nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2013‒01‒12
25 papers chosen by
Steve Ross
University of Connecticut

  1. Supply, Demand and Prices in the US Housing Market By Conefrey, Thomas; Whelan, Karl
  2. Suburban hotels and the atomization of tourist space in large cities: the case of Rome By Filippo Celata
  3. Is Urban Economic Growth Inclusive in India? By Tripathi, Sabyasachi
  4. Home Voters, House Prices, and the Political Economy of Zoning By Dascher, Kristof
  5. The geography of European low-cost airline networks: A contemporary analysis By Frédéric Dobruszkes
  6. A Mechanism for Booms and Busts in Housing Prices By Hillebrand, Marten; Kikuchi, Tomoo
  7. Wages, Rents, Unemployment, and the Quality of Life By Wrede, Matthias
  8. Estimating Urban Agglomeration Economies for India: A New Economic Geography Perspective By Tripathi, Sabyasachi
  9. Unequal Pay or Unequal Employment? What Drives the Skill-Composition of Labor Flows in Germany? By Arntz, Melanie; Gregory, Terry; Lehmer, Florian
  10. The Polarization of Employment in German Local Labor Markets By Wielandt, Hanna; Senftleben, Charlotte
  11. Trade, Economic Geography and the Choice of Product Quality By Pierre M. Picard
  12. Spatial System Estimators for Panel Models: A Sensitivity and Simulation Study By Shuangzhe Liu; Tiefeng Ma; Wolfgang Polasek
  13. Human Capital, Consumption, and Housing Wealth in Transition By Fidrmuc, Jarko; Senaj, Matus
  14. What is the impact of educational systems on social mobility across Europe? A comparative approach By Pedro Abrantes; Manuel Abrantes
  15. Wanna Get Away? RD Identification Away from the Cutoff By Joshua Angrist; Miikka Rokkanen
  16. Hypercongestion in downtown metropolis By Fosgerau, Mogens; Small, Kenneth E.
  17. Diffusion and Spatial Equilibrium of a Social Norm: Voting Participation in the United States, 1920-2008 By Coleman, Stephen
  18. Complementary Policies to Increase Poor People’s Access to Higher Education: The Case of West Java, Indonesia By Mohamad Fahmi; Achmad maulana; Arief Anshory Yusuf
  19. The Effect of Education on Fertility: Evidence from a Compulsory Schooling Reform By Cygan-Rehm, Kamila; Mäder, Miriam
  20. Heterogeneous Firms and Substitution by Tasks: the Productivity Effect of Migrants By Lucht, Michael; Haas, Anette
  21. Effects of Milan's Congestion Charge By Carnovale, Maria; Gibson, Matthew
  22. The effects of early childhood intervention on child development and early skill formation. Evidence from a randomized experiment. By Sandner, Malte
  23. Incumbency Effects in Germany: Federal and Mayoral Elections By Sieger, Philip
  24. Residential Property Auctions: What do they tell us? By O'Brien, Eoin
  25. Effective Labor Taxation and the International Location of Headquarters By Strecker, Nora; Egger, Peter; Radulescu, Doina

  1. By: Conefrey, Thomas (Central Bank of Ireland); Whelan, Karl (University College Dublin)
    Abstract: The slowdown in the US economy in 2008, and in the housing market in particular, has been accom- panied by a sharp fall in house prices and a glut of homes for sale on the market. While the idea that this overhang of dwellings for sale should place downward pressure on house prices is intuitive, little empirical work has been done in this area. This paper explicitly models the relationship between changes in house prices and various measures of housing supply. The results show that months supply of new homes places greater downward pressure on house prices that the months supply of existing homes. We build a small simulation model to examine the evolution of the housing market.
