winters are more likely to have an airport in the first place. We also find that airports add significantly to economic output per capita, when controlling for other variables, and that the size of the airport activities matters.
    Keywords: Airports; economic development
    JEL: R00 R40
    Date: 2012–03–13
  14. By: Koundouri, Phoebe; Kountouris, Yannis; Stithou, Mavra
    Abstract: This paper presents the results of a Choice Experiment (CE) conducted to estimate the values derived from a highway construction project in Greece. To account for preference heterogeneity conditional logit with interactions and random parameter logit models are estimated. The results indicate that individuals have significant values for travel time savings, percentage decrease in traffic accidents, percentage decrease in traffic related emissions and landscape modifications. Models where the attributes are interacted with socioeconomic variables perform better and produce lower welfare estimates compared to models without interactions with important implications for cost benefit analysis.
    Keywords: Choice experiments; transport infrastructure;travel time savings; accidents; pollution reduction
    JEL: C9 N7 C93
    Date: 2012
  15. By: William F. Maloney; Felipe Valencia Caicedo
    Abstract: Using subnational historical data, this paper establishes the within country persistence of economic activity in the New World over the last half millennium. We construct a data set incorporating measures of pre-colonial population density, new measures of present regional per capita income and population, and a comprehensive set of locational fundamentals. These fundamentals are shown to have explanatory power: native populations throughout the hemisphere were found in more livable and productive places. We then show that high pre-colonial density areas tend to be dense today: population agglomerations persist. The data and historical evidence suggest this is due partly to locational fundamentals, but also to classic agglomeration effects: colonialists established settlements near existing native populations for reasons of labor, trade, knowledge and defense. We then show that high density (historically prosperous) areas also tend to have higher incomes today, and largely due to agglomeration effects: fortune persists for the United States and most of Latin America. Further, we show that extractive institutions, in our case, slavery, reduce persistence even if they do not overwhelm other forces in its favor.
    Date: 2012–09–20
  16. By: Judith K. Hellerstein; Mark J. Kutzbach; David Neumark
    Abstract: We test for evidence of spatial, residence-based labor market networks. Turnover is lower for workers more connected to their neighbors generally and more connected to neighbors of the same race or ethnic group. Both results are consistent with networks producing better job matches, while the latter could also reflect preferences for working with neighbors of the same race or ethnicity. For earnings, we find a robust positive effect of the overall residence-based network measure, whereas we usually find a negative effect of the same-group measure, suggesting that the overall network measure reflects productivity enhancing positive network effects, while the same-group measure captures a non-wage amenity.
    Date: 2012–09
  17. By: Wouter Vermeulen; Christian A.L. Hilber
    Abstract: <p>We explore the impact of different types of supply constraints on house prices in England by exploiting a unique panel dataset of 353 local planning authorities ranging from 1974 to 2008.</p><p>Using exogenous variation from a policy reform, vote shares and historical density to identify the endogenous constraints-measures, we find that:</p><ol><li>Regulatory constraints have a substantive positive long-run impact on the house price-earnings elasticity;</li><li>The effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas;</li><li>Uneven topography has a quantitatively less meaningful impact;</li><li>The effects of supply constraints are greater during boom than bust periods.</li></ol>
    JEL: G12 R11 R21 R31 R52
    Date: 2012–10
  18. By: Scott A. Imberman; Michael F. Lovenheim
    Abstract: Using data from a group incentive program that provides cash bonuses to teachers whose students perform well on standardized tests, we estimate the impact of incentive strength on student achievement. These awards are based on the performances of students within a grade, school and subject, providing substantial variation in group size. We use the share of students in a grade-subject enrolled in a teacher's classes as a proxy for incentive strength since, as the teacher share increases, a teacher's impact on the probability of award receipt rises. We find that student achievement improves when a teacher becomes responsible for more students post program implementation: mean effects are between 0.01 and 0.02 standard deviations for a 10 percentage point increase in share for math, English and social studies, although mean science estimates are small and are not statistically significant. As predicted in our theoretical model, we also find larger effects at smaller shares that fall towards zero as share increases. For all four subjects studied, effect sizes start at 0.05 to 0.09 standard deviations for a 10 percentage point increase in share when share is initially close to zero and fade out as share increases. These findings suggest that small groups provide productivity gains over large groups. Further, they suggest that the lack of effects found in US teacher incentive pay experiments probably are in some part due to specific aspects of program design rather than failure of teachers to respond to incentives more generally.
