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on Urban and Real Estate Economics |
| By: | Laurent Gobillon (CEPR - Center for Economic Policy Research - CEPR, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, INED - Institut National d'Etudes Démographiques Paris - INED); Carine Milcent (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CEPREMAP - Centre pour la recherche économique et ses applications - Centre pour la recherche économique et ses applications) |
| Abstract: | Using a French exhaustive dataset, this article studies the determinants of regional disparities in mortality for patients admitted to hospitals for a heart attack. These disparities are large, with an 80% difference in the propensity to die within 15 days between extreme regions. They may reflect spatial differences in patient characteristics, treatments, hospital characteristics and local healthcare market structure. To distinguish between these factors, we estimate a flexible duration model. The estimated model is aggregated at the regional level and a spatial variance analysis is conducted. We find that spatial differences in the use of innovative treatments play a major role whereas the local composition of hospitals by ownership does not have any noticeable effect. Moreover, the higher the local concentration of patients in a few large hospitals rather than many small ones, the lower the mortality. Regional unobserved effects account for around 20% of spatial disparities. |
| Keywords: | Spatial health disparities ; Economic geography ; Stratified duration model |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseose:halshs-00879787&r=ure |
| By: | Stephen J. Redding; Matthew A. Turner |
| Abstract: | This paper surveys the theoretical and empirical literature on the relationship between the spatial distribution of economic activity and transportation costs. We develop a multi-region model of economic geography that we use to understand the general equilibrium implications of transportation infrastructure improvements within and between locations for wages, population, trade and industry composition. Guided by the predictions of this model, we review the empirical literature on the effects of transportation infrastructure improvements on economic development, paying particular attention to the use of exogenous sources of variation in the construction of transportation infrastructure. We examine evidence from different spatial scales, between and within cities. We outline a variety of areas for further research, including distinguishing reallocation from growth and dynamics. |
| Keywords: | Highways, market access, railroads, transportation |
| JEL: | F15 R12 R40 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1277&r=ure |
| By: | Hubert Jayet (EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université Lille I - Sciences et technologies - Université Lille II - Droit et santé - Université Lille III - Sciences humaines et sociales - PRES Université Lille Nord de France); Glenn Rayp (Department of Economics and SHERPPA - Ghent University); Ilse Ruyssen (UCL - universite catholique louvain - universite catholique louvain - Université Catholique de Louvain (UCL) - Belgique); Nadiya Ukrayinchuk (EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université Lille I - Sciences et technologies - Université Lille II - Droit et santé - Université Lille III - Sciences humaines et sociales - PRES Université Lille Nord de France) |
| Abstract: | This paper analyses migratory streams to Belgian municipalities between 1994-2007. The Belgian population register constitutes a rich and unique database of yearly migrant inflows and stocks broken down by nationality, which allows us to empirically explain the location choice of immigrants at municipality level. Speci cally, we aim at separating the network ef- fect, captured by the number of previous arrivals, from other location-speci c characteristics such as local labor or housing market conditions and the presence of public amenities. We expect labor and housing market variables to operate at diff erent levels and develop a fixed eff ects nested model of location choice in which an immigrant fi rst chooses a broad area, roughly corresponding to a labor market, and subsequently chooses a municipality within this area. We fi nd that the spatial repartition of immigrants in Belgium is determined by both network eff ects and local characteristics. The determinants of local attractiveness vary by nationality, as expected, but for all nationalities, they seem to dominate the impact of network eff ects. |
| Keywords: | Migration ; Location choice ; Network e ffects, Nested logit ; Immigrants ; Belgium |
| Date: | 2014–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01006864&r=ure |
| By: | Davide Antonioli (University of Ferrara); Simone Borghesi (University of Siena); Massimiliano Mazzanti (University of Ferrara) |
