nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2013‒02‒16
fifty papers chosen by
Steve Ross
University of Connecticut

  1. Automobile and Motorcycle Traffic on Indonesian National Roads: Is It Local or Beyond the City Boundary? By Firman Permana Wandani; Yuichiro Yoshida
  2. Factors explaining the spatial agglomeration of the Creative Class – Empirical evidence for German artists By Christoph Alfken; Tom Broekel; Rolf Sternberg
  3. Measuring the Effect of Green Space on Property Value: An Application of the Hedonic Spatial Quantile Regression By Liu, Sezhu; Hite, Diane
  4. House Prices and Rents: Micro Evidence from a Matched Dataset in Central London By Philippe Bracke
  5. Place Based Policies with Unemployment By Kline, Patrick; Moretti, Enrico
  6. Lessons Learned from the Largest Tenure Mix Operation in the World: Right to Buy in the United Kingdom By Kleinhans, Reinout; van Ham, Maarten
  7. Spatial Frictions By Behrens, Kristian; Mion, Giordano; Murata, Yasusada; Suedekum, Jens
  8. Urban Productivity: Who Benefits from Agglomeration Economies? By Brown, W. Mark<br /> Rigby, David
  9. A Non-Spatial Analysis of the Role of Residential Real Estate Investment in the Economic Development of the Northeast Region of the United States By Jayaraman, Praveena; Gebremedhin, Tesfa G.
  10. Related Variety, Unrelated Variety and Regional Functions: A spatial panel approach By Matthias Brachert; Asier Alexander Kubis; Mirko Titze
  11. Loss Aversion and Seller Behavior : Evidence from the Housing Market : Comment Working Paper. By Florent Buisson
  12. Task Specialization in U.S. Cities from 1880-2000 By Guy Michaels; Ferdinand Rauch; Stephen J. Redding
  13. House prices, expectations, and time-varying fundamentals By Paolo Gelain; Kevin J. Lansing
  14. Geospatial Analysis of Income Growth in Southeastern United States By Gyawali, Buddhi Raj; Banerjee, Swagata (Ban)
  15. The Interwar Housing Cycle in the Light of 2001-2011: A Comparative Historical Approach By Alexander J. Field
  16. Long-Term Neighborhood Effects on Low-Income Families: Evidence from Moving to Opportunity By Jens Ludwig; Greg J. Duncan; Lisa A. Gennetian; Lawrence F. Katz; Ronald C. Kessler; Jeffrey R. Kling; Lisa Sanbonmatsu
  17. Better test scores with a same-gender teacher? By Coenen, J.; Van Klaveren, C.
  18. Multicriteria decision making for sustainability evaluation of urban mobility projects By AWASTHI Anjali; OMRANI Hichem; GERBER Philippe
  19. The Home Selling Problem: Theory and Evidence By Antonio Merlo; François Ortalo-Magné; John Rust
  20. Universities, Public Research and Regional Innovation Output: An Empirical Study of 19 Technologies in Germany By Thomas Brenner; Charlotte Schlump
  21. Does Supporting Passenger Railways Reduce Road Traffic Externalities? By Rafael Lalive; Simon Luechinger; Armin Schmutzler
  22. House Price, Stock Price and Consumption in South Africa: A Structural VAR Approach By Goodness C. Aye; Rangan Gupta; Alain Kaninda; Wendy Nyakabawo; Aarifah Razak
  23. Grant Dependence, Regulation and the Effects of Formula-based Grant Systems on German Local Governments: A Data Report for Saxony-Anhalt By Peter Haug
  24. Measuring the Income-Distance Tradeoff for Rural-Urban Migrants in China By Zhang, Junfu; Zhao, Zhong
  25. Do the Maths: An Analysis of the Gender Gap in Mathematics in Africa By Dickerson, Andy; McIntosh, Steven; Valente, Christine
  26. Do Banks Price Discriminate Spatially? Evidence from Small Business Lending in Local Credit Markets By Andrea Bellucci; Alexander V. Borisov; Alberto Zazzaro
  27. Performance in Post-compulsory Education: Evidence from Vocational and Academic Tracks By Cristina Lopez-Mayan
  28. Trends in Homeownership by Age and Household Income: Factors Associated with the Decision to Own, 1981 to 2006 By Brown, W. Mark<br /> Lafrance, Amelie
  29. Elemente der räumlichen Preistheorie By Klaus Schöler
  30. What Influences a Student to Attend a Regionally Isolated University? By Monroe, A. Dean, Jr.; Howry, Sierra S.
  31. The Impact of Credit Constraints on Housing Demand: Assessed with Endogenous Price and Expenditure By Li, Yarui; Leatham, David J.
  32. A Note on the Extent of US Regional Income Convergence By Mark J. Holmes; Jesús Otero; Theodore Panagiotidis
  33. How effective are policies to reduce gasoline consumption? Evaluating a quasi-natural experiment in Spain By Javier Asensio; Andrés Gómez-Lobo; Anna Matas
  34. Varieties of Governance of Public Goods Delivery in Indonesia:The Case of Roads after Decentralization and Local Democratization By Ari Kuncoro; Vid Adrison; Ifa Isfandiarni
  35. The Effect of Adult Criminals’ Spillovers On the Likelihood of Youths Becoming Criminals By Carlos Medina; Jorge Andrés Tamayo; Christian Posso
  36. Geographic Concentration of Foreign Visitors to Japan By TANAKA Ayumu
  37. Policy induced innovation networks: the case of the German "Leading-Edge Cluster competition" By Uwe Cantner; Holger Graf; Susanne Hinzmann
  38. Do entrepreneurs matter? By Becker, Sascha; Hvide, Hans V
  39. On Discrete Location Choice Models By Nils Herger
  40. Self-Employment in China: Are Rural Migrant Workers and Urban Residents Alike? By Cui, Yuling; Nahm, Daehoon; Tani, Massimiliano
  41. Size Distributions for All Cities: Which One is Best? By González-Val, Rafael; Ramos, Arturo; Sanz, Fernando; Vera-Cabello, María
  42. "Endogenous Bank Credit and Its Link to Housing in OECD Countries" By Philip Arestis; Ana Rosa Gonzalez
  43. Shopping Externalities and Self-Fulfilling Unemployment Fluctuations By Greg Kaplan; Guido Menzio
  44. Localized knowledge spillovers and patent citations: A distance-based approach (revised version) By Yasusada Murata; Ryo Nakajima; Ryosuke Okamoto; Ryuichi Tamura
  45. Does social capital matter for European regional growth? By Jesús Peiró-Palomino; Anabel Forte Deltell
  46. Quasi-Experimental Impact Estimates of Immigrant Labor Supply Shocks: The Role of Treatment and Comparison Group Matching and Relative Skill Composition By Aydemir, Abdurrahman; Kirdar, Murat G.
