nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2014‒06‒02
sixty-five papers chosen by
Steve Ross
University of Connecticut

  1. Tipping points? Ethnic composition change in Dutch big city neighbourhoods By Ong C.
  2. School choice, segregation, and forced school closure By Witte K. de; Ong C.
  3. Big city life? Challenges and trade-offs for Auckland city By Lees, Kirdan
  4. Housing matters By Hammam, Sonia
  5. Converting land into affordable housing floor space By Bertaud, Alain
  6. House prices and land prices under the microscope: a property-level analysis for the Washington, DC area By Edward J. Pinto; Stephen D. Oliner; Morris A. Davis
  7. First-Come First-Served: Identifying the Demand Effect of Immigration Inflows on House Prices By Rosa Sanchis-Guarner
  8. The Brasília Experiment: Road Access and the Spatial Pattern of Long-term Local Development in Brazil By Bird, Julia; Straub, Stéphane
  9. Technological Progress and Economic Geography By Tabuchi, Takatoshi; Thisse, Jacques-François; Zhu, Xiwei
  10. Heterogeneous Peer Effects in Education By Patacchini, Eleonora; Rainone, Edoardo; Zenou, Yves
  11. Spatial dependence in (origin-destination) air passenger flows By Doucet, Romain; Margaretic, Paula; Thomas-Agnan, Christine; Villotta, Quentin
  12. How Urbanization Affect Employment and Social Interactions By Sato, Yasuhiro; Zenou, Yves
  13. Urbanization as opportunity By Fuller, Brandon; Romer, Paul
  14. Analyzing urban systems : have megacities become too large ? By Desmet, Klaus; Rossi-Hansberg, Esteban
  15. The Efficiency of Australian Schools: Evidence from the NAPLAN Data 2009-2011 By Nghiem, Son; Nguyen, Ha; Connelly, Luke
  16. Infrastructure : doing more with less By Woetzel, Jonathan; Pohl, Herbert
  17. Buying First or Selling First in Housing Markets By Moen, Espen R; Nenov, Plamen T.
  18. Do inventors talk to strangers? On proximity and collaborative knowledge creation By Crescenzi, Riccardo; Nathan, Max; Rodríguez-Pose, Andrés
  19. Keep Your Clunker in the Suburb: Low Emission Zones and Adoption of Green Vehicles By Wolff, Hendrik
  20. People, Places and Public Policy: Some Simple Welfare Economics of Local Economic Development Programs By Kline, Patrick; Moretti, Enrico
  21. The Illusion of School Choice: Empirical Evidence from Barcelona By Calsamiglia, Caterina; Güell, Maia
  22. Existence and uniqueness of equilibrium for a spatial model of social interactions By Blanchet, Adrien; Mossay, Pascal; Santambrogio, Filippo
  23. Government quality and spatial inequality: A cross-country analysis By Ezcurra, Roberto; Rodríguez-Pose, Andrés
  24. Does Violent Crime Deter Physical Activity? By Janke, Katharina; Propper, Carol; Shields, Michael
  25. House Price Gains and U.S. Household Spending from 2002 to 2006 By Atif Mian; Amir Sufi
  26. Sustainable and smart cities By Kahn, Matthew E.
  27. Overview -- the urban imperative : toward shared prosperity By Glaeser, Edward; Joshi-Ghani, Abha
  28. Do Firms Benefit from Active Labour Market Policies? By Lechner, Michael; Scioch, Patrycja; Wunsch, Conny
  29. The great migration : urban aspirations By Keith, Michael
  30. Mitigating long-run health effects of drought: Evidence from South Africa By Dinkelman, Taryn
  31. Intergenerational altruism and house prices: evidence from bequest tax reforms in Italy By G. Bellettini; F. Taddei; G. Zanella
  32. Home Price Beliefs in Australia By Callan Windsor; Gianni La Cava; James Hansen
  33. A Comparative Analysis of Housing Segregation: Orange County, California, and Vienna, Austria By Eloiza Murillo-Garcia
  34. “Job Accessibility, Employment and Job-Education Mismatch in the Metropolitan Area of Barcelona” By Antonio Di Paolo; Anna Matas; Josep Lluís Raymond
  35. Resetting the Urban Network: 117-2012 By Michaels, Guy; Rauch, Ferdinand
  36. Are cities the new growth escalator ? By Moretti, Enrico
  37. Economic Transition and Private-Sector Labor Demand: Evidence from Urban China By Iyer, Lakshmi; Meng, Xin; Qian, Nancy; Zhao, Xiaoxue
  38. Key Players in Co-Offending Networks By Lindquist, Matthew; Zenou, Yves
  39. Are clusters more resilient in crises? Evidence from French exporters in 2008-2009 By Martin, Philippe; Mayer, Thierry; Mayneris, Florian
  40. No-Bubble Condition: Model-free Tests in Housing Markets By Stefano Giglio; Matteo Maggiori; Johannes Stroebel
  41. Collateral constraints and rental markets By Hippolyte D'Albis; Eleni Iliopulos
  42. Why are some regions more innovative than others? The role of firm size diversity By Agrawal, Ajay; Cockburn, Iain M; Galasso, Alberto; Oettl, Alexander
  43. Banking Integration and House Price Comovement By Landier, Augustin; Sraer, David; Thesmar, David
  44. Household Debt and the Dynamic Effects of Income Tax Changes By Cloyne, James; Surico, Paolo
  45. Public investment and regional politics: The case of Turkey By Muysken J.; Crombrugghe D.P.I. de; Celbis M.G.
  46. Housing and urbanization in Africa : unleashing a formal market process By Collier, Paul; Venables, Anthony J.
  47. Industrial Agglomeration in China: Case studies of the Chinese Silicon Valley and the coastal SEZ (Japanese) By KURITA Kyosuke
  48. ‘United in Diversity’---Does Social Diversity Increase Subjective? By Matthias Opfinger
  49. Comparing Downpayment and Interest Rate Mortgage Subsidies: An Analytical Approach By Ricardo Bebczuk; Edgardo Demaestri
  50. Dynamic Oligopoly Pricing: Evidence from the Airline Industry By Siegert, Caspar; Ulbricht, Robert
  51. Breaking out of poverty traps: Internal migration and interregional convergence in Russia By Guriev, Sergei; Vakulenko, Elena
  52. Home Away From Home? Safe Haven Effects and London House Prices By Badarinza, Cristian; Ramadorai, Tarun
  53. The Allocation of Time in Sleep: a Social Network Model with Sampled Data By Liu, Xiaodong; Patacchini, Eleonora; Rainone, Edoardo
  54. Coworkers, Networks, and Job Search Outcomes By Saygin, Perihan Ozge; Weber, Andrea; Weynandt, Michèle
  55. International Capital Flows and the Boom-Bust Cycle in Spain By In 'T Veld, Jan; Kollmann, Robert; Pataracchia, Beatrice; Ratto, Marco; Roeger, Werner
  56. Household Leveraging and Deleveraging By Justiniano, Alejandro; Primiceri, Giorgio E; Tambalotti, Andrea
  57. Where do new firms locate? The effects of agglomeration on the formation and scale of operations of new firms in Punjab By Haroon, Maryiam; Chaudhry, Azam
  58. The Effects of the Saving and Banking Glut on the U.S. Economy By Justiniano, Alejandro; Primiceri, Giorgio E; Tambalotti, Andrea
  60. The Importance of Family Background and Neighborhood Effects as Determinants of Crime By Hederos Eriksson, Karin; Hjalmarsson, Randi; Lindquist, Matthew; Sandberg, Anna
  61. Diversification of Geographic Risk in Retail Bank Networks: Evidence from Bank Expansion after the Riegle-Neal Act By Aguirregabiria, Victor; Clark, Robert; Wang, Hui
  62. Crime and the Depenalization of Cannabis Possession: Evidence from a Policing Experiment By Adda, Jerome; McConnell, Brendon; Rasul, Imran
  63. Productivity Spillovers Through Labor Mobility By Heggedal, Tom-Reiel; Moen, Espen R; Preugschat, Edgar
  64. Viral Altruism? Generosity and Social Contagion in Online Networks By Lacetera, Nicola; Macis, Mario; Mele, Angelo
  65. Do Informal Referrals Lead to Better Matches? Evidence from a Firm's Employee Referral System By Brown, Meta; Setren, Elizabeth; Topa, Giorgio

  1. By: Ong C. (UNU-MERIT)
    Abstract: Micro-level studies using individual and household data have shown that residential location choices are influenced by neighbourhood ethnic composition. Using three conurbation samples in the Netherlands - Amsterdam metropolitan area, Rotterdam-The Hague metropolitan area, and the countrys largest conurbation, the Randstad metropolitan area - this paper analyses the evolution of neighbourhood ethnic composition as a social interaction outcome of disaggregated household behaviour. The potential tipping point in neighbourhood ethnic composition, beyond which white flight or the departure of native or advantaged households occurs, is tested. The share in neighbourhood population of native Dutch and western minority did not exhibit the hypothesised tipping behaviour in its growth rate with respect to initial share of non-western minority. This paper argues that the large social housing sector, centralised tax regime, and strong regulatory role of the state in housing and urban planning, are the main explanatory factors for the relative constancy in Dutch neighbourhood ethnic composition. Keywords Ethnic segregation; Neighbourhood; Tipping point; Urban renewal; Regression discontinuity
    Keywords: Economics of Minorities, Races, and Immigrants; Non-labor Discrimination; Urban, Rural, Regional, Real Estate, and Transportation Economics: General; Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand; Housing Supply and Markets; Regional Development Planning and Policy;
    JEL: J15 R00 R21 R31 R58
    Date: 2014
  2. By: Witte K. de; Ong C. (UNU-MERIT)
    Abstract: We exploit the forced closure of three segregated primary schools in Amsterdam to establish the determinants of school choice of ethnic minority pupils. The schools were closed due to mismanagement and poor assessment from the Education Inspectorate. Most of the affected students were of socially disadvantaged and non-western migrant background. Our analysis contrasts the respective school choice decisions of the early movers who had voluntarily changed schools within two years before the forced closure and the forced movers who had to move to other schools after the closure. Using a conditional logit model and a nested logit framework, we find that i students of segregated schools tend to re-concentrate into the same schools rather than disperse into different schools; ii primary school choice is nested upon school type; and iii the forced movers prefer schools with more peers of own non-western and low socioeconomic background, less peer truancy, and shorter residence-to-school distance. Keywords School choice; Ethnic segregation; School closure; School mobility, Nested logi
    Keywords: Education and Research Institutions: General; Education: Government Policy; Urban, Rural, Regional, Real Estate, and Transportation Economics: Government Policy;
    JEL: I20 I28 R28
    Date: 2014
  3. By: Lees, Kirdan (New Zealand Institute of Economic Research)
    Abstract: Auckland is on the move. Economic growth is outpacing most regions and people continue to flow into the city. This is putting pressure on the shape of Auckland city and the form of housing and transport infrastructure.