    JEL: H41 I21 J33 J38
    Date: 2012–10
  19. By: Paolo Gelain (Norges Bank (Central Bank of Norway)); Kevin J. Lansing (FRB San Francisco and Norges Bank (Central Bank of Norway)); Caterina Mendicino (Bank of Portugal)
    Abstract: Progress on the question of whether policymakers should respond directly to financial variables requires a realistic economic model that captures the links between asset prices, credit expansion, and real economic activity. Standard DSGE models with fully-rational expectations have difficulty producing large swings in house prices and household debt thatresemble the patterns observed in many developed countries over the past decade. We introduce excess volatility into an otherwise standard DSGE model by allowing a fraction of households to depart from fully-rational expectations. Specifically, we show that theintroduction of simple moving-average forecast rules for a subset of households can significantly magnify the volatility and persistence of house prices and household debt relative to otherwise similar model with fully-rational expectations. We evaluate various policy actions that might be used to dampen the resulting excess volatility, including a direct response to house price growth or credit growth in the central bank's interest rate rule, the imposition of more restrictive loan-to-value ratios, and the use of a modified collateral constraint that takes into account the borrower's loan-to-income ratio. Of these, we find that a loan-to-income constraint is the most effective tool for dampening overall excess volatility in the model economy. We find that while an interest-rate response to house price growth or credit growth can stabilize some economic variables, it can significantly magnify the volatility of others, particularly inflation.
    Keywords: Asset pricing, Excess volatility, Credit cycles, Housing bubbles, Monetary policy, Macroprudential policy
    JEL: E32 E44 G12 O40
    Date: 2012–08–20
  20. By: Evangelia Papapetrou (Bank of Greece and University of Athens); Dimitrios Bakas (University of Athens)
    Abstract: The purpose of the paper is to examine the nature of Greek unemployment allowing for cross-sectional dependence among Greek regions and for the presence of structural breaks. The paper contributes to the literature assessing the stochastic properties of Greek regional unemployment rates using recently developed and more powerful panel unit-root tests, such as the Lagrange Multiplier (LM) panel unit root test of Im et al. (2010), that allow for level and trend breaks, heterogeneity and cross-sectional dependence in the panel. The results show that in all cases, after taking into account the fact that regional unemployment rates in Greece are subject to a structural break both in mean and the slope of the series, the null hypothesis of a unit root is not rejected, indicating that the Greek regional unemployment series are non-stationary with the presence of a structural break.
    Keywords: Unemployment; Hysteresis; Panel unit root tests; Structural breaks; Cross-section dependence
    JEL: C32 C33 E24 J64 R23
    Date: 2012–06
  21. By: Piopiunik, Marc (Ifo Institute for Economic Research); Schwerdt, Guido (Ifo Institute for Economic Research); Woessmann, Ludger (Ifo Institute for Economic Research)
    Abstract: Many countries use centralized exit exams as a governance devise of the school system. While abundant evidence suggests positive effects of central exams on achievement tests, previous research on university-bound students shows no effects on subsequent earnings. We suggest that labor-market effects may be more imminent for students leaving school directly for the labor market and, on rigid labor markets, for unemployment. Exploiting variation in exit-exam systems across German states, we find that central exams are indeed associated with higher earnings for students from school types directly bound for the labor market, as well as with lower unemployment.
    Keywords: unemployment, earnings, central exit exams, Germany
    JEL: I20 J24 J31 J64
    Date: 2012–09
  22. By: Nobuhiro Hosoe (National Graduate Institute for Policy Studies)
    Abstract: After the Great East Japan Earthquake and the subsequent nuclear accident, nuclear power stations cannot be considered safe any longer and, thus, can be hardly allowed to restart in Japan. In this study, we develop a nine-region spatial equilibrium model for the Japanese power market and simulate two-part situations: (1) none of the nuclear power plants can operate any longer and (2) gas turbine combined cycle (GTCC) power plants are installed to fully cover the lost capacity of the nuclear power plants. When all the nuclear power plants are shut down, the average power prices would rise by 1.5–3 yen/kWh. By substituting their capacity with the GTCC power plants, we could compress the average price rise as high as 0.5–1.5 yen/kWh compared with the status quo. Their impact, however, would differ by region on the basis of the share of nuclear power in their plant portfolios. When nuclear power is fully available, inter-regional transmission is mainly driven by the abundant base-load capacity, including nuclear power, during the nighttime. After the nuclear power plant shutdown, the regions with abundant nuclear power capacity would not be able to afford to sell their power to other regions and this would cause less serious congestion at the inter-regional transmission links. The installation of GTCC power plants would make the plant portfolios more similar among regions and, thus, reduce inter-regional transmission further, which causes congestion very rarely.
    Date: 2012–10
  23. By: William N. Evans; Craig Garthwaite; Timothy J. Moore
    Abstract: We propose the rise of crack cocaine markets as an explanation for the end to the convergence in black-white educational outcomes beginning in the mid-1980s. After constructing a measure to date the arrival of crack markets in cities and states, we show large increases in murder and incarceration rates after these dates. Black high school graduation rates also decline, and we estimate that crack markets accounts for between 40 and 73 percent of the fall in black male high school graduation rates. We argue that the primary mechanism is reduced educational investments in response to decreased returns to schooling.