    Keywords: Housing market, supply, prices
    JEL: R21 R31
    Date: 2012–12
  2. By: Filippo Celata (Department of Metodi e modelli per l'economia, il territorio e la finanza MEMOTEF - Sapienza University of Rome (Italy))
    Abstract: Drawing on theoretical and empirical studies on hotel location, as well as on enquires into the specificities of contemporary suburbanization, the article investigates the drives, directions and consequences of the dispersal of hotels into the suburban areas of large historic cities, with an illustration of the case of Rome. The attractiveness of suburban tourism for both private investors and planning authorities - it is argued - is not simply a response to the congestion of city centres, but is constructed upon more general changes in the spatiality of urban tourism. The spread of suburban hotels exemplifies an atomization of the tourist city and it is an excellent indicator of the changing sociofunctional relations between the hospitality system and the city, the different role of accessibility and of agglomeration economies, the transformation of tourists’ experience of cities in an age of global suburbanization.
    Keywords: urban tourism, hotel location, suburbanization, urban planning, Rome (Italy)
    JEL: L83 R12 R33 R58 N94 L83 R12 R33 R58 N94
  3. By: Tripathi, Sabyasachi
    Abstract: This paper measures the overall inclusive growth of a city by considering changing trends in the key economic variables based on ‘Borda ranking’ and establishes a relationship between city economic growth and overall city inclusive growth. By using data of 52 large cities in India, this paper finds that higher urban economic growth is associated with an increase in urban inequality, a reduction in urban poverty, and a lower level of overall inclusive growth of a city.
    Keywords: Economic Growth; Poverty; Inequality; Inclusive Growth; Urban India
    JEL: D63 O15 R11
    Date: 2013–01
  4. By: Dascher, Kristof
    Abstract: One explanation of the recent real estate bubble might point to homeowners' artificially restricting housing supply. While empirical work has not found unequivocal evidence in support of this hypothesis, homeowners may well be restricting supply nonetheless, and without this restriction manifesting itself in a simple -- or even partial -- positive correlation between homeownership and rent. Three points emphasized in this paper's model cloud the relationship between homeownership and rent observed in the data. First, rent rises diffuse across cities. Second, homeowners may only wish to impose restrictions to supply if tenants are not few. And third, homeowners may negotiate supply restrictions in neighboring tenant-dominated cities, giving rise to homeowner-tenant coalitions in non-obvious ways. -- The paper's empirical part tests the model against a data set that combines micro data on homeowners and rents with information on East Germany's large scale demolition, with this demolition interpreted as one striking instance of zoning. --
    JEL: R31 H73 D72
    Date: 2012
  5. By: Frédéric Dobruszkes
    Abstract: Low-cost airlines (LCAs) have become essential actors supplying nationwide and continental air services.This paper focuses on the European case and investigates how the LCA spatial strategy hasevolved since the last available comprehensive analysis in 2004. Using comprehensive data, the analysisis conducted at three levels: global, cities and networks. It shows that LCAs now represent 31% ofintra-European airline seats. Although LCA business has expanded to Central-East Europe, Morocco,and a few remote areas, it remains mainly focused on the intra-Western market. In general, LCAs servelarge cities and tourist destinations. The use of secondary, regional airports is put into perspective. Servicevolatility is low at the city level but significant at the inter-city level. Average distance hasincreased, but most flights are short-haul. LCAs play an important role in launching new routes, thusdiversifying the European airline network, and in increasing frontal competition with traditional airlineson pre-existing routes. The niche markets are common in terms of routes but are rather limitedin terms of seats supplied. Actually, the main specificity of the largest LCAs is the provision of flightsthat do not serve the home country. A typology of networks demonstrates that there is no a singleEuropean low-cost model.