    Keywords: Auckland; transport; housing
    JEL: R31 R41
    Date: 2014–05–08
  4. By: Hammam, Sonia
    Abstract: Housing matters to the livability of cities and to the productivity of their economies. The failure of cities to accommodate the housing needs of growing urban populations can be seen in the proliferation of poorly serviced, high-density informal settlements. Such settlements are not new in the history of rapidly growing cities, their persistence results as much from policies as from economics and demographic transition. Slums have attracted most of the attention on urban housing in developing countries, and the Millennium Development Goals have given prominence to their reduction. However, urban housing issues transcend conditions in slums and are linked closely to economic activity. City economies influence housing demand, and in turn the flexibility of housing supply affects economic activity and city growth. This paper provides an overview of the policy and institutional building blocks that determine housing sector performance, drawing on studies from both developed and developing countries. It focuses on property rights, including tenure choice, housing finance, and subsidies. It also reviews the factors that affect supply: the availability of serviced land, as well as land and housing regulations. While these elements have been standard tools of housing policy, they are still the subject of considerable debate over their sequencing, policy content, and priority. There has been a great deal of emphasis over the last two decades on demand-side measures to improve property rights systems, develop housing finance, and even to introduce new subsidy systems. All these developments are important, but as this paper argues, less progress has been made in understanding and addressing the factors that constrain supply, which often thwart improvements on the demand side.
    Keywords: Banks&Banking Reform,Housing&Human Habitats,Public Sector Management and Reform,Regional Governance,Urban Governance and Management
    Date: 2014–05–01
  5. By: Bertaud, Alain
    Abstract: Cities emerge from the spatial concentration of people and economic activities. But spatial concentration is not enough; the economic viability of cities depends on people, ideas, and goods to move rapidly across the urban area. This constant movement within dense cities creates wealth but also various degrees of unpleasantness and misery that economists call negative externalities, such as congestion, pollution, and environmental degradation. In addition, the poorest inhabitants of many cities are often unable to afford a minimum-size dwelling with safe water and sanitation, as if the wealth created by cities was part of a zero-sum game where the poor will be at the losing end. The main challenge for urban planners and economists is reducing cities'negative externalities without destroying the wealth created by spatial concentration. To do that, they must plan and design infrastructure and regulations while leaving intact the self-organizing created by land and labor markets. The balance between letting markets work and correcting market externalities through infrastructure investment and regulation is difficult to achieve. Too often, planners play sorcerer's apprentice when dealing with markets whose functioning they poorly understand. The role of the urban planner is then, first, to better understand the complex interaction between market forces and government interventions, infrastructure investment and regulation, and second, to design these interventions based on precise quantitative objectives. Each city's priorities would depend on its history, circumstances, and political environment. But maintaining mobility and keeping land affordable remains the main urban planning objective common to all cities.
    Keywords: Transport Economics Policy&Planning,Municipal Financial Management,Urban Housing,National Urban Development Policies&Strategies,Urban Housing and Land Settlements
    Date: 2014–05–01
  6. By: Edward J. Pinto (American Enterprise Institute); Stephen D. Oliner (American Enterprise Institute); Morris A. Davis
    Abstract: Our data show that land prices were more volatile than house prices during the recent boom/bust cycle. In areas where land was inexpensive in 2000, the land share of property value jumped during the boom, and this rise in the landshare was a useful predictor of the subsequent crash in house prices. These results highlight the value of focusing on land for assessing house-price risk.
    Keywords: housing market,Housing finance,housing bubble
    JEL: A G R
    Date: 2014–05
  7. By: Rosa Sanchis-Guarner
    Abstract: An inflow of immigrants into a region affects house prices in three ways. In the short run, housing demand increases due to the increase in foreign-born population. In the long run, immigrants affect native location decisions and housing supply conditions. Previous research on the effect of immigration on local house prices has argued that the impact of immigrant demand cannot be separated from the demand changes due to native relocation or that the impact of immigrants on native mobility has no consequences on the estimates. In this paper I propose a methodology to pin down the immigrant demand effect. I apply it to Spanish data during the period 2002-2010 and I show that overlooking the impact of immigration on native mobility induces a sizeable bias in the short-run estimates. My results are robust to controlling for changes in housing supply.
    Keywords: Immigration, housing markets, instrumental variables
    JEL: J61 R12 R21
    Date: 2014–05
  8. By: Bird, Julia; Straub, Stéphane
    Abstract: This paper studies the impact of the rapid expansion of the Brazilian road network, which occurred from the 1960s to the 2000s, on the growth and spatial allocation of population and economic activity across the country's municipalities. It addresses the problem of endogeneity in infrastructure location by using an original empirical strategy, based on the "historical natural experiment" constituted by the creation of the new federal capital city Brasília in 1960. The results reveal a dual pattern, with improved transport connections increasing concentration of economic activity and population around the main centers in the South of the country, while spurring the emergence of secondary economic centers in the less developed North, in line with predictions in terms of agglomeration economies. Over the period, roads are shown to account for half of pcGDP growth and to spur a signifficant decrease in spatial inequality.
    Keywords: Transport costs, Infrastructure, Roads, Brazil
    JEL: F15 N76 N96 O18 R11 R12 R40
    Date: 2014–05
  9. By: Tabuchi, Takatoshi; Thisse, Jacques-François; Zhu, Xiwei
    Abstract: New economic geography focuses on the impact of falling transport costs on the spatial distribution of activities. However, it disregards the role of technological innovations, which are central to modern economic growth, as well as the role of migration costs, which are a strong impediment to moving. We show that this neglect is unwarranted. Regardless of the level of transport costs, rising labor productivity fosters the agglomeration of activities, whereas falling transport costs do not affect the location of activities. When labor is heterogeneous, the number of workers residing in the more productive region increases by decreasing order of productive efficiency when labor productivity rises.
    Keywords: labor heterogeneity; labor productivity; migration costs; new economic geography; technological progress
    JEL: J61 R12
    Date: 2014–03
  10. By: Patacchini, Eleonora; Rainone, Edoardo; Zenou, Yves
    Abstract: We develop a network model looking at the role of different types of peers in education. The empirical salience of the model is tested using a very detailed longitudinal dataset of adolescent friendship networks. We find that there are strong and persistent peer effects in education but peers tend to be influential only when their friendships last more than a year and not a shorter period of time. In the short run, however, both types of ties have an impact on current grades.