| Abstract: | The adoption and diffusion of environmental innovations (EIs) is crucial to greening the economy and achieving win-win environmental – economic gains. A large and increasing literature has focused on the levers underlying EIs that are external to the firm, such as stakeholders’ pressure and policy pressure. Little attention, however, has been devoted so far to the possible role of local spatial spillovers which are one of the factors affecting sector/geographical specialisations. We analyse a rich dataset that covers the innovative activities and economic performances of firms in the Emilia-Romagna region in Italy, an area rich of manufacturing districts. We analyse EIs drivers and effects on firms’ performances through a two-step procedure. First, we look at the relevance of spatial levers, namely whether the agglomeration of EIs induces EIs in a given firm. Second, we test whether EIs are significantly related to firms’ economic performances. As to the importance of spatial levers, the role of agglomeration turns out to be fairly local in nature: we find that spillovers are significantly inducing innovation within municipal boundaries. Regarding economic performances, firms' productivity is positively related to EI adoption; in particular, firms that jointly adopt EIs and organizational changes show a better economic performance. |
| Keywords: | Environmental Innovations, Firm Economic Performances, Local Spillovers, Manufacturing, Agglomeration. |
| JEL: | Q5 Q55 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.42&r=ure |
| By: | Karbownik, Krzysztof (Institute for Policy Research, Northwestern University) |
| Abstract: | This paper examines teachers’ mobility in response to exogenous changes in the credentials of their students using data from Stockholm high schools. I explore a major admission reform that lead to the reshuffling of students between schools within the municipality of Stockholm. The results show that a 10-percentile-point increase in student quality decreases the probability of a separation by up to 9 percentage points. These effects are very similar across all types of teachers and are found mainly for mobility between schools rather than out of the profession. They are also present only in the lower half of the student quality distribution. Teachers react mostly to direct measures of student quality (grades from compulsory school) rather than to other characteristics that are correlated with student quality (immigrant status, parental income, paternal cognitive skills). Finally, I do not find any significant effects of changes in student quality on individual teacher’s earnings or school hiring policies. |
| Keywords: | Teacher mobility; student quality; school choice |
| JEL: | I21 J44 |
| Date: | 2014–06–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2014_015&r=ure |
| By: | Karayalcin, Cem; Yilmazkuday, Hakan |
| Abstract: | Many developing countries display remarkably high degrees of urban concentration that are incommensurate with their levels of urbanization. The cost of excessively high levels of urban concentration can be very high in terms of overpopulation, congestion, and productivity growth. One strand of the theoretical literature suggests that such high levels of concentration may be the result of restrictive trade policies that trigger forces of agglomeration. Another strand of the literature, however, points out that trade liberalization itself may exacerbate urban concentration by favoring the further growth of those large urban centers that have better access to international markets. The empirical basis for judging this question has been weak so far; in the existing literature, trade policies are poorly measured (or are not measured, as when trade volumes are used spuriously). Here, new disaggregated tariff measures are used to empirically test the hypothesis. A treatment-and-control analysis of pre- versus post-liberalization performance of the cities is also employed in liberalizing and non-liberalizing countries. It is found that (controlling for the largest cities that have ports and, thus, have better access to external markets) liberalizing trade leads to a reduction in urban concentration. |
| Keywords: | Transport Economics Policy&Planning,Economic Theory&Research,Free Trade,Urban Housing and Land Settlements,National Urban Development Policies&Strategies |
| Date: | 2014–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6913&r=ure |
| By: | Alexander S. Skorobogatov (National Research University Higher School of Economics) |
| Abstract: | This paper documents the negative link between the age of Russian cities and their average wage. This link is robust to various definitions of city age and sample censuring, the inclusion of regional and time fixed effects, dependent variable spatial lag and many urban characteristics. This link is revealed especially for cities founded after the Soviet industriali-zation and for upper quintiles of cities by their average wage. To determine a mechanism behind the established fact, hypotheses as to spatial patterns of economic performance are discussed, including the increasing return hypothesis, the institutions hypothesis and the geography hypothesis. Following the sophisticated version of the geography hypothesis, a model of growth in n-city and two-sector economy