    Keywords: Low-cost airlines; Low-fare airlines; No-frills airlines; Air transport; Airline networks; Europe
    Date: 2013
  6. By: Hillebrand, Marten; Kikuchi, Tomoo
    Abstract: We study an exchange economy with overlapping generations of consumers who derive utility from consuming a non-durable commodity and housing. A banking sector offers loans to finance housing. We provide a complete characterization of the equilibrium dynamics which alternates between an expansive regime where housing prices increase and banks expand loans and a contractive regime associated with decreasing housing values and shrinking credit volume. Regime switches occur even under small but persistent income changes giving rise to large booms and busts in housing prices not reflecting changes in fundamentals. --
    JEL: C62 E32 G21
    Date: 2012
  7. By: Wrede, Matthias
    Abstract: Combining a spatial equilibrium model with a matching unemployment model, this paper analyzes the regional quality of life when wages, rents, and unemployment risk compensate for local amenities and disamenities. In particular, the paper shows for quasi-linear utility that the effects of any amenity on wages and unemployment rates are of opposite sign. Additionally, the wage rate and the labor market tightness increase and the unemployment ratio decreases in reaction to an increase in the level of an amenity if the amenity is marginally more beneficial to producers than to consumers per unit of land. Based on the model, quality of life of the unemployed in West German counties is estimated. --
    JEL: R12 H73 R14
    Date: 2012
  8. By: Tripathi, Sabyasachi
    Abstract: The main objective of this paper is to provide answer to an important question: Are Indian firms or industries in urban areas operating under decreasing returns to scale or increasing returns to scale? Scale economies are one of the main assumptions of new economic geography models that posit the formation of agglomeration economies. For this purpose, we use Kanemoto et al. (1996) model for estimation of aggregate production function and to derive the magnitude of scale economies. Using firm level data in 2004-05 from the Annual Survey of Industry, we find that urban firms in Indian industry operate under decreasing returns to scale.
    Keywords: Economic geography; Urban agglomeration; Firm level analysis; Manufacturing industry; India
    JEL: L60
    Date: 2012–12
  9. By: Arntz, Melanie; Gregory, Terry; Lehmer, Florian
    Abstract: This paper examines the determinants of gross labour flows in a context where modeling the migration decision as a wage-maximizing process may be inadequate due to regional wage rigidities that result from central wage bargaining. In such a context, the framework that has been developed by Borjas et al. (1992) on the selectivity of internal migrants with respect to skills has to be extended to allow migrants to move to regions that best reward their skills in terms of both wages and employment. The extended framework predicts skilled workers to be disproportionately attracted to regions with higher mean wages and employment rates as well as higher regional wage and employment inequalities. Estimates from a labour flow fixed effects model and a GMM estimator show that these predictions hold, but only the effects for mean employment rates and employment inequality are robust and significant. The paper may thus be able to explain why earlier attempts to explain skill selectivity in Europe within a pure wage-based approach failed to replicate the US results. --
    JEL: R23 J31 J61
    Date: 2012
  10. By: Wielandt, Hanna; Senftleben, Charlotte
    Abstract: This paper uses the task-based view of technological change to study employment and wage polarization at the level of local labor markets in Germany between 1979 and 2007. In order to directly relate technological change to subsequent employment trends, we exploit variation in the regional task structure which reflects a region s potential of being affected by computerization. We build a measure of regional routine intensity to test whether there has been a reallocation from routine towards non-routine labor conditional on a region s initial computerization potential. We find that routine intensive regions have witnessed a differential reallocation towards non-routine employment and an increase in low- and medium-skilled service occupations. Our results corroborate the predictions of the task-based framework and confirm previous evidence on employment polarization in Germany in the sense that employment growth deteriorates at the middle of the skill distribution relative to the lower and the upper tail of the distribution. --
    JEL: R23 J24 J62
    Date: 2012
  11. By: Pierre M. Picard (CREA, University of Luxembourg and CORE, Université Catholique de Louvain)
    Abstract: The present paper studies the effect of the choice of product quality on trade and location of firms. We build a quality-augmented model where consumers have preferences for the quality of a set of differentiated varieties. Firms do not only develop and sell manufacturing varieties in a monopolistic competitive market but also determine the quality level of their varieties by investing in research and de- velopment. We explore the price and quality equilibrium properties when firms are immobile. We then consider a footloose capital model where capital is allocated to the manufacturing firms in the region offering the highest return. We show that the larger region produces varieties of higher quality and that the quality gap increases with larger asymmetries in region sizes and with larger trade costs. Finally, the home market effect is mitigated when firms choose their product quality.