    Keywords: education; efficient 2SLS estimation; long-term peer effects; Social networks; spatial autoregressive model
    JEL: C31 D85 I21 Z13
    Date: 2014–02
  11. By: Doucet, Romain; Margaretic, Paula; Thomas-Agnan, Christine; Villotta, Quentin
    Abstract: We explore the estimation of origin-destination (OD), city-pair, air passengers, in order to explicitly take into account spatial autocorrelation. To our knowledge, we are the …rst to test the presence of spatial autocorrelation and apply spatial econometric OD ow models to air transport. Drawing on a world sample of 279 cities, over 2010-2012, we …nd signi…cant evidence of spatial autocorrelation in air passenger ows. Thus, contrary to common practice, we need to incorporate the spatial structure present in the data, when estimating OD air passengers. Importantly, failure to do it, may lead to ine¢ cient estimated coe¢ cients and prediction bias.
    Keywords: Spatial autocorrelation, spatial econometric origin-destination flow model, air passenger flows.
    Date: 2014–03
  12. By: Sato, Yasuhiro; Zenou, Yves
    Abstract: We develop a model where the unemployed workers in the city can find a job either directly or through weak or strong ties. We show that, in denser areas, individuals choose to interact with more people and meet more random encounters (weak ties) than in sparsely populated areas. We also demonstrate that, for a low urbanization level, there is a unique steady-state equilibrium where workers do not interact with weak ties, while, for a high level of urbanization, there is a unique steady-state equilibrium with full social interactions. We show that these equilibria are usually not socially efficient when the urban population has an intermediate size because there are too few social interactions compared to the social optimum. Finally, even when social interactions are optimal, we show that there is over-urbanization in equilibrium.
    Keywords: labor market.; social interactions; strong ties; urban economics; Weak ties
    JEL: J61 R14 R23
    Date: 2014–02
  13. By: Fuller, Brandon; Romer, Paul
    Abstract: Urbanization deserves urgent attention from policy makers, academics, entrepreneurs, and social reformers of all stripes. Nothing else will create as many opportunities for social and economic progress. The urbanization project began roughly 1,000 years after the transition from the Pleistocene to the milder and more stable Holocene interglacial. In 2010, the urban population in developing countries stood at 2.5 billion. The developing world can accommodate the urban population growth and declining urban density in many ways. The most important citywide projects -- successes like New York and Shenzhen -- show even more clearly how influential human intention can be. The developing world can accommodate the urban population growth and declining urban density in many ways. One is to have a threefold increase in the average population of its existing cities and a six fold increase in their average built-out area. Another, which will leave the built-out area of existing cities unchanged, will be to develop 625 new cities of 10 million people -- 500 new cities to accommodate the net increase in the urban population and another 125 to accommodate the 1.25 billion people who will have to leave existing cities as average density falls by half.
    Keywords: Population Policies,Urban Housing and Land Settlements,National Urban Development Policies&Strategies,City Development Strategies,ICT Applications
    Date: 2014–05–01
  14. By: Desmet, Klaus; Rossi-Hansberg, Esteban
    Abstract: The trend toward ever greater urbanization continues unabated across the globe. According to the United Nations, by 2025 closes to 5 billion people will live in urban areas. Many cities, especially in the developing world, are set to explode in size. Over the next decade and a half, Lagos is expected to increase its population 50 percent, to nearly 16 million. Naturally, there is an active debate on whether restricting the growth of megacities is desirable and whether doing so can make residents of those cities and their countries better off. When analyzing whether megacities have become too large, policy makers often analyze a single city in depth. But no city is an island: improving urban infrastructure in one city might attract migrants, and a negative shock in one location can be mitigated because people can move to another. Considering the general equilibrium effects of any such urban policy is thus key. That is, when deciding whether to make medium-size cities more attractive, policy makers need to understand how cities of all sizes will be affected. The second section briefly summarizes the theoretical framework and discusses which data are needed. The third section implements the methodology for the benchmark case of the United States. The fourth section does the same for China and Mexico and compares the findings. And the last section concludes. A technical online appendix guides the reader through a practical, step-by-step, discussion of how to do the analysis.
    Keywords: City Development Strategies,Urban Slums Upgrading,Urban Services to the Poor,Regional Governance,Urban Governance and Management
    Date: 2014–05–01
  15. By: Nghiem, Son; Nguyen, Ha; Connelly, Luke
    Abstract: This study examines the technical efficiency of schools in Australia and its determinants using NAPLAN test results of about 6,800 schools in 2009-2011 and other information from the “My School” website. For each school, we use the average growth of test scores for the same students between 2009 and 2011 as the measure of the school's output and four input measures: the student-teacher ratios, student-non-teaching staff ratios, recurrent income per student and (averaged) capital expenditure per student. We are also able to compare schools by type: including whether or not the school is a public school or a private school, a single sex or co-educational schools, a primary or secondary school, or a school that provides both primary and secondary schooling. In addition we control for several other environmental indicators for each school including: an index of social and educational advantage, the proportion of school children who identify as an Aborigine or Torres Strait Islander, the proportion of students from a non English-speaking background, the proportion of students female, as well as the region, state and territory in which the school is located. We estimate that the average technical efficiency score of Australian schools is 59 per cent and find evidence of input congestion for all of the inputs studied. On average, the growth target for schools in the sample to reach the efficiency frontier is 100 NAPLAN points. Our results suggest that eliminating inputs congestion could, in theory, reduce expenditure per school student by A$2,000. At the primary level, Catholic and independent schools are less efficient than public schools, but this story is reversed at the secondary level. We also find that schools with students from more advantageous social and economic backgrounds and schools with higher ratios of students from non-English speaking backgrounds tend to be more efficient. The results are robust to the choices about how to construct the frontier (e.g., in aggregate or for disaggregates by school type) and to our treatments of output and super-efficiency.
    Keywords: Efficiency, Australia, data envelopment analysis, double bootstrap
    JEL: D24 I21
    Date: 2014–05–27
  16. By: Woetzel, Jonathan; Pohl, Herbert
    Abstract: Adequate urban infrastructure can be expensive, but the costs of not delivering housing, transportation, water, sewage, public facilities, and other necessities are also high. Inadequate infrastructure slows and even reverses economic growth, driving unemployment, crime, and urban decay. It can fuel urban tensions by widening divisions among ethnic or income groups or between long-time residents and recent immigrants. And it can foster a general malaise that drains a city's vitality and spirit. One study in Africa showed that the return on investment for infrastructure was about 50 percent, based on contributions to gross domestic product (GDP), and that if investments were optimized, the return will be closer to 150 percent. This value is delivered through increased productivity and job creation, among other channels. Social benefits from improved public services and living standards are also substantial. In emerging markets, inadequate infrastructure can be a substantial barrier to growth. Adequate infrastructure reduces costs, supports economic activity, increases factor productivity in cities, and connects cities to domestic and international markets. With the staggering demand for infrastructure in emerging economies, officials will need to continue gathering as much funding as possible to meet their needs. This paper looks closer at the infrastructure needs of cities in emerging markets, based on the most recent McKinsey Global Institute (MGI) analysis. It offers practical suggestions on how to answer fundamental questions facing any government trying to get the greatest impact from limited infrastructure funds. And before concluding, it examines how cities worldwide have improved governance, institutions, processes, and capabilities to help close the infrastructure funding gap.
    Keywords: Transport Economics Policy&Planning,Municipal Financial Management,Urban Slums Upgrading,Urban Services to the Poor,ICT Policy and Strategies
    Date: 2014–05–01
  17. By: Moen, Espen R; Nenov, Plamen T.
    Abstract: Housing transactions by existing homeowners take two steps, a purchase of a new property and sale of the old housing unit. These two decisions are not independent, and their sequence may depend on the state of the housing market. This paper shows how the sequence of buyer-seller decisions depends on, and in turn, affects housing market conditions in an equilibrium search-and-matching model of the housing market. Under a simple payoff condition, we show that the decisions to ``buy first'' or ``sell first'' among existing homeowners are strategic complements - homeowners prefer to ``buy first'' whenever there are more buyers than sellers in the market. This behavior leads to multiple steady state equilibria and to dynamic equilibria featuring low frequency self-fulfilling fluctuations in house prices and time on the market. The model is broadly consistent with stylized facts about the housing market.
    Keywords: Excess volatility; Housing market; Order of transactions; Search frictions; Self-fulfilling fluctuations
    JEL: R21 R31
    Date: 2014–04
  18. By: Crescenzi, Riccardo; Nathan, Max; Rodríguez-Pose, Andrés
    Abstract: This paper investigates how physical, organisational, institutional, cognitive, social, and ethnic proximities between inventors shape their collaboration decisions. Using a new panel of UK inventors and a novel identification strategy, this paper systematically explores the net effects of all these ‘proximities’ on co-patenting. The regression analysis allows us to identify the full effects of each proximity, both on choice of collaborator and on the underlying decision to collaborate. The results show that physical proximity is an important influence on collaboration, but is mediated by organisational and ethnic factors. Over time, physical proximity increases in salience. For multiple inventors, geographic proximity is, however, much less important than organisational, social, and ethnic links. For inventors as a whole, proximities are fundamentally complementary, while for multiple inventors they are substitutes.