is developed. The model replicates the link between age and per capita income and contains testable hypotheses that enable one to check whether a mechanism outlined in the model is behind the link between city age and wage. Our empirical strategy is based on a quasi-experiment, in which the treat-ment effect is made by time and various age groups of the cities are broken up into treatment and control groups. The results are strongly in favor of the sophisticated geography hypothesis. The revealed mechanism suggests that the chang-ing spatial patterns of wage differentials are explained by the changing remaining stocks of natural resources. Older cit-ies are getting relatively poorer due to the shrinking of their remaining resource stocks, while new cities are emerging in resource-rich territories with the respective income advantages. |
| Keywords: | quasi-experiment, exhaustible resources, internal colonization, differences-in-differences, urban development |
| JEL: | R12 Q32 O13 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:60/ec/2014&r=ure |
| By: | Bande, Roberto; López-Mourelo, Elva |
| Abstract: | This paper analyses the spatial distribution of workplace accidents in Spain and analyses the role of economic and institutional variables in this geographical outcome. After estimating an econometric model that explains regional variation in job accidents incidence, we compute conditional regional distributions of workplace accidents under the assumption of no regional variation in workplace inspections. Results show that much of the regional differences in severe and fatal accidents are explained by different inspection intensities. This calls for a regional homogenization of the inspection activities, in contrast to the current situation. |
| Keywords: | workplace accidents, Spanish regions, workplace inspections |
| JEL: | J28 J81 |
| Date: | 2014–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56767&r=ure |
| By: | Bruna, Fernando; Faíña, Andrés; Lopez-Rodriguez, Jesus |
| Abstract: | In the context of the New Economic Geography (NEG) wage equation, the ‘curse of distance’ is the tendency of peripheral regions to have lower income because of being far from the main markets, as captured by a variable Market Potential. This pattern is consistent with the core-periphery spatial distribution of the European regional economic activity. Nevertheless, during the last decades, the European Union has been implemented active transport and regional policies, which should mitigate the consequences of peripherality. This paper analyzes the changes of the cross-sectional effects of Market Potential on the European regional income per capita during the sample period 1995-2008. The paper finds evidence that the cross-sectional elasticity of per capita income to Market Po-tential has been decreasing over the sample period. However, some results are sensitive to changes in the specification of the wage equation or the estimation method. |
| Keywords: | NEG, wage equation, distance, core-periphery, regional policy, European regions |
| JEL: | C21 F12 R11 R12 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56747&r=ure |
| By: | Antonio Ciccone; Walter Garcia-Fontes |
| Abstract: | We propose estimating gender peer effects in school by exploiting within-school variation in gender composition across birth cohorts. Our approach differs from the existing literature, which exploits variation in gender composition at a given grade level in different years. We argue that the birth cohort approach is a useful alternative as the grade level approach generally yields spurious gender peer effects when there is grade retention. The birth cohort approach applied to primary schools in Spain indicates statistically significant positive gender peer effects of girls on boys' academic achievement and statistically insignificant effects of girls on girls' achievement. |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1424&r=ure |
| By: | Carlos Garriga (Federal Reserve Bank of St. Louis); Finn E. Kydland (University of California-Santa Barbara (UCSB)); Roman Šustek (Queen Mary, School of Economics and Finance) |
| Abstract: | Mortgage loans are a striking example of a persistent nominal rigidity. As a result, under incomplete markets, monetary policy affects decisions through the cost of new mortgage borrowing and the value of payments on outstanding debt. Observed debt levels and payment to income ratios suggest the role of such loans in monetary transmission may be important. A general equilibrium model is developed to address this question. The transmission is found to be stronger under adjustable- than fixed-rate contracts. The source of impulse also matters: persistent inflation shocks have larger effects than cyclical fluctuations in inflation and nominal interest rates. |
| Keywords: | Mortgages, debt servicing costs, monetary policy, transmission mechanism, housing investment |
| JEL: | E32 E52 G21 R21 |
| Date: | 2013–12 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:1306&r=ure |