    Keywords: Monopolistic Competition, Endogenous Quality, Economic Geography
    Date: 2012
  12. By: Shuangzhe Liu (University of Canberra, Australia); Tiefeng Ma (Southwestern University of Finance and Economics, China); Wolfgang Polasek (Institute for Advanced Studies, Austria; The Rimini Centre for Economic Analysis (RCEA), Italy)
    Abstract: System of panel models are popular models in applied sciences and the question of spatial errors has created the recent demand for spatial system estimation of panel models. Therefore we propose new diagnostic methods to explore if the spatial component will change significantly the outcome of non-spatial estimates of seemingly unrelated regression (SUR) systems. We apply a local sensitivity approach to study the behavior of generalized least squares (GLS) estimators in two spatial autoregression SUR system models: a SAR model with SUR errors (SAR-SUR) and a SUR model with spatial errors (SUR-SEM). Using matrix derivative calculus we establish a sensitivity matrix for spatial panel models and we show how a first order Taylor approximation of the GLS estimators can be used to approximate the GLS estimators in spatial SUR models. In a simulation study we demonstrate the good quality of our approximation results.
    Keywords: Seemingly unrelated regression models, panel systems with spatial errors, SAR and SEM models, generalized least-squares estimators, Taylor approximations
    Date: 2012–11
  13. By: Fidrmuc, Jarko; Senaj, Matus
    Abstract: This paper focuses on human capital and physical capital of households in Slovakia during the economic reforms of the last two decades. We compare households who entered the labor market before and after the economic reforms in 1990. On the one hand, we study the returns to education by different labor market cohorts using household consumption surveys. On the other hand, we analyze the determinants of housing wealth and its impact on consumption. We show that old cohorts are characterized by lower returns to human capital and consumption levels, but higher housing wealth. Thus, we do not identify a clear pattern of winners and losers from transition. --
    JEL: D12 J24 C31
    Date: 2012
  14. By: Pedro Abrantes; Manuel Abrantes
    Abstract: Education is reasonably expected to enhance intergenerational social mobility. However, the extent to which educational systems foster or otherwise constrain social mobility remains controversial. In this paper, data from the European Social Survey covering 22 countries is analysed in order to assess social mobility in the second half of the 20th Century. Variation across five cohesive regional clusters is examined in detail. Results confirm increasing rates of social mobility in Europe and their close relation to massive structural shifts. The erosion of the education-occupation linkage presents a current threat to this trend. Considering formal credentials only, the most equalitarian educational systems are to be found in the United Kingdom and Ireland, but their ability to allocate individuals in the occupational structure is lower than in the other regions. Scandinavian systems show higher chances of social mobility through education, while Mediterranean systems present lower fluidity rates in both the background-education link (like Eastern European countries) and the education-occupation link (like the UK & Ireland). Gender and migration are identified as key factors to explain these differences.
    Keywords: education, educational systems, gender, migration, social mobility
    JEL: I24 J21 J70 Y10 Z13
    Date: 2012–03
  15. By: Joshua Angrist; Miikka Rokkanen
    Abstract: In the canonical regression discontinuity (RD) design for applicants who face an award or admissions cutoff, causal effects are nonparametrically identified for those near the cutoff. The impact of treatment on inframarginal applicants is also of interest, but identification of such effects requires stronger assumptions than are required for identification at the cutoff. This paper discusses RD identification away from the cutoff. Our identification strategy exploits the availability of dependent variable predictors other than the running variable. Conditional on these predictors, the running variable is assumed to be ignorable. This identification strategy is illustrated with data on applicants to Boston exam schools. Functional-form-based extrapolation generates unsatisfying results in this context, either noisy or not very robust. By contrast, identification based on RD-specific conditional independence assumptions produces reasonably precise and surprisingly robust estimates of the effects of exam school attendance on inframarginal applicants. These estimates suggest that the causal effects of exam school attendance for 9th grade applicants with running variable values well away from admissions cutoffs differ little from those for applicants with values that put them on the margin of acceptance. An extension to fuzzy designs is shown to identify causal effects for compliers away from the cutoff.
    JEL: C26 C31 C36 I21 I24 I28 J24
    Date: 2012–12
  16. By: Fosgerau, Mogens; Small, Kenneth E.
    Abstract: Engineering studies demonstrate that traffic in dense downtown areas obeys a stable functional relationship between average speed and density, including a region of 'hypercongestion' where flow decreases with density. This situation can be described as queuing behind a bottleneck whose capacity declines when the queue is large. We combine such a variable-capacity bottleneck with Vickrey scheduling preferences for the special case where there are only two possible levels of capacity. Solving the model leads to several new insights, including that the marginal cost of adding a traveler is especially sensitive to the lowest level of capacity reached. We analyze an optimal toll, a coarse toll, and metering, showing substantial benefits from using these policies to eliminate the period of reduced capacity. Under hypercongestion, all of these policies can be designed so that travelers gain even without considering any toll revenues.