    Keywords: Collaboration; Ethnicity; Innovation; Knowledge spillovers; Patents; Proximities; Regions
    JEL: O31 O33 R11 R23
    Date: 2013–12
  19. By: Wolff, Hendrik (University of Washington)
    Abstract: Spatial distribution and leakage effects are of great policy concern and increasingly discussed in the economics literature. Here we study Europe's most aggressive recent air pollution regulation: Low Emission Zones are areas in which vehicular access is allowed only to vehicles that emit low levels of air pollutants. Using new administrative datasets from Germany, we assess the distribution of air pollution and the spatial substitution effects in green versus dirty vehicles. We find that LEZs decrease air pollution by around nine percent in urban traffic centers while pollution is unchanged in non-traffic areas. These results are driven by our finding that vehicle owners have an incentive to adopt cleaner technologies the closer they live to an LEZ. We reject the widespread concern that dirty vehicles contribute to higher pollution levels by increasingly driving longer routes outside of the LEZ. Back of the envelope calculations suggest that the health benefits of roughly two billion dollars have come at a cost of just over 1 billion dollars for upgrading the fleet of vehicles. Moreover, we find that non-attainment cities that decided not to include an LEZ but engaged in other methods (building ring roads, enhancing public transportation), experience no decrease in pollution.
    Keywords: low emission zones, air pollution, PM10
    JEL: Q58 R48
    Date: 2014–05
  20. By: Kline, Patrick; Moretti, Enrico
    Abstract: Most countries exhibit large and persistent geographical differences in wages, income and unemployment rates. A growing class of ``place based'' policies attempt to address these differences through public investments and subsidies that target disadvantaged neighborhoods, cities or regions. Place based policies have the potential to profoundly affect the location of economic activity, along with the wages, employment, and industry mix of communities. These programs are widespread in the U.S. and throughout the world, but have only recently been studied closely by economists. We consider the following questions: Who benefits from place based interventions? Do the national benefits outweigh the costs? What sorts of interventions are most likely to be effective? To study these questions, we develop a simple spatial equilibrium model designed to characterize the welfare effects of place based policies on the local and the national economy. Using this model, we critically evaluate the economic rationales for place based policies and assess the latest evidence on their effects. We conclude with some lessons for policy and directions for future research.
    Keywords: Place based policies; spatial equilibrium; subsidies.; taxes
    JEL: H2 J2 R1
    Date: 2013–11
  21. By: Calsamiglia, Caterina (Universitat Autònoma de Barcelona); Güell, Maia (University of Edinburgh)
    Abstract: School choice aims to improve (1) the matching between children and schools and (2) students' educational outcomes. Yet, the concern is that disadvantaged families are less able to exercise choice, which raises (3) equity concerns. The Boston mechanism (BM) is a procedure that is widely used around the world to resolve overdemands for particular schools by defining a set of priority points based on neighborhood and socioeconomic characteristics. The mechanism design literature has shown that under the BM, parents may not have incentives to provide their true preferences, thereby establishing a trade-off between preferences and perceived safety. However, the set of possible Nash equilibria arising from the BM is large and has varying properties, and what will actually happen is an empirical question. We exploit an unexpected change in the definition of neighborhood in Barcelona, which provides an exogenous change in the set of schools perceived as safe and allows us to separate housing and schooling decisions to assess the importance of this trade-off in the data. We find that safety carries a large weight in family choice. The huge majority of parents opt for schools for which they have the highest priority – the neighborhood schools – excluding other preferred schools. Similar to the previous literature, we also find that some parents seem naive, but using school registry data, we find that a significant fraction of them have the outside option of private schools, which allows them to take higher risks to access the best public schools. At the other extreme, some of the naive are not matched to any of the schools they applied for. Our results suggest that when allowing school choice under the BM with priorities: (1) the gains in terms of matching seem limited, because the equilibrium allocation is not very different from a neighborhood-based assignment, (2) estimating the effect of choice on outcomes by implementing such a mechanism may lead to a lower bound on the potential effects of having choice, and (3) important inequalities emerge beyond parents' naivete found in the literature.
    Keywords: school choice, Boston mechanism, priorities
    JEL: C78 D63 I24
    Date: 2014–05
  22. By: Blanchet, Adrien; Mossay, Pascal; Santambrogio, Filippo
    Abstract: We extend Beckmann’s spatial model of social interactions to the case of a two-dimensional spatial economy involving a large class of utility functions, accessing costs, and space-dependent amenities. We show that spatial equilibria derive from a potential functional. By proving the existence of a minimiser of the functional, we obtain that of a spatial equilibrium. Under mild conditions on the primitives of the economy, the functional is shown to satisfy displacement convexity, a concept used in the theory of optimal transportation. This provides a variational characterisation of spatial equilibria. Moreover, the strict displacement convexity of the functional ensures the uniqueness of spatial equilibrium. Also, the spatial symmetry of equilibrium is derived from that of the spatial primitives of the economy. Several examples illustrate the scope of our results. In particular, the emergence of multiple of equilibria in the circular economy is interpreted as a lack of convexity of the problem.
    Keywords: social interaction, spatial equilibria, multiple cities, optimal transportation, displacement convexity.
    Date: 2014
  23. By: Ezcurra, Roberto; Rodríguez-Pose, Andrés
    Abstract: This paper examines the relationship between government quality and spatial inequality across 46 countries over the period 1996-2006. The results of the analysis point to the existence of a negative and significant association between government quality and the magnitude of regional disparities. Countries with better quality of government register lower levels of spatial inequality. This finding is robust to the inclusion in the analysis of additional explanatory variables that may affect both regional disparities and governance outcomes. The observed link between government quality and spatial inequality is confirmed by various robustness tests.
    Keywords: government quality; spatial inequality
    JEL: H11 R12
    Date: 2013–11
  24. By: Janke, Katharina; Propper, Carol; Shields, Michael
    Abstract: Crime has been argued to have important externalities. We investigate the relationship between violent crime and an important type of behaviour: individuals’ participation in their local area through walking and physical activity. We use a sample of nearly 1 million people residing in over 320 small areas in England between 2005 and 2011. We show that concerns about personal safety co-move with police recorded violent crime. To identify the causal effect of recorded violent crime on walking and other physical activity we control for individual-level characteristics, non-time varying local authority effects, national time effects and local authority-specific trends. In addition, we exploit a natural experiment that caused a sudden increase in crime – the 2011 England riots – to identify the causal impact of a large exogenous crime shock on physical activity in a triple difference framework. Our results show a substantive deterrent effect of local area violent crime on walking, pointing to important effects of violent crime on non-victims. The adverse effect of an increase in local area violent crime from the 25th to the 75th percentile on walking is equivalent in size to a 6 C fall in average minimum temperature.
    Keywords: physical activity; riots; violent crime; walking
    JEL: I12 I18 R23
    Date: 2013–09
  25. By: Atif Mian; Amir Sufi
    Abstract: We examine the effect of rising U.S. house prices on borrowing and spending from 2002 to 2006. There is strong heterogeneity in the marginal propensity to borrow and spend. Households in low income zip codes aggressively liquefy home equity when house prices rise, and they increase spending substantially. In contrast, for the same rise in house prices, households living in high income zip codes are unresponsive, both in their borrowing and spending behavior. The entire effect of housing wealth on spending is through borrowing, and, under certain assumptions, this spending represents 0.8% of GDP in 2004 and 1.3% of GDP in 2005 and 2006. Households that borrow and spend out of housing gains between 2002 and 2006 experience significantly lower income and spending growth after 2006.
    JEL: E2 E21 E3 E32 E44 E5 G02 G21
    Date: 2014–05
  26. By: Kahn, Matthew E.
    Abstract: This paper explores the challenges and opportunities that government officials face in designing coherent'rules of the game'for achieving urban sustainability during times of growth. Sustainability is judged by three criteria. The first involves elements of day-to-day quality of life, such as having clean air and water and green space. The provision of these public goods has direct effects on the urban public's health and productivity. The second focuses on the city's greenhouse gas emissions. Developing cities are investing in new infrastructure, from highways and public transit systems to electricity generation and transmission. They are building water treatment, water delivery, and sewage disposal systems. Residents of these cities are simultaneously making key decisions about where they live and work and whether to buy such energy-consuming durables as private vehicles and home air-conditioning units. Given the long-lived durability of the capital stock, short-term decisions will have long-term effects on the city's carbon footprint. The third criterion is a city's resilience to natural disasters and extreme weather events. This subsection focuses on how the urban poor can be better equipped to adapt to the anticipated challenges of climate change.