  47. Vertical Grants and Local Public Efficiency By Ivo Bischoff; Peter Bönisch; Peter Haug; A. Illy
  48. Social Distance and Trust: Experimental Evidence from a Slum in Cairo By Binzel, Christine; Fehr, Dietmar
  49. The Impact of Social Networks on Labour Market Outcomes: New Evidence from Cape Breton By Adnan Q. Khan; Steven F. Lehrer
  50. Multiple Job Search Networks: Theory and Evidence from Indonesia By Tolga Umut Kuzubas; Andrea Szabo

  1. By: Firman Permana Wandani (Ministry of Public Works); Yuichiro Yoshida (National Graduate Institute for Policy Studies)
    Abstract: This paper investigates the dimensions of private vehicles’ trips on national roads between neighboring cities in Indonesia using the spatial lag model and the spatial error model approach to reveal the spatial correlations among cities. Private vehicles are defined as privately owned automobiles and motorcycles, and vehicle trips or usage levels are defined in terms of vehicle kilometers traveled (VKT) for both types of private vehicles. The paper finds that motorcycle trips are characteristically local because there is no sign of a spatial correlation with neighboring cities for those trips; by contrast, automobile trips often cross city boundaries, although the models constructed in this study demonstrate only weak spatial correlations among neighboring cities for automobile trips. The models also indicate that the road capacity, gasoline prices, gross domestic regional product per capita, population density, city size, number of public buses, and worker resident density have a significant effect on VKT for both cars and motorcycles. Therefore, these findings suggest that in general, the design of urban transportation policies on national roads could be less complex in Indonesian cities because local solutions may be effective for solving traffic problems in individual cities.
    Date: 2013–02
  2. By: Christoph Alfken (Institue of Economic and Cultural Geography, Leibnitz-University of Hannover); Tom Broekel (Institue of Economic and Cultural Geography, Leibnitz-University of Hannover); Rolf Sternberg (Institue of Economic and Cultural Geography, Leibnitz-University of Hannover)
    Abstract: The paper contributes to the ongoing debate about the relative importance of economic and amenity-related location factors for attracting talents or members of the creative class. While Florida highlights the role of amenities, openness, and tolerance, others instead emphasize the role of regional productions systems, local labour markets and externalities. The paper sheds light on this issue by analysing changes in the spatial distribution of four groups of artists over time: visual artists, performing artists, musicians, and writers. Little evidence is found for amenity-related factors influencing the growth rates of regional artist populations. Moreover, artists are shown to be a heterogeneous group inasmuch as the relative importance of regional factors significantly differs between artist branches.
    Keywords: Artists, bohemians, creative class, spatial dynamics, amenities, agglomeration
    JEL: O31 O18 R12
    Date: 2013–02–08
  3. By: Liu, Sezhu; Hite, Diane
    Abstract: Green space is an important part of environment around houses. Generally, most research focused on the economic impacts of green space on urban planning and environmental pollution cost, but ignored the impact on single family home values. Limited research was conducted in this area and few studies of green space and housing prices have incorporated spatial econometric techniques. This technique is necessary since housing value may be influenced by characteristics of nearby properties. This research attempts to quantify the impacts of green space, by using the hedonic price analysis of the relationship between property values and the green space amenities around the selected single family houses in Delaware County, Ohio. Also, by incorporating spatial-lag term, we can compare the results with and without spatial effect. Eventually, after extending the model by quantile regression, the influence of different green space characteristics on housing price may change across the conditional distribution of housing price. Substantial variation was found between the results with and without spatial effects across quantiles, which indicates that luxury house buyers may value green space differently from middle or low level house buyers.
    Keywords: Hedonic model, Spatial-lag, Two-stage quantile regression, Generalized spatial two-stage least-square, Green space, Community/Rural/Urban Development, Environmental Economics and Policy, C21, R20, D10,
    Date: 2013
  4. By: Philippe Bracke
    Abstract: Using the proprietary dataset of a real estate agency, I analyse tens of thousands of housing sale and rental transactions in Central London during the 2005-2011 period. I run hedonic regressions on both prices and rents and show that price-rent ratios are higher for bigger and more central units. Since this result could be driven by differences in unobserved characteristics between properties for sale and properties for rent, I replicate my analysis using only units that were both sold and rented out within 6 months, and get similar results. I discuss several possible explanations for my findings.
    Keywords: House prices, housing rents, price index
    JEL: G10 R21 R31
    Date: 2013–02
  5. By: Kline, Patrick (University of California, Berkeley); Moretti, Enrico (University of California, Berkeley)
    Abstract: Many countries have policies aimed at creating jobs in depressed areas with high unemployment rates. In standard spatial equilibrium models with perfectly competitive labor and land markets, local job creation efforts are distortionary. We develop a stylized model of frictional local labor markets with the goal of studying the efficiency of unemployment differences across areas and the potential for place based policies to correct local market failures. Our model builds on the heavily studied Diamond-Mortensen-Pissarides framework, adapted to a local labor market setting with a competitive housing market. The result is a simple search analogue of the classic Roback (1982) model that provides a tractable environment for studying the effects of local job creation efforts. In the model, workers are perfectly mobile and the productivity of worker-firm matches may vary across metropolitan areas. In equilibrium, higher local productivity results in higher nominal wages, higher housing costs, and lower unemployment rates. Although workers can move freely to arbitrage away differences in expected utility across metropolitan areas, equilibrium unemployment rates are not equalized across space. We find that if hiring costs are excessive, firms may post too few vacancies. This problem may be offset via local hiring subsidies of the sort found in many place based policies. The optimal hiring subsidy is city specific in the sense that it depends upon the local productivity level.