    Keywords: hypercongestion; congestion; road pricing;
    JEL: R40
    Date: 2012
  17. By: Coleman, Stephen
    Abstract: Social conformity can spread social norms and behaviors through a society. This research examines such a process geographically and over time for voting, which is strongly influenced by the norm that citizens should vote. A mathematical model for the spread of voting participation under the influence of social conformity is developed based on the diffusion equation, and predictions are tested with spatial analysis of state-level voter turnout in American presidential elections from 1920 to 2008. Results show that voter turnout has converged to a stable equilibrium in its geographical distribution across the states—but it is an equilibrium that results in persistent differences at the state level. Turnout increases about one percentage point with each degree of latitude.
    Keywords: social norm; voter turnout; social conformity; spatial model; equilibrium; diffusion
    JEL: C02 D72 Z13 C21
    Date: 2012–12–31
  18. By: Mohamad Fahmi (Department of Economics, Padjadjaran University); Achmad maulana (Department of Economics, Padjadjaran University); Arief Anshory Yusuf (Department of Economics, Padjadjaran University)
    Abstract: We see a weakness of the merit-based government scholarship program for students from poor families, Bidik Misi, as most of them fail to meet the minimum academic requirement. This paper provide a policy simulation that compares two programs, private tutoring voucher (PTV) and conditional cash transfer (CCT), to complement the Bidik Misi scholarship to boost the number of poor students to get the support. To this end, we offer a policy targeted for second and third year high school students at public schools. The data sources that we used in this study are the Indonesia Family Life Survey (IFLS), the Indonesia Social and Economic Survey (SUSENAS), and some primary data. To choose the best alternatives, we compare the cost effectiveness of both program and we find that the cost effectiveness per student in private tutoring voucher (PTV) is lower than conditional cash transfer program. The PTV program is also more convincing than CCT as PTV could directly influence the quality of instruction. We also check the robustness of the scenario using two one way sensitivity analyses. The sensitivity analyses support our finding that PTV program has more cost effective than the CCT.
    Keywords: Policy simulation, Cost Effectiveness Analysis, Sensitivity Analysis, Private Tutoring Voucher, Conditional Cash Transfer
    JEL: I24 I28
    Date: 2013–01
  19. By: Cygan-Rehm, Kamila; Mäder, Miriam
    Abstract: This study analyzes the effect of education on the number of children, childlessness, and the timing of the first birth. We use exogenous variation from a mandatory reform to compulsory schooling in West Germany to deal with the endogeneity of schooling. In contrast to studies for other developed countries, we find a significant negative effect of education on completed fertility. We attribute this finding to the particularly high opportunity costs of child-rearing in Germany. --
    JEL: I21 J13 J24
    Date: 2012
  20. By: Lucht, Michael; Haas, Anette
    Abstract: Economic debate about the consequences of immigration in Germany has largely focused on the wage effects for natives at an aggregate level. Especially the role of imperfect substitutability of migrants and natives gained importance. A new micro oriented approach is to focus on the firm level by estimating production functions in an equilibrium framework to gain more detailed information including firm heterogeneity. Another branch of recent literature emphasizes the role of task dimension of occupations additionally to the qualification of workers: migrants work in different jobs than natives do and are concentrated in agglomerations. The task approach is thus a key to understand imperfect substitution on the firm level. Our contribution in this article is manifold: we examine the effects of the relative (dis-)advantages in performing certain tasks and their implications on the labor market outcomes. Using this framework we construct a general equilibrium model with monopolistic competition a la Dixit-Stiglitz considering heterogeneous firms with different productivity levels and two types of jobs for migrants and natives. Firms differ in the ability to employ migrants which gives rise to wage differences between natives and migrants. Therefore firms with a higher share of migrants realize wage cost advantages. In the long run equilibrium only those firms survive in the market which are highly productive or are able to compensate their lower productivity level by wage cost advantages. We show that a higher migrant share is able to explain the increase of productivity. Further, the heterogeneous distribution of migrants in our model is the source of regional disparities. Thus part of the agglomeration advantages can be explained by the empirical stable observation that migrants tend to move to cities. The conclusions of the model are in line with three empirical facts in Germany. Firstly, the average productivity of firms is higher in cities. Secondly, the wage difference between migrants and natives in a region is increasing in the share of migrants in that region. Thirdly, less productive firms are more likely to employ a higher share of migrants, as wage advantages and productivity acts as a substitute. keywords: immigration, firm heterogeneity, skills, tasks, regional labor markets JEL: R23, J15, J24, J61 --