    Keywords: Transport Economics Policy&Planning,Climate Change Mitigation and Green House Gases,Energy Production and Transportation,Climate Change Economics,Population Policies
    Date: 2014–05–01
  27. By: Glaeser, Edward; Joshi-Ghani, Abha
    Abstract: Urbanization is undoubtedly a key driver of development -- cities provide the national platform for prosperity, job creation, and poverty reduction. But urbanization also poses enormous challenges that one is familiar with: congestion, air pollution, social divisions, crime, the breakdown of public services and infrastructure, and the slums that one billion urban resident's call home. Urbanization is perhaps the single most important question in development today. It is clear that cities have not performed as well as can be expected in their transformative role for more livable, inclusive, people-centered, and sustainable development. But they have enormous potential as growth escalators, offering the opportunity to lift millions out of poverty, and serve as centers of knowledge, innovations, and entrepreneurship. Cities in both the developed and developing world want to attract more entrepreneurs and create more jobs. Cities also need to be resilient to natural hazards and the impacts of climate change. If these are left unaddressed, cities will become part of the problem rather than the solution.
    Keywords: Transport Economics Policy&Planning,Environmental Economics&Policies,Urban Slums Upgrading,Urban Services to the Poor,National Urban Development Policies&Strategies
    Date: 2014–05–01
  28. By: Lechner, Michael; Scioch, Patrycja; Wunsch, Conny
    Abstract: This paper investigates the link between variation in the supply of workers who participate in specific types of active labour market policies (ALMPs) and firm performance using a new exceptionally informative German employer-employee data base. For identification we exploit that German local employment agencies (LEAs) have a high degree of autonomy in determining their own mix of ALMPs and that firms' hiring regions overlap only imperfectly with the areas of responsibility of the LEAs. Our results indicate that in general firms do not benefit from ALMPs and in some cases may even be harmed by certain programs, in particular by subsidized employment and longer training programs. These findings complement the negative assessment of the cost-effectiveness of ALMPs from the empirical literature on the effects for participants.
    Keywords: program evaluation; regional variation; Subsidized employment programs; training programs
    JEL: J68
    Date: 2013–09
  29. By: Keith, Michael
    Abstract: The great 21st-century migration into cities will present both a great challenge for humanity and a significant opportunity for global economic growth. This paper describes the diverse patterns that define this metropolitan migration. It then lays out a framework for understanding the costs and benefits of new arrivals through migration's externalities and the challenges and policy tradeoffs that confront city stakeholders. The paper concludes by suggesting ways municipalities, by optimizing flexibility, can make migration more productive and less destructive in shaping the'good city'and the'smart city.'There are few paths to global economic growth that do not run through cities, and even fewer that do not depend on growing the city in population size, scale, and economic exchange. Historically, cities have grown by concentrating the economic advantages of number and density, the social potential of innovation, and the cultural possibilities of newness. By bringing together the factors of production, land, labor, capital, and enterprise, in ever more recombinant forms, cities offer the possibility of securing new economic advantages and scaling them up.
    Keywords: Population Policies,Municipal Financial Management,Housing&Human Habitats,Anthropology,National Urban Development Policies&Strategies
    Date: 2014–05–01
  30. By: Dinkelman, Taryn
    Abstract: Drought is Africa’s primary natural disaster and a pervasive source of income risk for poor households. This paper documents the long-run health effects of early life exposure to drought and investigates an important source of heterogeneity in these effects. Combining birth cohort variation in South African Census data with cross-sectional and temporal drought variation, I estimate long-run health impacts of drought exposure among Africans confined to homelands during apartheid. Drought exposure in early childhood significantly raises later life male disability rates by 4% and reduces cohort size. Among a subset of homelands – the TBVC areas – disability effects are double and negative cohort effects are significantly larger. I show that differences in spatial mobility restrictions that influence the extent of migrant networks across TBVC and non-TBVC areas contribute to this heterogeneity. Placebo checks show no differential disability impacts of drought exposure across TBVC and non-TBVC areas after the repeal of migration restrictions. The results show that although drought has significant long-run effects on health human capital, migrant networks in poor economies provide one channel through which families mitigate these negative impacts of local environmental shock
    Keywords: disability and early life health; drought; local shocks; migration; South Africa
    JEL: I15 J61 N37 O15
    Date: 2014–02
  31. By: G. Bellettini; F. Taddei; G. Zanella
    Abstract: We identify the degree of intergenerational altruism in an OLG framework à la Barro exploiting the quasi-experimental variation generated by reforms of bequest taxation (estate or inheritance tax, in the U.S.) and taxes on inter vivos real estate donations (gift tax, in the U.S.) that were enacted in Italy between 2000 and 2001. Employing a unique data set containing information on the housing stock and house prices in 13 large Italian cities between 1993 and 2004, we identify the structural parameter of interest via the effect of changes in the tax rate on house prices. We find that the intergenerational altruism parameter is about 20%. Given the possible anticipation of the reform this estimate should be interpreted as a lower bound.
    JEL: E60 E65 H24
    Date: 2014–05
  32. By: Callan Windsor (Reserve Bank of Australia); Gianni La Cava (Reserve Bank of Australia); James Hansen (Reserve Bank of Australia)
    Abstract: We document some new stylised facts about how Australian homeowners value their homes using household panel data and unit-record data on home sale prices. We find that homeowners' price beliefs are unbiased at the postcode level, on average, although there is considerable dispersion in the difference between beliefs and prices across postcodes. Household characteristics, such as age and tenure, and the regional unemployment rate are correlated with differences between beliefs and prices. We also find evidence that the difference between beliefs and prices has explanatory power for average household consumption, leverage and portfolio decisions after controlling for the market-inferred value of the home. These facts provide empirical evidence to support recent literature on the importance of belief formation for household decision-making.
    Keywords: housing; consumer behaviour; beliefs
    JEL: C33 D8 E21 G11 G12
    Date: 2014–05
  33. By: Eloiza Murillo-Garcia
  34. By: Antonio Di Paolo (Faculty of Economics, University of Barcelona); Anna Matas (GEAP, Universitat Autònoma de Barcelona); Josep Lluís Raymond (GEAP, Universitat Autònoma de Barcelona)
    Abstract: This paper analyses the effect of job accessibility by public and private transport on labour market outcomes in the metropolitan area of Barcelona. Beyond employment, we consider the effect of job accessibility on job-education mismatch, which represents a relevant aspect of job quality. We adopt a recursive system of equations that models car availability, employment and mismatch. Public transport accessibility appears as an exogenous variable in the three equations. Even though it may reflect endogenous residential sorting, falsification proofs suggest that the estimated effect of public transport accessibility is not entirely driven by the endogenous nature of residential decisions.
    Keywords: employment, job-education mismatch, job accessibility, public transport, Barcelona JEL classification: J61, J21, O18, P25, R41
    Date: 2014–05
  35. By: Michaels, Guy; Rauch, Ferdinand
    Abstract: Do locational fundamentals such as coastlines and rivers determine town locations, or can historical events trap towns in unfavorable locations for centuries? We examine the effects on town locations of the collapse of the Western Roman Empire, which temporarily ended urbanization in Britain, but not in France. As urbanization recovered, medieval towns were more often found in Roman-era town locations in France than in Britain, and this difference still persists today. The resetting of Britain's urban network gave it better access to naturally navigable waterways when this was important, while many French towns remained without such access.
    Keywords: Economic Geography; Economic History; Path Dependence; Transportation
    JEL: N93 O18 R11
    Date: 2013–11
  36. By: Moretti, Enrico
    Abstract: Urban areas tend to have much more productive labor and higher salaries than rural areas, and there are vast differences across urban areas. Areas with high salaries and high productivity tend to have employers that invest in much more research and development than areas with low salaries and low productivity. This paper addresses two questions. First, it discusses the causes of these vast geographical differences in wages, human capital, and innovation. The second part of the paper discusses regional economic development policies. The European Union has an even more ambitious program transferring its development funds to regions with below average incomes. Asian countries, especially China, have a variety of special economic zones, designed to attract foreign investment to specific areas. Such regional development policies, often called place-based economic policies, are effectively a form of welfare, targeting cities or regions, not individuals. While such policies are widespread, the economic logic behind them is rarely discussed and even less frequently understood. This paper clarifies when these policies are wasteful, when they are efficient, and who the expected winners and losers are. Understanding when government intervention makes sense and when it does not is a crucial first step in setting sound economic development policies. Local governments can certainly lay a foundation for economic development and create all the conditions necessary for a city's rebirth, including a business climate friendly to job creation.
    Keywords: Tertiary Education,Labor Markets,Labor Policies,Political Economy,Urban Slums Upgrading
    Date: 2014–05–01
  37. By: Iyer, Lakshmi; Meng, Xin; Qian, Nancy; Zhao, Xiaoxue
    Abstract: This paper studies the policy determinants of economic transition and estimates the demand for labor in the infant private sector in urban China. We show that a reform that untied access to housing in urban areas from working for the state sector accounts for more than a quarter of the overall increase in labor supply to the private sector during 1986-2005. Using the reform to instrument for private-sector labor supply, we find that private-sector labor demand is very elastic. We provide suggestive evidence that the reform equalized wages across sectors and reduced private-sector rents.