    Keywords: spatial equilibrium, cities
    JEL: J6
    Date: 2013–01
  6. By: Kleinhans, Reinout (Delft University of Technology); van Ham, Maarten (Delft University of Technology)
    Abstract: In the last few decades, urban renewal policies have taken firm root in many Western European countries. Underlying these renewal policies is a strong belief in negative neighborhood effects of living in poverty concentration areas, often neighborhoods with a large share of social housing. In Europe, great importance is attached to creating a more diverse housing stock (in terms of tenure and dwelling types) and as a means to establish a more socially mixed neighborhood population. Mixed housing strategies are stated explicitly by governments in the Netherlands, the United Kingdom, Germany, France, Finland and Sweden. The idea is that mixing homeowners with social renters will create a more diverse socio-economic mix in neighborhoods, removing the potential of negative neighborhood effects. By far the largest tenure mix operation in Europe is the Right to Buy (RTB) scheme in the United Kingdom. Since the 1970s, over 2.7 million social rented houses have been sold with large discounts, mainly to sitting tenants. In this paper we synthesize the outcomes of RTB with regard to neighborhood impacts: residualisation, neighborhood stability, tenure mix and social mix, social interactions, and dwelling maintenance. Although we acknowledge substantial socioeconomic benefits of the RTB for many individual residents, we find that the neighborhood outcomes of RTB are by no means solely beneficial.
    Keywords: Right to Buy, tenure mix, neighbourhood effects, urban renewal, residential mobility, poverty neighbourhoods
    JEL: J61 R21 R23 R28
    Date: 2013–01
  7. By: Behrens, Kristian (University of Québec at Montréal); Mion, Giordano (CEP, London School of Economics); Murata, Yasusada (Nihon University); Suedekum, Jens (University of Duisburg-Essen)
    Abstract: The world is replete with spatial frictions. Shipping goods across cities entails trade frictions. Commuting within cities causes urban frictions. How important are these frictions in shaping the spatial economy? We develop and quantify a novel framework to address this question at three different levels: Do spatial frictions matter for the city-size distribution? Do they affect individual city sizes? Do they contribute to the productivity advantage of large cities and the toughness of competition in cities? The short answers are: no; yes; and it depends.
    Keywords: city-size distribution, urban frictions, trade frictions, productivity, markups
    JEL: F12 R12
    Date: 2013–01
  8. By: Brown, W. Mark<br /> Rigby, David
    Abstract: There is abundant evidence that many firms cluster together in space and that there is an association between clustering and productivity. This paper moves beyond identifying the broad effects of clustering and explores how different types of firms benefit from agglomeration. It advances research on agglomeration by showing, first, that not all firms gain to the same degree from co-location and, second, that businesses with different internal capabilities capture different forms of geographical externalities. The empirical analysis focuses on Canadian manufacturing establishments operating over the period from 1989 to 1999.
    Keywords: Manufacturing, Business performance and ownership, Economic accounts, Business ownership, Productivity accounts
    Date: 2013–02–06
  9. By: Jayaraman, Praveena; Gebremedhin, Tesfa G.
    Keywords: Community/Rural/Urban Development, Public Economics,
    Date: 2013–02
  10. By: Matthias Brachert; Asier Alexander Kubis; Mirko Titze
    Abstract: The paper presents estimates for the impact of related variety, unrelated variety and the functions a region performs in the production process on regional employment growth in Germany. We argue that regions benefit from the existence of related activities that facilitate economic development. Thereby the sole reliance of the related and unrelated variety concept on standard industrial classifications (SIC) remains debatable. We offer estimations for establishing that conceptual progress can be made when the focus of analysis goes beyond solely considering industries. We develop an industry-function based approach of related and unrelated variety and test our hypothesis by the help of spatial panel approach. Our findings suggest that related variety as same as unrelated variety facilitate regional employment growth in Germany. However, the drivers behind these effects do differ. While the positive effect of related variety is driven by high degrees of relatedness in the regional “R&D” and “White-Collar”-functions, the effects of unrelated variety are spurred by “Blue Collar”-functions in this period.
    Date: 2013–01
  11. By: Florent Buisson (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: In an often quoted article, Genesove and Mayer (2001) observe that house sellers are reluctant to sell at a loss, and attribute this finding to loss aversion. I show that loss aversion cannot explain this phenomenon.
    Keywords: Loss aversion, prospect theory, housing market.
    JEL: D03 D11 D83
    Date: 2013–01
  12. By: Guy Michaels; Ferdinand Rauch; Stephen J. Redding
    Abstract: We develop a new methodology for quantifying the tasks undertaken within occupations using 3,000 verbs from around 12,000 occupational descriptions in the Dictionary of Occupational Titles (DOTs). Using micro-data from the United States from 1880-2000, we find an increase in the employment share of interactive occupations within sectors over time that is larger in metro areas than non-metro areas. We provide evidence that this increase in the interactiveness of employment is related to the dissemination of improvements in transport and communication technologies. Our findings highlight a change in the nature of agglomeration over time towards an increased emphasis on human interaction.
    Keywords: Economic development, human interaction, urbanization
    JEL: N92 O18 R12
    Date: 2013–02
  13. By: Paolo Gelain (Norges Bank (Central Bank of Norway)); Kevin J. Lansing (Federal Reserve Bank of San Francisco)
    Abstract: We investigate the behavior of the equilibrium price-rent ratio for housing in a simple Lucas-type asset pricing model. We allow for time-varying risk aversion (via external habit formation) and time-varying persistence and volatility in the stochastic process for rent growth, consistent with U.S. data for the period 1960 to 2011. Under fully-rational expectations, the model signi ficantly underpredicts the volatility of the U.S. price-rent ratiofor reasonable levels of risk aversion. We demonstrate that the model can approximately match the volatility of the price-rent ratio in the data if near-rational agents continually update their estimates for the mean, persistence and volatility of fundamental rent growth using only recent data (i.e., the past 4 years), or if agents employ a simple moving-average forecast rule that places a large weight on the most recent observation. These two versions of the model can be distinguished by their predictions for the correlation between expected future returns on housing and the price-rent ratio. Only the moving-average model predicts a positive correlation such that agents tend to expect higher future returns when house prices are high relative to fundamentals–a feature that is consistent with survey evidence on the expectations of real-world housing investors.
    Keywords: Asset pricing, Excess volatility, Housing bubbles, Predictability, Time-varying risk premiums, Expected returns
    JEL: D84 E32 E44 G12 O40 R31
    Date: 2013–02–04
  14. By: Gyawali, Buddhi Raj; Banerjee, Swagata (Ban)
    Abstract: Income convergence and both endogenous and exogenous factors causing income growth in the southeastern United States were examined by using county level census data between 1980 and 2000. The study found that spatial variations in education, employment, and industries concentrations were strongly related with income convergence in the region.