| By: | Creina Day (Crawford School of Public Policy, The Australian National University); Ross S. Guest (Griffith University - School of Accounting and Finance - Gold Coast Campus) |
| Abstract: | This paper presents an intertemporal model of household choice where endogenous increases in house prices play an important role in the effect of rising female relative wages on fertility. Households save for a deposit in young age, rear children and repay mortgages in middle age and sell housing in retirement. House prices are determined by a market for housing. The outcome from this model is that fertility: i. increases as female wages rise relative to male wages provided the price elasticity in housing supply is sufficiently high; ii. declines as female relative wages rise if housing supply is fixed; iii. declines as the working age to old age population ratio increases provided the housing supply price elasticity is less than the inverse of elasticity of house prices with respect to the support ratio. These results reconcile recent observations that fertility rebounds with rising house prices and female relative wages in several high income economies, but continues to decline in others and provide a novel mechanism whereby past demographic change impacts current fertility through house prices. |
| JEL: | J13 J16 R21 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:een:crwfrp:1401&r=ure |
| By: | F. Quatraro; S. Usai |
| Abstract: | The paper investigates the impact of distance, contiguity and technological proximity on cross- regional knowledge flows, by comparing the evidence concerning co-inventorship, applicant-inventor relationships and citation flows. We find evidence of significant differences across these diverse kinds of knowledge flows for what concerns the role of distance, and the moderating role of contiguity and technological proximity. Moreover, we show that border effects may prove crucial in a twofold sense. On the one hand we show that contiguity between regions belonging to two different countries still plays a moderating role, although weaker as compared to that of within-country contiguity. On the other hand, regions sharing a frontier with a foreign country are more likely to exchange knowledge with this foreign country than other regions which are far away from the border. |
| Keywords: | regional competitiveness, Patents, knowledge flows, gravity, europe, Border regions |
| JEL: | R11 O33 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:201405&r=ure |
| By: | Elinder, Mikael (Department of Economics, Uppsala University); Persson, Lovisa (Department of Economics, Uppsala University) |
| Abstract: | In 2008, the Swedish property tax was reformed and a cap on yearly tax liabilities was introduced. A large fraction of owner occupied houses was subject to a substantial decrease in the tax. When the reform was announced, most analysts projected – in line with tax capitalization theory – that the tax decrease would lead to significant increases in house prices. We estimate price responses and capitalization degrees, using various DID strategies, in which the price dynamics of houses that were subject to a generous tax reduction are compared to the price dynamics of houses with a more modest reduction. Our results are largely inconsistent with capitalization theory. For the majority of properties, we find no evidence that the tax cut led to increases inhouse prices. However, we find evidence of partial capitalization in sub-markets with highly valued properties, highly educated citizens and were it is especially difficult to increase supply. We argue that theories of bounded rationality can help explain why house buyers may fail to take a tax decrease into account in the valuation of houses. |
| Keywords: | Announcement effects; Capitalization; Financial literacy; Housing market; Inattention; Saliency |
| JEL: | D01 D03 D04 D12 H22 H24 R21 R38 |
| Date: | 2014–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1029&r=ure |
| By: | Nicholas Ajzenman, Sebastian Galiani, and Enrique Seira |
| Abstract: | Reliable estimates of the effects of violence on economic outcomes are scarce. We exploit the manyfold increase in homicides in 2008-2011 in Mexico resulting from its war on organized drug traffickers to estimate the effect of drug-related homicides on house prices. We use an unusually rich dataset that provides national coverage on house prices and homicides and exploit within-municipality variations. We find that the impact of violence on housing prices is borne entirely by the poor sectors of the population. An increase in homicides equivalent to one standard deviation leads to a 3% decrease in the price of low-income housing. In spite of this large burden on the poor, the willingness to pay in order to reverse the increase in drug-related crime is not high. We estimate it to be approximately 0.1% of Mexico’s GDP. |
| Keywords: | drug-related homicides, costs of crime, poverty |
| JEL: | K4 I3 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:cgd:wpaper:364&r=ure |
| By: | Flores, Miguel; Rodriguez-Oreggia, Eduardo |