    Keywords: Economic Transition; Labor Mobility; Structural Change
    JEL: J23 O12 P2 P26
    Date: 2014–01
  38. By: Lindquist, Matthew; Zenou, Yves
    Abstract: We study peer effects in crime by analyzing co-offending networks. We first provide a credible estimate of peer effects in these networks equal to 0.17. This estimate implies a social multiplier of 1.2 for those individuals linked to only one co-offender and a social multiplier of 2 for those linked to three co-offenders. We then provide one of the first empirical tests of the key player policy in a real world setting. This policy defines a micro-founded strategy for removing the criminal from each network that reduces total crime by the largest amount. Using longitudinal data, we are able to compare the theoretical predictions of the key player policy with real world outcomes. By focusing on networks for which the key player has disappeared over time, we show that the theoretical predicted crime reduction is close to what is observed in the real world. We also show that the key player policy outperforms other reasonable police policies such as targeting the most active criminals or targeting criminals who have the highest betweenness or eigenvector centrality in the network. This indicates that behavioral-based policies can be more efficient in reducing crime than those based on algorithms that have no micro-foundation.
    Keywords: Crime; crime policies; key player; peer effects; social multiplier; social networks
    JEL: A14 K42 Z13
    Date: 2014–03
  39. By: Martin, Philippe; Mayer, Thierry; Mayneris, Florian
    Abstract: Clusters have already been extensively shown to favor firm-level economic performance (productivity, exports, innovation etc.). However, little is known about the capacity of firms in clusters to resist economic shocks. In this paper, we analyze whether firms that agglomerate in clusters and firms that have been selected to benefit from the "competitiveness cluster'' industrial policy, implemented in France in 2005, have performed better on export markets during the recent economic turmoil. We show that, on average, both agglomeration and the cluster policy are associated with a higher survival probability of firms on export markets, and conditioning on survival, a higher growth rate of their exports. However, these effects are not stronger during the 2008-2009 crisis; if anything, the opposite is true. We then show that this weaker resilience of competitiveness cluster firms is probably due to the fact that firms in clusters are more dependent on the fate of the ``leader'', i.e. the largest exporter in the cluster.
    Keywords: clusters; competitiveness clusters; crisis; exports; resilience
    JEL: F1 R10 R11 R12 R15
    Date: 2013–09
  40. By: Stefano Giglio; Matteo Maggiori; Johannes Stroebel
    Abstract: We test for the existence of infinitely-lived bubbles in housing markets by directly measuring failures of the pricing condition requiring the present value of infinite-maturity payments to be zero. This condition is central to workhorse models of bubbles. In the U.K. and Singapore, property ownership takes the form of either leaseholds or freeholds. Leaseholds are finite-maturity ownership contracts with maturities often exceeding 700 years; freeholds are perpetual contracts. The price difference between long-maturity leaseholds and freeholds reflects the present value of the freehold after leasehold expiry, thus directly measuring the no-bubble condition. We find no evidence of infinitely-lived bubbles.
    JEL: E44 G02 G11 G12 R30 R31
    Date: 2014–05
  41. By: Hippolyte D'Albis (INED - Paris School of Economics - Université Paris I - Panthéon-Sorbonne); Eleni Iliopulos (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: We study a benchmark model with collateral constraints and heterogeneous discounting. Contrarily to a rich literature on borrowing limits, we allow for rental markets. By incorporating this missing market, we show that impatient agents choose to rent rather than to own the collateral in the neighborhood of the deterministic steady state. Consequently, impatient agents are not indebted and borrowing constraints play no role in local dynamics.
    Keywords: heterogeneous discounting; collateral constraints; rental market; credit market.
    Date: 2013–12–01
  42. By: Agrawal, Ajay; Cockburn, Iain M; Galasso, Alberto; Oettl, Alexander
    Abstract: Large firms spawn spin-outs caused by innovations deemed unrelated to the firm's overall business. Small firms generate demand for specialized services that lower entry costs for others. We study the interplay of these two localized externalities and their impact on regional innovation. We examine MSA-level patent data during the period 1975-2000 and find that innovation output is higher in regions where large and small firms coexist. The finding is robust to across-region as well as within-region analysis and the effect is stronger in certain subsamples in a manner that is consistent with our explanation.
    Keywords: cities; externalities; firm size diversity; innovation; patents; spin-outs
    JEL: L16 O18 O47
    Date: 2013–12
  43. By: Landier, Augustin; Sraer, David; Thesmar, David
    Abstract: The correlation across US states in house price growth increased dramatically between 1976 and 2000. This paper shows that the contemporaneous geographic integration of the US banking market, via the emergence of large banks, was a primary driver of this phenomenon. To this end, we first theoretically derive an appropriate measure of banking integration across state pairs and document that house price growth correlation is strongly related to this measure of financial integration. Our IV estimates suggest that banking integration can explain up to one third of the rise in house price correlation over the period.
    Keywords: comovement; financial integration; house prices
    JEL: F36 G21 R30
    Date: 2013–11
  44. By: Cloyne, James; Surico, Paolo
    Abstract: Using a long span of expenditure survey data and a new narrative measure of exogenous income tax changes for the United Kingdom, we show that households with mortgage debt exhibit large and persistent consumption responses to tax changes. Home-owners without a mortgage, in contrast, do not appear to react, with responses not statistically different from zero at all horizons. Splitting the sample by age and education yields only limited evidence of heterogeneity as the distributions of these demographics tend to overlap across housing tenure groups. We interpret our findings through the lens of traditional and more recent theories of liquidity constraints, providing a novel interpretation for the aggregate effects of tax changes on the real economy.
    Keywords: liquidity constraints; mortgage debt; narrative tax changes
    JEL: E21 E62 H31
    Date: 2013–09
  45. By: Muysken J.; Crombrugghe D.P.I. de; Celbis M.G. (UNU-MERIT)
    Abstract: The determinants of the regional allocation of transportation and communication investments are analysed for the twenty-six statistical regions of Turkey for the years 1999 through 2011. A unique regional GVA series covering this period is constructed for this purpose. We specifically account for the possibility of dependence between allocation decisions for different infrastructure types. Estimation results strongly suggest that political bias has been present in the allocation decisions of regional transportation and communication public investments in Turkey. Keywords Public Infrastructure; Regional Policy; Investment Allocation.
    Keywords: National Government Expenditures and Related Policies: Infrastructures; Other Public Investment and Capital Stock; Capitalist Systems: Political Economy; Transportation Systems: Government and Private Investment Analysis; Road Maintenance, Transportation Planning; Regional Development Planning and Policy;
    JEL: P16 R42 R58 H54
    Date: 2014
  46. By: Collier, Paul; Venables, Anthony J.
    Abstract: The accumulation of decent housing matters both because of the difference it makes to living standards and because of its centrality to economic development. The consequences for living standards are far-reaching. In addition to directly conferring utility, decent housing improves health and enables children to do homework. It frees up women's time and enables them to participate in the labor market. More subtly, a home and its environs affect identity and self-respect. Commentary on the emergence of an African middle class has become common, but it is being defined in terms of discretionary spending and potential for consumer markets. A politically more salient definition of a middle class will be in terms of home ownership and the consequent stake in economic stability. This paper examines why such a process has not happened in Africa. The hypothesis is that the peculiarity of housing exposes it to multiple points of vulnerability not found together either in private consumer goods or in other capital goods. Each point of vulnerability can be addressed by appropriate government policies, but addressing only one or two of them has little payoff if the others remain unresolved. Further, the vulnerabilities faced by housing are the responsibility of distinct branches of government, with little natural collaboration. Unblocking multiple impediments to housing therefore requires coordination that can come only from the head of government: ministries of housing have neither the political weight nor the analytic capacity to play this role effectively. Yet in Africa, housing has never received such high political priority. This in turn is because the centrality of housing in well-being and of housing investment in development has not been sufficiently appreciated.
    Keywords: Housing&Human Habitats,Public Sector Economics,Debt Markets,Access to Finance,Urban Housing
    Date: 2014–05–01
  47. By: KURITA Kyosuke
    Abstract: This paper verifies the policy impacts of introducing foreign capital to promote industrial development from the perspective of industrial agglomeration in China. There are two analyses; the first is on the high-tech industry in Zhongguancun, called the Chinese Silicon Valley, and the second focuses on the coastal special economic zone (SEZ) in China. From the results, the effects of industrial agglomeration policy are limited. Although these policies succeeded in attracting firms with high productivity to Zhongguancun and the coastal SEZ, the analyses show no significant effects of building the firms' networks and generating spillover effects to local firms.