    Keywords: Agglomeration, BlackBelt, census, clusters, convergence, industries, employment, income, southeastern, spatial, Community/Rural/Urban Development, Food Security and Poverty, O12, O15, R12,
    Date: 2013–02–05
  15. By: Alexander J. Field
    Abstract: This paper examines the interwar housing cycle in comparison to what transpired in the United States between 2001 and 2011. The 1920s experienced a boom in construction and prolonged retardation in building in the 1930s, resulting in a swing in residential construction’s share of GDP, and its absolute volume, that was larger than what has taken place in the 2000s. In contrast, there was relatively little sustained movement in the real price of housing between 1919 and 1941, and the up and down price movements were remarkably modest, certainly in comparison with more recent experience. The paper documents the higher degree of housing leverage in 2001-2011. And it documents a rate of foreclosure on residential housing post 2006 that is likely higher than during the 1930s. It concludes that balance sheet problems resulting from a prior residential housing boom pose greater obstacles to recovery today than they did in the interwar period.
    JEL: E2 E22 E44 N22 N62
    Date: 2013–02
  16. By: Jens Ludwig; Greg J. Duncan; Lisa A. Gennetian; Lawrence F. Katz; Ronald C. Kessler; Jeffrey R. Kling; Lisa Sanbonmatsu
    Abstract: We examine long-term neighborhood effects on low-income families using data from the Moving to Opportunity (MTO) randomized housing-mobility experiment, which offered some public-housing families but not others the chance to move to less-disadvantaged neighborhoods. We show that 10-15 years after baseline MTO improves adult physical and mental health; has no detectable effect on economic outcomes, youth schooling and youth physical health; and mixed results by gender on other youth outcomes, with girls doing better on some measures and boys doing worse. Despite the somewhat mixed pattern of impacts on traditional behavioral outcomes, MTO moves substantially improve adult subjective well-being.
    JEL: H43 I18 I38 J38
    Date: 2013–02
  17. By: Coenen, J.; Van Klaveren, C.
    Keywords: Teacher, Student Achievement, Gender, Mathematics
    Date: 2013
  18. By: AWASTHI Anjali; OMRANI Hichem; GERBER Philippe
    Abstract: Confronted with negative environmental impacts, rising fuel costs and increas-ing congestion, many cities are implementing sustainable mobility measures to improve the flow of passenger and goods. Examples of these measures are use of public transport, cycling, walking, energy efficient vehicles, biofuels. The challenge before transport decision makers is which one(s) to choose for im-plementation as often there is no or limited quantitative data available on the subject. Moreover, the context of each city, its geographic and transport condi-tions restrict the generalization of results obtained in experienced cities. In this paper, we investigate four multicriteria decision making (MCDM) techniques namely TOPSIS, VIKOR, SAW and GRA for sustainability evaluation of urban mobility projects under qualitative data and demonstrate their application through a numerical example.
    Keywords: Multicriteria decision making; GRA; Urban Mobility; SAW; Sustainability Evaluation; Fuzzy Numbers; TOPSIS; VIKOR
    JEL: C60 D80 R40
    Date: 2013–01
  19. By: Antonio Merlo (Department of Economics, University of Pennsylvania); François Ortalo-Magné (Wisconsin School of Business, University of Wisconsin-Madison); John Rust (Department of Economics, Georgetown University)
    Abstract: This paper formulates and solves the problem of a homeowner who wants to sell her house for the maximum possible price net of transactions costs (including real estate commissions). The optimal selling strategy consists of an initial list price with subsequent weekly decisions on how much to adjust the list price until the home is sold or withdrawn from the market. The solution also yields a sequence of reservation prices that determine whether the homeowner should accept offers from potential buyers who arrive stochastically over time with an expected arrival rate that is a decreasing function of the list price. We estimate the model using a rich data set of complete transaction histories for 780 residential properties in England introduced by Merlo and Ortalo-Magné (2004). For each home in the sample, the data include all listing price changes and all offers made on the home between initial listing and the final sale agreement. The estimated model fits observed list price dynamics and other key features of the data well. In particular, we show that a very small “menu cost” of changing the listing price (estimated to equal 10 thousandths of 1% of the house value, or approximately £10 for a home worth £100,000) is sufficient to explain the high degree of “stickiness” of listing prices observed in the data.
    Keywords: housing, bargaining, sticky prices, optimal selling strategy, dynamic programming
    JEL: H5
    Date: 2013–01–30
  20. By: Thomas Brenner (Philipps-Universität Marburg); Charlotte Schlump (Philipps-Universität Marburg)
    Abstract: It has been repeatedly shown that universities and public research institutes contribute to local innovation generation and facilitation. The mechanisms behind this contribution are well discussed in the literature. However, detailed empirical examinations are missing. We analyse the impact of universities and public research on regional innovation output. Thereby we analyse separately 19 technologies and distinguish whether university education and public research are rather innovation generators or innovation facilitators. All analyses are conducted on German data.
    Keywords: regional innovation systems, innovation output, university, public research
    JEL: C13 I25 O31 R12
    Date: 2013–02–08
  21. By: Rafael Lalive; Simon Luechinger; Armin Schmutzler
    Abstract: Many governments subsidize regional rail service as an alternative to road traffic. This paper assesses whether increases in service frequency reduce road traffic externalities. We exploit differences in service frequency growth by procurement mode following a railway reform in Germany to address endogeneity of service growth. Increases in service frequency reduce the number of severe road traffic accidents, carbon monoxide, nitrogen monoxide, nitrogen dioxide pollution and infant mortality. Placebo regressions with sulfur dioxide and ozone yield no effect. Service frequency growth between 1994 and 2004 improves environmental quality by an amount that is worth approximately 28-40 % of total subsidies. An analysis of household behavior shows that the effects of railway services on outcome variables are driven by substitution from road to rail.
    Keywords: Railways, pollution, procurement, accidents
    JEL: Q53 R41 R48
    Date: 2013–02
  22. By: Goodness C. Aye (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria); Alain Kaninda (Department of Economics, University of Pretoria); Wendy Nyakabawo (Department of Economics, University of Pretoria); Aarifah Razak (Department of Economics, University of Pretoria)
    Abstract: This paper compares the effects of real house price and real stock price shocks on consumption decisions in South Africa over the period 1966 to 2012 using a Structural Vector Autoregressive (SVAR) approach.The sample comprises quarterly, seasonally adjusted South African data on consumption, inflation, real house price, real stock price and the nominal Treasury bill rate. We find that a positive 1 percent shock in stock prices leads to about 0.05 percent increase in consumption, with the effect being short-lived, and declines after 4 quarters to become statistically insignificant. While, a 1 percent shock in house prices increase consumption by about 0.3 percent at around the 4th quarter, but thereafter declines and becomes negative from the 8th quarter. These results show that in South Africa, house prices play economically, but not statistically, a greater role than stock prices with respect to consumption expenditure.