    JEL: I0 I2 I21 I28 J0 J01 J1
    Date: 2012–10
  24. By: A. Kerem Cosar (The University of Chicago Booth School of Business); Paul L. E. Grieco (The Pennsylvania State University); Felix Tintelnot (The Pennsylvania State University)
    Abstract: Using a micro-level dataset of wind turbine installations in Denmark and Germany, we estimate a structural oligopoly model with cross-border trade and heterogeneous firms. Our approach separately identifies border-related from distance-related variable costs and bounds the fixed cost of exporting for each firm. Variable border costs are large: equivalent to roughly 400 kilometers (250 miles) in distance costs, which represents 40 to 50 percent of the average exporter's total delivery costs. Fixed costs are also important; removing them would increase German firms' market share in Denmark by 10 percentage points. Counterfactual analysis indicates that completely eliminating border frictions would increase total welfare in the wind turbine industry by 5 percent in Denmark and 10 percent in Germany.
    Keywords: Trade costs, oligopoly, spatial competition, constrained MLE.
    JEL: F14 L11 L20 L60 R12
    Date: 2012–10
  25. By: Böhme, Enrico; Müller, Christopher
    Abstract: We analyze the optimal location choice of a monopolistic firm that operates two platforms on a two-sided market. We show that the optimal platform locations are equivalent to the one-sided benchmark if both sides are either restricted to single- or multi-homing. In the mixed case (one side single-homes, the other one multi-homes), the optimal platform locations are determined by the relative profitability of both market sides. Our results indicate that modeling mergers on two-sided markets with fixed locations is often inappropriate.
    Keywords: two-sided markets; location choice; monopoly; merger simulation
    JEL: K20 L51 L12 D42
    Date: 2012–10–05
  26. By: Timo Mitze; Alfredo R. Paloyo; Björn Alecke
    Abstract: Applied econometrics has recently emphasized the identification of causal parameters for policy analysis. This revolution has yet to fully propagate to the field of regional science. We examine the scope for application of the matching approach – part of the modern applied econometrics toolkit – in regional science and highlight special features of regional data that make such an application difficult. In particular, our analysis of the effect of regional subsidies on labor-productivity growth in Germany indicates that such policies are effective, but only up to a certain maximum treatment intensity. Although the matching approach is very appealing due to its methodological rigor and didactical clarity, we faced difficulties in balancing the set of covariates for our regional data given that the regions differ strongly with respect to the underlying structural characteristics. Thus, results have to be interpreted with some caution. The matching approach nevertheless can be of great value for regional policy analysis and should be the subject of future research efforts in the field of empirical regional science.
    Keywords: Generalized propensity score; nearest neighbor matching; labor productivity growth; regional policy
    JEL: C21 R11 R58
    Date: 2012–09
  27. By: Werner Hölzl (WIFO)
    Abstract: This paper studies the influence of mobility barriers on industry evolution using the stylised pure selection model developed by Metcalfe. It is shown that mobility barriers influence industry dynamics by reducing the speed of competitive selection. Based on the theoretical model, we argue that mobility barriers should lead to a reduction of market share reallocation dynamics in models that use replicator dynamics. We then test this prediction empirically, finding that industries with high mobility barriers have a larger share of stable firms that grow or decline only marginally, compared to industries with low mobility barriers. This has important implications for the interpretation of productivity decompositions. Our empirical results show that higher mobility barriers result in a lower contribution of reallocation to aggregate productivity growth in Austrian manufacturing industries.
    Keywords: Intensity of competition, mobility barriers, sunk costs, selection dynamics, firm growth, reallocation
    Date: 2012–10–01
  28. By: Graziano Abrate (Department of Business Management and Environment, University of Eastern Piedmont); Fabrizio Erbetta (Department of Business Management and Environment, University of Eastern Piedmont); Giovanni Fraquelli (Department of Business Management and Environment, University of Eastern Piedmont); Davide Vannoni (Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino, Italy)
    Abstract: The focus of the paper is to analyze the costs of solid waste collection by applying a well-behaved multiproduct cost function model to a sample of more than 500 Italian municipalities. Beyond shedding light on the presence and on the extent of size (or scale) economies, our aim is to investigate in depth the issue of economies of density, which is still an underexplored topic in the literature. Our cost function specification, by being able to estimate several measures of density economies (such as output density economies, vertical density economies and horizontal density economies), allows to capture the impact of different urbanization models on the costs of refuse collection and disposal. The results of the estimates highlight the presence of output density economies as well as horizontal density economies. Conversely, there is significant and robust evidence of the existence of vertical density diseconomies, which suggests that congestion problems in densely populated councils are severely affecting garbage collection costs. Finally, there is evidence of diseconomies of size, which suggests that aggregating the refusal collection operations of several municipalities would not bring savings in the average costs.
    Keywords: Solid waste, density economies, cost functions.
    JEL: D24 H42 L32 L99
    Date: 2012–07

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