    Date: 2014–05
  48. By: Matthias Opfinger
    Abstract: The European Union emphasizes the advantages arising from diversity. However, economic studies prove that diversity can lead to detrimental outcomes, ultimately resulting in lower well-being. This paper assesses the direct link between well-being and diversity within a society, in terms of ethnicity, language, and religion. I find that ethnic diversity is linearly and positively related to happiness and life satisfaction. The other dimensions of social diversity and well-being are related in a U-shape. At low levels of diversity an increase reduces well-being. The relationship becomes positive only if diversity is sufficiently high. I argue that a threat to the dominant position of one group prevents the formation of a common identity. If diversity is sufficiently high, the groups have to establish contact which reduces prejudices and helps to form a common identity.
    Keywords: Social Diversity, Common Identity, Group Threat, Tolerant Societies
    JEL: I3 Z1
    Date: 2014
  49. By: Ricardo Bebczuk (Universidad Nacional de La Plata, Argentina); Edgardo Demaestri (Interamerican Development Bank)
    Abstract: Our paper sets up a simple model to assess, to the best of our knowledge for the first time, the relative pros and cons of housing downpayment and interest rate subsidies on the access to and the stability of the mortgage market. Our analysis unveils a number of relevant policy lessons for the design of housing subsidy programs, namely: (a) Under fiscal neutrality (same government outlay), both subsidies have the same positive effect on the ability and willingness to repay. But, for such neutrality to hold, the percentage interest rate subsidy must be larger than the downpayment subsidy, which is rare to happen in practice; (b) The interest rate subsidy raises the loan size a bank is willing to grant, but the downpayment subsidy does not, the reason being that the latter actually diminishes the need for bank financing for a given property value; (c) When targeting lower income households, the downpayment subsidy is superior to the interest rate subsidy, as the former increases the loan-to-value and debt-to-income ratios, two key criteria for mortgage borrower eligibility. By the same token, the downpayment subsidy is more likely to have a stronger effect on low and medium value housing units; (d) Such progressivity comes at the cost of a higher probability of default, meaning that some trade-off between equity and financial stability may emerge; (e) Subsidies are likely to put upward pressure on housing prices. The downpayment subsidy has a direct effect (by injecting fiscal resources to cover part of the property price) and an indirect effect (by easing the access to the mortgage market); (f) The interest rate subsidy only has the latter effect; and (g) Compared to the interest rate subsidy, the downpayment support promotes a less aggressive competition in the real estate market.
    Date: 2014–06
  50. By: Siegert, Caspar; Ulbricht, Robert
    Abstract: We explore how pricing dynamics in the European airline industry vary with the competitive environment. Our results highlight substantial variations in pricing dynamics that are consistent with a theory of intertemporal price discrimination. First, the rate at which prices increase towards the scheduled travel date is decreasing in competition, supporting the idea that competition restrains the ability of airlines to price-discriminate. Second, the sensitivity to competition is substantially increasing in the heterogeneity of the customer base, reflecting further that restraints on price discrimination are only relevant if there is initial scope for price discrimination. These patterns are quantitatively important, explaining about 83 percent of the total within-flight price dispersion, and explaining 17 percent of the observed cross-market variation of pricing dynamics.
    Keywords: Airline industry; capacity constraints; dynamic oligopoly pricing; intertemporal price dispersion; price discrimination
    JEL: D43 D92 L11 L93
    Date: 2014–03–23
  51. By: Guriev, Sergei; Vakulenko, Elena
    Abstract: We study barriers to labor mobility using panel data on gross region-to-region migration flows in Russia for 1995-2010. We find that barriers that hindered internal migration in 1990s have been generally eliminated by the end of 2000s. In 1990s many poor Russian regions were in poverty traps: potential migrants wanted to leave those regions but could not afford to finance the move. In 2000s (especially in late 2000s), these constraints were no longer binding. Overall economic growth and development of financial markets allowed even the poorest Russian regions to grow out of poverty traps resulting in convergence between Russian regions in 2000s.
    Keywords: internal migration; liquidity constraints; poverty traps
    JEL: J61 R23
    Date: 2013–10
  52. By: Badarinza, Cristian; Ramadorai, Tarun
    Abstract: Historical time-series data is short relative to the frequency of political and economic crises. This makes it difficult to use pure time-series methods to identify the impacts of safe haven demand on asset prices, in the face of confounding effects from a wide range of alternative drivers. We present a new method to identify safe-haven effects which relies on combining the cross-section of asset prices with time-series measures of economic and political risk. We employ this strategy on large databases of historical housing transactions in London, and show that economic and political risk in Southern Europe, China, the Middle East, Russia, and South Asia is an important factor in explaining the dynamics of London house prices over the past two decades.
    Keywords: economic risk; hedonic pricing; house prices; London; political risk; safe-haven
    JEL: C53 D80 E47 F21 G12 G15
    Date: 2013–12
  53. By: Liu, Xiaodong; Patacchini, Eleonora; Rainone, Edoardo
    Abstract: We analyze peer e¤ects in sleeping behavior using a representative sample of U.S. teenagers from the National Longitudinal Survey of Adolescent Health. The sampling design of the survey causes the conventional 2SLS estimator to be inconsistent. We extend the NLS estimator in Wang and Lee (2013a) to estimate network models with sampled observations on the dependent variable. When accounting for sampling, we find that the sleeping behaviour of the friends is important to shape own sleeping behaviour, besides the impact of individual, family and friend characteristics.
    Keywords: health; missing data; nonlinear least squares; siblings; social interactions; spatial autoregressive model; time use
    JEL: C13 C21 I15 I19 J22
    Date: 2013–11
  54. By: Saygin, Perihan Ozge (University of Mannheim); Weber, Andrea (University of Mannheim); Weynandt, Michèle (University of Mannheim)
    Abstract: Social networks are an important channel of information transmission in the labor market. This paper studies the mechanisms by which social networks have an impact on labor market outcomes of displaced workers. We base our analysis on administrative records for the universe of private sector employment in Austria where we define work-related networks formed by past coworkers. To distinguish between mechanisms of information transmission, we adopt two different network perspectives. From the job-seeker's perspective we analyze how network characteristics affect job finding rates and wages in the new jobs. Then we switch to the perspective of the hiring firm and analyze which types of displaced workers get hired by firms that are connected to a closing firm via past coworker links. Our results indicate that employment status and the firm types of former coworkers are crucial for the job finding success of their displaced contacts. Moreover, 21% of displaced workers find a new job in a firm that is connected to their former workplace. Among all workers that were displaced from the same closing firm those with a direct link to a former coworker are twice as likely to be hired by the connected firm than workers without a link. These results highlight the role of work related networks in the transmission of job information and strongly suggest that job referrals are an important mechanism.
    Keywords: social networks, job displacement, plant closure, referral hiring
    JEL: J63 J64 M51
    Date: 2014–05
  55. By: In 'T Veld, Jan; Kollmann, Robert; Pataracchia, Beatrice; Ratto, Marco; Roeger, Werner
    Abstract: We study the joint dynamics of foreign capital flows and real activity during the recent boom-bust cycle of the Spanish economy, using a three-country New Keynesian model with credit constrained households and firms, a construction sector and a government. We estimate the model using 1995Q1-2013Q2 data for Spain, the rest of the Euro Area (REA) and the rest of the world. We show that falling risk premia on Spanish housing and non-residential capital, a loosening of collateral constraints for Spanish households and firms, as well as a fall in the interest rate spread between Spain and the REA fuelled the Spanish output boom and the persistent rise in foreign capital flows to Spain, before the global financial crisis. During and after the global financial crisis, falling house prices, and a tightening of collateral constraints for Spanish borrowers contributed to a sharp reduction in capital inflows, and to the persistent slump in Spanish real activity. The credit crunch was especially pronounced for Spanish households; firm credit constraints tightened later and more gradually, and contributed much less to the slump.
    Keywords: boom-bust cycle; European Monetary Union; financial frictions; housing market; international capital flows; Spain; sudden stop
    JEL: C11 E21 E32 E62
    Date: 2014–05
  56. By: Justiniano, Alejandro; Primiceri, Giorgio E; Tambalotti, Andrea
    Abstract: Abstract. U.S. households' debt skyrocketed between 2000 and 2007, and has been falling since. This leveraging (and deleveraging) cycle cannot be accounted for by the liberalization, and subsequent tightening, of credit standards in mortgage markets observed during the same period. We base this conclusion on a quantitative dynamic general equilibrium model calibrated using macroeconomic aggregates and microeconomic data from the Survey of Consumer Finances. From the perspective of the model, the credit cycle is more likely due to factors that impacted house prices more directly, thus affecting the availability of credit through a collateral channel. In either case, the macroeconomic consequences of leveraging and deleveraging are relatively minor, because the responses of borrowers and lenders roughly wash out in the aggregate.