    Keywords: Consumption, House Price, Stock Prices, Structural Vector Autoregression
    JEL: C32 E21 G12
    Date: 2013–02
  23. By: Peter Haug
    Abstract: Recent empirical studies have found – seemingly − efficiency-enhancing effects of vertical grants on local public service provision. The main purpose of this paper is to prepare an elaborate theoretical and empirical analysis of these contradictory results. Therefore, it investigates if certain fiscal and institutional conditions (fiscal stress, fiscal rank-preserving vertical grant systems, input- and output regulation), that might help to explain these empirical findings, are characteristic of at least some parts of the local government sector or certain regions. The German state of Saxony-Anhalt is chosen for case study purposes. The main results are: First, the local governments suffer from severe fiscal problems such as high grant dependency, low tax revenues and the prevalent inability to finance investments by own resources. Second, the output- and input-regulation density of certain mandatory municipal services (schools, childcare facilities, fire protection) is high. Finally, the most important vertical grant category for local governments, the formula-based grants (“Schlüsselzuweisungen”), can be described as mainly exogenous, unconditional block grants that in most cases preserve the relative fiscal position of the grant recipients.
    Keywords: vertical grants, local public finance, fiscal equalization, regulation of the public sector, Saxony-Anhalt
    JEL: H71 H72
    Date: 2013–02
  24. By: Zhang, Junfu (Clark University); Zhao, Zhong (Renmin University of China)
    Abstract: Rural-urban migrants in China appear to prefer nearby destination cities. To gain a better understanding of this phenomenon, we build a simple model in which migrants from rural areas choose among potential destination cities to maximize utility. The distance between a migrant's home village and destination city is explicitly included in the utility function. Using recent survey data, we first estimate an individual's expected income in each potential destination city using a semi-parametric method, controlling for potential self-selection biases. We then estimate the indirect utility function for rural- urban migrants in China based on their migration destination choices. Our baseline estimates suggest that to induce a migrant to move 10 percent further away from home, the income of this migrant has to increase by 15 percent. This elasticity varies very little with migration distance; it is slightly higher for female than male migrants; it is not affected by the migrant's age, education, or marital status. We explore possible explanations of these results and discuss their policy implications.
    Keywords: income-distance tradeoff, rural-urban migration, hukou system, China
    JEL: O15 R12 R23
    Date: 2013–01
  25. By: Dickerson, Andy (University of Sheffield); McIntosh, Steven (University of Sheffield); Valente, Christine (University of Bristol)
    Abstract: This paper uses microdata for 19 African countries to examine the gender difference in maths test scores amongst primary school children. There is a significant difference in maths test scores in favour of boys, similar to that previously observed in developed countries. This difference cannot be explained by gender differences in school quality, home environment, or within-school gender discrimination in access to schooling inputs. However, the gender gap varies widely with characteristics of the regions in which the pupils live, and these regional characteristics are more predictive of the gender gap than parental education and school characteristics, including teacher gender. At the cross-country level, differences in fertility rates account for nearly half the variation in the gender gap, and this relationship is not due to the correlation between fertility and GDP nor to gender inequality as measured by the Gender Gap Index.
    Keywords: cognitive maths skills, gender, Africa
    JEL: O15 I20
    Date: 2013–01
  26. By: Andrea Bellucci (Universit… di Urbino); Alexander V. Borisov (Indiana University); Alberto Zazzaro (Universit… Politecnica delle Marche, MoFiR)
    Abstract: In this paper we explore the effects of bank-borrower physical proximity on price and non-price aspects of small business lending in local credit markets. Along the price dimension, our analysis reveals that interest rates increase with bank-borrower distance and decrease with the distance between borrower and other competing banks. Along the quantity dimension, we observe that more distant borrowers are more likely to experience binding credit limits. We also show that the quantity effects of bank-borrower distance are concentrated among less transparent firms. Our findings are consistent with pricing based on marginal costs that reflect information-based factors, and are in contrast to the established paradigm, where banks adopt spatial discriminatory pricing rules when lending to small-sized enterprises.
    Keywords: Bank lending, Credit availability, Distance, Interest rate, Pricing
    JEL: G21 G32 L11
    Date: 2013–02
  27. By: Cristina Lopez-Mayan (Departament d'Economia Aplicada, Universitat Autonoma de Barcelona)
    Abstract: This paper investigates the factors in_uencing grade performance in two different high school tracks (academic and vocational), including the effect of the amount of work achieved while studying. The empirical strategy analyzes grade progression through the outcomes, passing, repeating and dropping out, conditioning on previous outcomes, and dealing with the endogeneity introduced by the working variable. The analysis is based on a unique Spanish data with information on schooling and labor histories. Findings show that working reduces performance in both tracks, mainly during the first year, although the ffects are less detri- mental in the vocational path. Additionally, good performance in compulsory education, at- tending a private high school, or having high-educated parents improve outcomes, particularly in academic high school.
    Keywords: Dropout, high school performance, grade progression, youth employment, control function.
    JEL: I20 I21 J24
    Date: 2013–02
  28. By: Brown, W. Mark<br /> Lafrance, Amelie
    Abstract: This paper examines why rates of homeownership have been increasing amongst young higher-income households, but declining among young lower-income households. For the period from 1981 to 2006, household data from the Census of Population, supplemented with information from the Survey of Financial Security, are employed to model the decision to own across the income distribution. The model assesses whether housing market conditions (e.g., the cost of renting versus owning), the financial condition of households (e.g., whether the household has sufficient wealth to make a standard down payment), and demographic factors (e.g., changing family composition) account for these diverging trends in housing demand.
    Keywords: Income, pensions, spending and wealth, Families, households and housing, Household assets, debts and wealth, Household characteristics, Housing and dwelling characteristics
    Date: 2013–01–29
  29. By: Klaus Schöler
    Abstract: For a long period the models of spatial pricing were developed and connected with the famous names of Wilhelm Launhardt und August Lösch. These approaches take the spatial dimension of pricing into account in partial analytical models. This publication discusses monopoly, monopolistic competition, and international trade. The reader will get a greater insight into the basic models and more complex structures.
    Keywords: spatial pricing, spatial discriminatory pricing, spatial monopoly, international spatial trade
    Date: 2013–01
  30. By: Monroe, A. Dean, Jr.; Howry, Sierra S.
    Abstract: Prospective college students use a small set of socioeconomic factors in deciding on an institution to attend. These factors are further narrowed when their regional context is sparsely populated and substitution choice is low. This study found that proximity and scholarships influence student choice of university in geographically isolated areas.