    JEL: R23 J15 J63
    Date: 2012
  21. By: Carnovale, Maria; Gibson, Matthew
    Keywords: Economics, Other, Environmental Economics
    Date: 2012–12–05
  22. By: Sandner, Malte
    Abstract: This paper presents results from a randomized evaluation of a home visiting program for disadvantaged first time mothers and their families implemented in three German federal states. At the end of the first year of the program, children in home visited families perform significantly better than those in the control families by 0.18 standard deviations in the Mental Developmental Index. Examination of gender differences revealed that home visited girls scored 0.30 standard deviations higher than girls in the control families, whereas boys scored similar in both groups. Results indicate no differences in the scores of the Psychomotor Developmental Index and the birth outcomes, despite 0.28 standard deviations higher birth weight for boys in the home visited families compared to boys in the control families. We find evidence for skill self productivity but in different magnitude for boys and girls. Furthermore, we analyze possible monetary returns of the program. --
    JEL: J13 J12 I21
    Date: 2012
  23. By: Sieger, Philip
    Abstract: In this paper incumbency effects in Federal Elections and Mayoral Elections in Germany are estimated using a quasi-experimental design which allows for causal inference under a set of rather mild assumptions. Relying on nonparametric and parametric estimation procedures and exploiting a recently developed bandwidth selection criteria, incumbency effects for the two major parties in Germany cause an increase in vote share of 1.4%-1.7% in Federal Elections. Analyzing Mayoral Elections, the causal effect of incumbency is about ten times larger with an increase in vote share of 14%-17%. Both results are robust with respect to the inclusion of further covariates. These huge differences might possibly be explained by the differences in visibility and popularity of mayors compared to candidates in Federal Elections. --
    JEL: C14 C21 D72
    Date: 2012
  24. By: O'Brien, Eoin (Central Bank of Ireland)
    Abstract: This letter analyses results from residential property auctions conducted over the last eighteen months. At present, where there is considerable uncertainty surrounding the property market and transaction activity has declined, auctions can provide some transparency to the market. The limitation of the auction data, however, is the small sample size which means caution should be used in generalising widely from the results. The analysis indicates that properties sold at auction do so at a discount to the current market asking price and, on average, at a level over 65 per cent below peak prices. Additionally, rental yields achieved on the properties sold are above current market yields and at levels similar to those seen in the mid-1990s. The analysis also suggests that conditions differ across segments of the market as Dublin properties on average sold for smaller discounts relative to peak and current asking prices than properties outside of Dublin.
    Date: 2012–10
  25. By: Strecker, Nora; Egger, Peter; Radulescu, Doina
    Abstract: Profit taxes are widely acknowledged to influence the location of firms' headquarters. This paper sheds light on the role of aspects of labor taxation for the international location of headquarters. We construct a unique data set of effective labor taxes in 120 countries and use data on the location of 35,206 firms to analyze the impact of labor income tax rates, the progressivity of the income tax schedule, and social security contributions on firms' decisions where to locate their headquarters. The findings suggest that both a higher progressivity of the tax system and higher (employee- and employer-borne) social security contributions negatively influence a country's attractiveness for headquarters location. A one percentage point increase in a country's average labor income tax rate reduces its probability to be chosen as the headquarters location for the average firm by about 1.2 percentage points. --
    JEL: H24 C25 H22
    Date: 2012

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