    Keywords: Collateral constraints; Financial liberalization; House prices; Household debt
    JEL: E20 E21
    Date: 2013–10
  57. By: Haroon, Maryiam; Chaudhry, Azam
    Abstract: The formation of new firms is an important determinant of economic development and the industrial organization literature highlights agglomeration as one of the main factors affecting the formation and scale of operations of new firms. This paper is one of the first to use developing country data to estimate the impact of localization (the benefits accruing to firms that choose to locate in a specific region within a specific industry) and urbanization (the benefits accruing to firms located close to each other regardless of the type of industry to which they belong) on new firms' formation and scale of operations. Our findings reveal that agglomeration measured through density of employment has a significant impact on the formation of new firms and on their scale of operations in Punjab. --
    Keywords: agglomeration,firms,localization,urbanization
    JEL: L1 L2
    Date: 2014
  58. By: Justiniano, Alejandro; Primiceri, Giorgio E; Tambalotti, Andrea
    Abstract: Abstract. We use a quantitative equilibrium model with houses, collateralized debt and foreign borrowing to study the impact of global imbalances on the U.S. economy in the 2000s. Our results suggest that the dynamics of foreign capital flows account for between one fourth and one third of the increase in U.S. house prices and household debt that preceded the financial crisis. The key to these findings is that the model generates the sustained low level of interest rates observed over that period.
    Keywords: Capital flows; Collateral constraints; Global imbalances; House prices; Household debt
    JEL: E21 F32 G21
    Date: 2013–11
  59. By: Allen Tran
    Abstract: To study the impact of online retail on aggregate welfare, I use a spatial model to calculate a new measure of store level retail productivity and each store's equilibrium response to increased competitive pressure from online retailers. The model is estimated on confidential store-level data spanning the universe of US retail stores, detailed local-level demographic data and shortest-route data between locations. From counterfactual exercises mimicking improvements in shipping and increased internet access, I estimate that improvements in online retail increased aggregate welfare from retail activities by 13.4 per cent. Roughly two-thirds of the increase can be attributed to welfare improvements holding fixed market shares, with the remainder due to reallocation. Surprisingly, 8.2 percent of firms actually benefit as they absorb market share from closed stores. Finally, I estimate that the proposed Marketplace Fairness Act would claw back roughly one-third of sales that would otherwise have gone to online retailers between 2007-12.
    Date: 2014–04
  60. By: Hederos Eriksson, Karin; Hjalmarsson, Randi; Lindquist, Matthew; Sandberg, Anna
    Abstract: We quantify the importance of family background and neighborhood effects as determinants of criminal convictions and incarceration by estimating sibling and neighborhood correlations. At the extensive margin, factors common to siblings account for 24 percent of the variation in criminal convictions and 39 percent of the variation in incarceration. At the intensive margin, these factors typically account for slightly less than half of the variation in prison sentence length and between one-third and one-half of the variation in criminal convictions, depending on crime type and gender. Neighborhood correlations, on the other hand, are quite small. We, therefore, conclude that these large sibling correlations are most likely generated by family influences and not by neighborhood influences. Further analysis shows that parental criminality and family structure contribute more to sibling similarities in crime than parental income and education or neighborhood characteristics. The lions’ share of the sibling crime correlations, however, are unexplained by these factors. Finally, sibling spacing also matters – more closely spaced siblings are more similar in their criminal behavior.
    Keywords: crime; family background; incarceration; neighborhood correlation; neighborhood effects; sibling correlation
    JEL: J13 J62 K42
    Date: 2014–03
  61. By: Aguirregabiria, Victor; Clark, Robert; Wang, Hui
    Abstract: The 1994 Riegle Neal (RN) Act removed interstate banking restrictions in the US. The primary motivation was to permit geographic risk diversification (GRD). Using a factor model to measure banks' geographic risk, we show that RN expanded GRD possibilities in small states, but that few banks took advantage. Using our measure of geographic risk and an empirical model of bank choice of branch network, we identify preferences towards GRD separately from the contribution of other factors that may limit the expansion of some banks after RN. Counterfactual experiments based on the estimated structural model show that risk has a significant negative effect on bank value, but this has been counterbalanced by economies of density/scale, reallocation/merging costs, and concerns for local market power.
    Keywords: Branch networks; Commercial banking; Geographic risk diversification; Liquidity risk; Oligopoly competition; Riegle Neal Act
    JEL: G21 L13 L51
    Date: 2014–02
  62. By: Adda, Jerome; McConnell, Brendon; Rasul, Imran
    Abstract: We evaluate the impact on crime of a localized policing experiment that depenalized the possession of small quantities of cannabis in the London borough of Lambeth. Such a policy can: (i) impact the demand for cannabis in Lambeth as users move there to purchase cannabis; (ii) enable the Lambeth police to reallocate effort towards other types of crime. We investigate whether the depenalization policy impacts the level and composition of crime, using administrative records on criminal offences by drug type, and for seven types of non-drug crime. We find that depenalization in Lambeth led to significant increases in cannabis possession offences that persisted well after the policy experiment ended. We find evidence that the policy caused the police to reallocate effort towards crimes related to the supply of Class-A drugs, as well as reallocating effort towards non-drug crime: there are significant reductions in five types of non-drug crime, and significant improvements in police effectiveness against such crimes as measured by arrest and clear-up rates. Despite the overall fall in crime attributable to the policy, we find the total welfare of local residents likely fell, as measured by house prices. These welfare losses are concentrated in Lambeth zip codes where the illicit drug market was most active. Finally, we shed light on what would be the impacts on crime of a citywide depenalization policy, by developing and calibrating a structural model of the market for cannabis and crime, accounting for the behavior of police and cannabis users. This highlights that many of the gains of the policy can be retained, and some of the deleterious consequences ameliorated, if all jurisdictions depenalized cannabis possession. These results provide new insights for the current policy debate on the regulation of illicit drug markets.
    Keywords: cannabis; crime; depenalization; police behavior
    JEL: H75 J18 K42
    Date: 2014–03
  63. By: Heggedal, Tom-Reiel; Moen, Espen R; Preugschat, Edgar
    Abstract: Do firms have the right incentives to innovate in the presence of productivity spillovers? This paper proposes an explicit model of spillovers through labor flows in a framework with search frictions. Firms can choose to innovate or to imitate by hiring a worker from a firm that has already innovated. We show that if innovation firms can commit to long-term wage contracts with their workers, productivity spillovers are fully internalized. If firms cannot commit to long-term wage contracts, there is too little innovation and too much imitation in equilibrium. Our model is tractable and allows us to analyze welfare effects of various policies in the limited commitment case. We find that subsidizing innovation and taxing imitation improves welfare.Moreover, allowing innovation firms to charge quit fees or rent out workers to imitation firms also improves welfare. By contrast, non-pecuniary measures like covenants not to compete, interpreted as destruction of matches between imitation firms and workers from innovation firms, always reduce welfare.
    Keywords: efficiency; imitation; innovation; productivity; search frictions; spillovers; worker flows
    JEL: J63 J68 O38
    Date: 2014–03
  64. By: Lacetera, Nicola (University of Toronto); Macis, Mario (Johns Hopkins University); Mele, Angelo (Johns Hopkins University)
    Abstract: How do the social media affect the success of charitable promotional campaigns? We use individual-level longitudinal data and experimental data from a social-media application that facilitates donations while broadcasting donors' activities to their contacts. We find that broadcasting is positively associated with donations, although some individuals appear to opportunistically broadcast a pledge, and then delete it. Furthermore, broadcasting a pledge is associated with more pledges by a user's contacts. However, results from a field experiment where broadcasting of the initial pledges was randomized suggest that the observational findings were likely due to homophily rather than genuine social contagion effects. The experiment also shows that, although our campaigns generated considerable attention in the forms of clicks and “likes,” only a small number of donations (30 out of 6.4 million users reached) were made. Finally, an online survey experiment showed that both the presence of an intermediary and a fee contributed to the low donation rate. Our findings suggest that online platforms for charitable giving may stimulate costless forms of involvement, but have a smaller impact on actual donations, and that network effects might be limited when it comes to contributing real money to charities.
    Keywords: altruism, fundraising, social media, network effects, field experiments
    JEL: D64 C93
    Date: 2014–05
  65. By: Brown, Meta (Federal Reserve Bank of New York); Setren, Elizabeth (MIT); Topa, Giorgio (Federal Reserve Bank of New York)
    Abstract: Using a new firm-level dataset that includes explicit information on referrals by current employees, we investigate the hiring process and the relationships among referrals, match quality, wage trajectories and turnover for a single U.S. corporation, and test various predictions of theoretical models of labor market referrals. We find that referred candidates are more likely to be hired; experience an initial wage advantage which dissipates over time; and have longer tenure in the firm. Further, the variances of the referred and non-referred wage distributions converge over time. The observed referral effects appear to be stronger at lower skill levels. The data also permit analysis of the role of referrer-referee pair characteristics.
    Keywords: referrals, human resources, turnover, wage trajectory
    JEL: J30 J63 J64
    Date: 2014–05

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