    Keywords: Service Areas, College Influence Factors, GIS, Cluster Analysis, Geographically Isolated University, Marketing,
    Date: 2013
  31. By: Li, Yarui; Leatham, David J.
    Abstract: This article assesses the impact of credit constraints on housing demand with price and expenditure treated as endogenous variables. Using AIDS model, we find the model without controlling for endogeneities tends to underestimate the impact of credit constraint on the budget shares and the estimates are less significant.
    Keywords: Credit constraint, housing market, AIDS model, endogeneity, Consumer/Household Economics,
    Date: 2013
  32. By: Mark J. Holmes (Department of Economics, Waikato University, New Zealand); Jesús Otero (Facultad de Economía, Universidad del Rosario, Colombia); Theodore Panagiotidis (Department of Economics, University of Macedonia, Greece)
    Abstract: Long-run income convergence is investigated in the US context. We employ a novel pair-wise econometric procedure based on a probabilistic definition of convergence. The time-series properties of all the possible regional income pairs are examined by means of unit root and non-cointegration tests where inference is based on the fraction of rejections. We distinguish between the cases of strong convergence, where the implied cointegrating vector is [1,-1], and weak convergence, where long-run homogeneity is relaxed. To address cross-sectional dependence, we employ a bootstrap methodology to derive the empirical distribution of the fraction of rejections. We find supporting evidence of US states sharing a common stochastic trend consistent with a definition of convergence based on long-run forecasts of state incomes being proportional rather than equal. We find that the strength of convergence between states decreases with distance and initial income disparity. Using Metropolitan Statistical Areas data, evidence for convergence is stronger.
    Keywords: Panel data, cross-section dependence, pair-wise approach, income, convergence
    JEL: C2 C3 R1 R2 R3
    Date: 2013–01
  33. By: Javier Asensio (Department of Applied Economics, Universitat Autonoma de Barcelona (UAB) and Institut d'Economia de Barcelona (IEB)); Andrés Gómez-Lobo (Department of Economics, University of Chile); Anna Matas (Department of Applied Economics (UAB) and IEB)
    Abstract: Using a panel of 48 provinces for four years we empirically analyze a series of temporary policies aimed at curbing fuel consumption implemented in Spain between March and June 2011. The first policy was a reduction in the speed limit in highways. The second policy was an increase in the biofuel content of fuels used in the transport sector. The third measure was a reduction of 5% in commuting and regional train fares that resulted in two major metropolitan areas reducing their overall fare for public transit. The results indicate that the speed limit reduction in highways reduced gasoline consumption by between 2% and 3%, while an increase in the biofuel content of gasoline increased this consumption. This last result is consistent with experimental evidence that indicates that mileage per liter falls with an increase in the biofuel content in gasolines. As for the reduction in transit fares, we do not find a significant effect for this policy. However, in specifications including the urban transit fare for the major cities in each province the estimated cross-price elasticity of the demand for gasoline -used as a proxy for car use- with respect to the price of transit is within the range reported in the literature. This is important since one of the main eficiency justification for subsidizing public transit rests on the positive value of this parameter and most of the estimates reported in the literature are quite dated.
    Date: 2013–02
  34. By: Ari Kuncoro (Institute of Economic and Social Research, Faculty of Economics, University of Indonesia); Vid Adrison (Institute of Economic and Social Research, Faculty of Economics, University of Indonesia); Ifa Isfandiarni (Institute of Economic and Social Research, Faculty of Economics, University of Indonesia)
    Abstract: For Indonesia the fall of Suharto in 1998 brought dramatic changes in the political landscape. It signified the beginning of transformation from an authoritarian regime towards a more democratic society where the distribution power is more devolved. In this respect Indonesia follow what is called a big-bang approach in the transition. First in the agenda of socio-economic reform is decentralization which changes the relationship between the center and local governments. Next in the country’s reform was democratization at the local government level. In this paper we examine how decentralization and democratization affect governance at the local government level. Our particular interest is to assess the impact of decentralization and local democratization on the quality of road. We find that although the temptation to produce lower quality roads is high the combination of democratization, free media, an ad-hoc anti-corruption agency and well educated bureaucrats keep the quality of roads reasonably good while the corruption is held in check.
    Keywords: Governance, Decentralization, Democratization, Infrastructure Provision
    JEL: D73 H73 O17
    Date: 2013–01
  35. By: Carlos Medina; Jorge Andrés Tamayo; Christian Posso
    Abstract: We use a unique data set at the individual level to estimate an empirical model explaining the probability of young individuals to become criminals as a function of the presence of adult criminals in their neighborhoods, an a complete set of control variables, including census sector fixed effects. We use the census of criminals captured in Medellín between 2000 and 2010 to construct our peer’s variables, and find a strong and robust positive effect of the presence of adult criminal neighbors on the probability of becoming criminal. The result is robust across different specifications of the presence of criminals, and with respect to the probability of committing different types of crimes, even controlling for contextual and group effects. Both modeling peer effects as the sum of friends’ efforts and modeling them as deviations from the means, affect the likelihood to become criminal, although with differential importance by type of crime.
    Keywords: Crime, Social Interactions. Classification JEL: C31, K40, K42
    Date: 2013–02
  36. By: TANAKA Ayumu
    Abstract: Using new data that tabulate the number of nights spent by visitors in each prefecture and locational Gini coefficients, this study provides the first empirical evidence that foreign travelers concentrate their visits to Japan in extremely few locations. Moreover, the concentration in travel destinations is far greater for foreign travelers than for Japanese ones, and the degree of geographic concentration varies according to their nationality. In addition, this study employs gravity equations to examine the factors that determine the number of nights that foreign visitors spend in each prefecture. Empirical results suggest that visa policy, transportation infrastructure, and natural and cultural factors along with traditional gravity variables such as distance and economic size play a role in international travel to Japanese prefectures.
    Date: 2013–02
  37. By: Uwe Cantner (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Holger Graf (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Susanne Hinzmann (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: The last decades saw a pronounced shift in innovation policy in Germany and many other countries towards increased funding of cooperative R&D. Over the last years, competitions between regional initiatives pushed this trend even further by adding a regional perspective, by increasing the scope of funding, and by fostering interaction between a large number of actors. In 2008 the German ministry for education and research (BMBF) started the "Leading-Edge Cluster competition" ("Spitzencluster-Wettbewerb") in which 15 clusters were selected in three waves (2008, 2010, 2012) and are funded for a five-year period with up to 40 million Euro each. Our paper presents selected results regarding the influence of government funding on cooperation networks within five of the clusters that were successful in the first wave of the "Spitzencluster- Wettbewerb". More specifically, we analyse the extent of policy influence on the network of most important cooperation partners, its geographic reach, and the changes of network structure in general. Our empirical analysis is based on original data that was collected in 2011 with cluster actors (firms and public research) who received government funding. Our results indicate that the program was quite effective in initiating new cooperations between cluster actors and in intensifying existing linkages. The vast majority of the linkages which are influenced by the cluster competition are between actors located in the cluster region. With respect to the influence of the cluster competition on network structure, we find an increase in network centralization. Small and medium sized enterprises used the chance to connect with the local 'stars', but not as much among each other.
    Keywords: Cluster, Innovation Policy, Evaluation, Social Network Analysis
    JEL: O3 O38 L14 R1
    Date: 2013–02–04
  38. By: Becker, Sascha (University of Warwick); Hvide, Hans V (University of Bergen)
    Abstract: In the large literature on firm performance, economists have given little attention to entrepreneurs. We use deaths of more than 500 entrepreneurs as a source of exogenous variation, and ask whether this variation can explain shifts in firm performance. Using longitudinal data, we find large and sustained effects of entrepreneurs at all levels of the performance distribution. Entrepreneurs strongly affect firm growth patterns of both very young firms and for firms that have begun to mature. We do not find significant differences between small and larger firms, family and non-family firms, nor between firms located in urban and rural areas, but we do find stronger effects for founders with high human capital. Overall, theresults suggest that an often overlooked factor –individual entrepreneurs –plays a large role in affecting firm performance.
    Keywords: entrepreneurship, Örm performance, human capital.
    Date: 2013
  39. By: Nils Herger (Study Center Gerzensee)
    Abstract: Within the context of the firm location choice problem, Guimarães et al. (2003) have shown that a Poisson count regression and a conditional logit model yield identical coeffcient estimates. Yet, the corresponding interpretation differs since these discrete choice models reflect polar cases as regards the degree with which the different locations are similar. Schmidheiny and Brülhart (2011) have shown that these cases can be reconciled by adding a fixed outside option to the choice set and transforming the conditional logit into a nested logit framework. This gives rise to a dissimilarity parameter that equals 1 for the Poisson count regression (where locations are completely dissimilar) and 0 for the conditional logit model (where locations are completely similar). Though intermediate values are possible, the nested logit framework does not permit the dissimilarity parameter to be pinned down. We show that, with panel data and adopting a choice consistent normalisation, the fixed outside option can also be introduced into the Poisson count framework, from which the estimation of the dissimilarity parameter is relatively straightforward. The different location choice models are illustrated with an empirical application using cross-border acquisitions data.
    Date: 2013–02
  40. By: Cui, Yuling (Macquarie University, Sydney); Nahm, Daehoon (Macquarie University, Sydney); Tani, Massimiliano (Macquarie University, Sydney)
    Abstract: This paper studies differences in the motivation to be self-employed between rural migrants and urban residents in modern China. Estimates of the wage differential between self-employment and paid-employment obtained through a three-stage methodology using the 2002 China Household Income Project (CHIP), reveal that rural migrants become self-employed to avoid low-pay city jobs, enhancing their odds of economic assimilation. Conversely, urban residents become entrepreneurs to move out of unemployment. The empirical analysis confirms that self-employment also attracts married individuals and those in good health, while it negatively relates to high educational attainment. The decomposition of hourly wage differences between pairs (by type of employment and residence status) shows that higher hourly wages of paid and self-employed urbanites over migrants predominantly arise through differences in coefficients (i.e. "discrimination") while those between self- and paid employment among urbanites are mostly due to differences in individual characteristics. Discrimination overwhelmingly accounts for hourly wage differences between self- and paid employment among rural immigrants. We interpret the relevant effect of discrimination in 2002 in urban labour markets as a sign of the institutional barriers associated with the Hukou system.
    Keywords: rural migrant workers, wage differentials, self-employment, urban residents
    JEL: C36 J61 J31 J21 J24
    Date: 2013–01
  41. By: González-Val, Rafael; Ramos, Arturo; Sanz, Fernando; Vera-Cabello, María
    Abstract: This paper analyses in detail the features offered by three distributions used in urban economics to describe city size distributions: lognormal, q-exponential and double Pareto lognormal, and another one of use in other areas of economics: the log-logistic. We use a large database which covers all cities with no size restriction in the US, Spain and Italy from 1900 until 2010, and, in addition, the last available year for the rest of the countries of the OECD. We estimate the previous four density functions by maximum likelihood. To check the goodness of the fit in all periods and for the thirty-four countries we use the Kolmogorov-Smirnov and Cramér-von Mises tests, and compute the Akaike Information Criterion (AIC) and the Bayesian Information Criterion (BIC). The results show that the distribution which best fits the data in most of the cases (86.76%) is the double Pareto lognormal.
    Keywords: city size distribution; double Pareto lognormal; log-logistic; q-exponential; lognormal
    JEL: C16 C13 R00
    Date: 2013–02–09
  42. By: Philip Arestis; Ana Rosa Gonzalez
    Abstract: The relevant economic literature frequently focuses on the impact of credit shocks on housing prices. The doctrine of the "New Consensus Macroeconomics" completely ignores bank credit. The "Great Recession," however, has highlighted the significance of bank credit. The purpose of this contribution is to revisit this important macroeconomic variable. We propose to endogenize the volume of bank credit by paying special attention to those variables that are related to the real estate market, which can be considered key to the evolution of bank credit. Our theoretical hypothesis is tested by means of a sample of 15 Organisation for Economic Co-operation and Development (OECD) economies from 1970 to 2011. We apply the cointegration technique for the latter purpose, which permits the modeling of the long-run equilibrium relationship and the dynamics of the short run, along with an error-correction term.
    Keywords: Bank Credit; Collateral Channel; Housing Market; OECD Countries; Empirical Modeling
    JEL: C22 R31
    Date: 2013–01
  43. By: Greg Kaplan; Guido Menzio
    Abstract: We propose a novel theory of self-fulfilling fluctuations in the labor market. A firm employing an additional worker generates positive externalities on other firms, because employed workers have more income to spend and have less time to shop for low prices than unemployed workers. We quantify these shopping externalities and show that they are sufficiently strong to create strategic complementarities in the employment decisions of different firms and to generate multiple rational expectations equilibria. Equilibria differ with respect to the agents' (rational) expectations about future unemployment. We show that negative shocks to the agents' expectations lead to fluctuations in vacancies, unemployment, labor productivity and the stock market that closely resemble those observed in the US during the Great Recession.
    JEL: D11 D21 D43 E32
    Date: 2013–02
  44. By: Yasusada Murata (Advanced Research Institute for the Sciences and Humanities, Nihon University); Ryo Nakajima (Department of Economics, Keio University); Ryosuke Okamoto (National Graduate Institute for Policy Studies); Ryuichi Tamura (Center for Economic Growth Strategy, Yokohama National University)
    Abstract: We develop a new distance-based test of localized knowledge spillovers that embeds the concept of control patents. Using microgeographic data, we identify localization distance for each technology class while allowing for spillovers across geographic units. We revisit the debate by Thompson and Fox-Kean (2005a,b) and Henderson, Jaffe and Trajtenberg (2005) on the existence of localized knowledge spillovers, and find solid evidence supporting localization even when using fine-grained controls. We further relax the assumption of perfect controls, and show that our distance-based test detects localization for the majority of technology classes unless hidden biases induced by imperfect controls are extremely large.
    Date: 2013–01
  45. By: Jesús Peiró-Palomino (Department of Economics, Universitat Jaume I, Castellón, Spain); Anabel Forte Deltell (Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: This article analyzes the role of different elements of social capital in economic growth for a sample of 85 European regions during the period 1995 - 2008. Much has been said about social capital in the last two decades, but studies for the European regional context are scant, and those analyzing periods after the nineties are nonexistent. The improvements in data availability allow us to consider the traditionally disregarded Central and Eastern European regions. This is especially interesting, since they are all transition economies that recently joined to the European Union and show remarkably low levels of social capital. Additionally, we follow the Bayesian paradigm, which not only allows us to make direct inference on the parameters to be estimated, but also deals with parameter uncertainty, leading to a deeper understanding of the data. Contrary to other contributions for the European context, results suggest, among other findings, that trust and social norms might have the major implications for regional growth, whereas the role of active participation in groups does not seem to be so well defined.
    Keywords: Social capital, economic growth, European regions, Bayesian inference
    JEL: C15 R10 Z13
    Date: 2013
  46. By: Aydemir, Abdurrahman (Sabanci University); Kirdar, Murat G. (Middle East Technical University)
    Abstract: This paper examines the employment effects of a large burst of immigration – the politically-driven exodus of ethnic Turks from Bulgaria into Turkey in 1989. In some locations, the rise in the labor force due to this inflow of repatriates was 5 to 10 percent. A key feature of our context is the strong involvement of the Turkish state in the settlement of earlier waves of repatriates, which provides us a strong source of exogenous variation in the 1989 immigrant shock across locations and brings our study closer to an ideal natural experiment. Using a reservoir of 342 cities and towns in Turkey with variable treatment intensity, this analysis places much attention on constructing a matched sample that is well balanced in terms of covariate distributions of the treatment and comparison groups – using propensity score matching. We find a positive effect of repatriates on the unemployment of non-repatriates. In fact, a 1 percent increase in the labor force due to repatriates increases the unemployment rate of natives by 0.4 percentage points. When the analysis is done according to skill groups, we find that the impact is the strongest on the young and on non-repatriates with similar educational attainment.
    Keywords: labor force and employment, immigrant workers, quasi experiments
    JEL: J21 J61
    Date: 2013–01
  47. By: Ivo Bischoff; Peter Bönisch; Peter Haug; A. Illy
    Abstract: This paper analyses the impact of vertical grants on local public sector efficiency. First, we develop a theoretical model in which the bureaucrat sets the tax price while voters choose the quantity of public services. In this model, grants reduce efficiency if voters do not misinterpret the amount of vertical grants the local bureaucrats receive. If voters suffer from fiscal illusion, i.e. overestimate the amount of grants, our model yields an ambiguous effect of grants on efficiency. Second, we use the model to launch a note of caution concerning the inference that can be drawn from the existing cross-sectional studies in this field: Taking into account vertical financial equalization systems that reduce differences in fiscal capacity, empirical studies based on cross-sectional data may yield a positive relationship between grants and efficiency even when the underlying causal effect is negative. Third, we perform an empirical analysis for the German state of Saxony-Anhalt, which has implemented such a fiscal equalization system. We find a positive relationship between grants and efficiency. Our analysis shows that a careful reassessment of existing empirical evidence with regard to this issue seems necessary.
    Keywords: vertical grants, local public finance, efficiency, DEA, bureaucracy
    JEL: H11 H72
    Date: 2013–02
  48. By: Binzel, Christine (University of Heidelberg); Fehr, Dietmar (WZB - Social Science Research Center Berlin)
    Abstract: While strong social ties help individuals cope with missing institutions, trade is essentially limited to those who are part of the social network. We examine what makes the decision to trust a stranger different from the decision to trust a member of a given social network (a friend), by comparing the determinants of these two decisions for the same individual. We implement a binary trust game with hidden action in a lab-in-the-field experiment with residents of an informal housing area in Cairo. Our results show that trust is higher among friends than among strangers and that higher trust among friends is related to the principal's belief of trustworthiness. However, on average a principal underestimates her friend's trustworthiness leading to inefficient outcomes. Our findings suggest that even within a social network, trade may often be limited to exchanges with few information asymmetries.
    Keywords: trust, social distance, hidden action, solidarity, economic development
    JEL: C72 C93 D82 O12
    Date: 2013–01
  49. By: Adnan Q. Khan; Steven F. Lehrer
    Abstract: Debates centered on the role of social networks as a determinant of labour market outcomes have a long history in economics and sociology; however, determining causality remains a challenge. In this study we use information on random assignment to a unique intervention to identify the impact of changes in the size of alternative social network measures on subsequent employment at both the individual and community level. Our results indicate that being assigned to the treatment protocol significantly increased the size of social networks, particularly weak ties. Nevertheless, these increases did not translate into improved employment outcomes 18 months following study completion. We do not find any evidence of treatment effect heterogeneity based on the initial size of one's social network; but those whose strong ties increased at a higher rate during the experiment were significantly less likely to hold a job following the experiment. We find that many of these results also hold at the community level among those who did not directly participate in the intervention. In summary, our results suggest that policies can successfully influence the size of an individual's social network, but these increases have limited impacts on long run labour market outcomes with the notable exception of changes in the composition of individuals who hold jobs.
    JEL: C93 J08
    Date: 2013–02
  50. By: Tolga Umut Kuzubas; Andrea Szabo
    Date: 2013–06

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