| Abstract: | This paper investigates spatial diffusion patterns of high levels of violence across Mexican municipalities to nearby locations while also exploring the possible effect of increasing law enforcement resources in some regions of the country. Our approach consists of providing a framework based on spatial regime models to address spatial heterogeneity that indicates instability in the structural determinants of homicides. In this context, a distinction is made in relation to the regimes that are analyzed between those municipalities that were exposed to joint operations (‘operativos conjuntos’) and those that were not exposed to the operations. Spatial econometric models were estimated for each regime in light of investigating possible spillover effects arising from the covariates. The results point to differences in regard to the significance, magnitude, and sign of the effects related to some variables according to each spatial regime’s specification. While the direct effects show that socioeconomic variables tend to play an important role in explaining the variation of homicides in the non-joint operation regime, the historical level of homicides and closeness to the U.S. border operate in a more significant way for those municipalities in the joint operation regime. In regard to the indirect effects estimates, a positive and significant spillover effect upon homicide rates is attributed to our law enforcement variable as well as to the proxy variable of informality. These spillover effects are found to be greater in magnitude especially in those municipalities exposed to joint operations. |
| Keywords: | ESDA, spillover effects, homicides, spatial regime model |
| JEL: | C1 H7 O1 R1 |
| Date: | 2014–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:56507&r=ure |
| By: | Marion Drut (EQUIPPE - ECONOMIE QUANTITATIVE, INTEGRATION, POLITIQUES PUBLIQUES ET ECONOMETRIE - Université Lille I - Sciences et technologies - Université Lille II - Droit et santé - Université Lille III - Sciences humaines et sociales - PRES Université Lille Nord de France); Aurélie MAHIEUX (IFSTTAR/AME/DEST - Dynamiques Economiques et Sociales des Transports - IFSTTAR - PRES Université Paris-Est) |
| Abstract: | The aim of the paper is to correct standard measures of agglomeration economies in order to account for air pollution generated by commuting. This paper examines the impact of nitrogen oxide (NOX) on worker productivity. NOX emissions are primarily released by the transportation sector. Literature on agglomeration economies is abundant and highlights the positive role of density on productivity. Nevertheless, this literature does not take into account the environmental impact generated by a better accessibility, namely commuting. We rst develop a general framework to estimate the agglomeration economies for the 304 French employment areas. In line with the literature, we nd an estimate of 0.05 for the elasticity coe cient of productivity with respect to density. Then, we introduce NOX emissions. The estimates suggest that emissions reduce the positive e ect of density on productivity by more 13%. The model con rms that air pollution matters. Agglomeration economies should be corrected by the environmental impacts associated with the enhancement of accessibility such as the implementation of a new transport infrastructure or policy. |
| Keywords: | agglomeration economies ; accessibility ; atmospheric pollution ; transport policies |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01007019&r=ure |
| By: | Ghani, Ejaz; Kerr, William R.; Tewari, Ishani |
| Abstract: | This paper examines the employment growth of Indian districts from 2000 to 2010 in the manufacturing and services sectors. Specialization and diversity metrics that combine industries in both sectors are calculated and related to subsequent job growth. The analysis finds robust and consistent evidence that the diversity of industries in the district across the two sectors links to subsequent job growth. Somewhat surprisingly, this link finds its strongest expression outside typical stories about the role of diversity. For example, the growth is strongest in rural areas of districts and in districts with low population density. Diversity correlates with disproportionately higher employment growth in the informal sector and plays a role in generating employment in the district's smaller industries. These findings point toward the"inclusive"nature of diversity-driven growth and highlight a potentially important agenda item for policy makers concerned with inclusive development. |
| Keywords: | Banks&Banking Reform,Transport Economics Policy&Planning,Water and Industry,Housing&Human Habitats,Labor Policies |
| Date: | 2014–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6919&r=ure |
| By: | Kalena Cortes; Joshua Goodman; Takako Nomi |
| Abstract: | We study an intensive math instruction policy that assigned low-skilled 9th graders to an algebra course that doubled instructional time, altered peer composition and emphasized problem solving skills. A regression discontinuity design shows substantial positive impacts of double-dose algebra on credits earned, test scores, high school graduation and college enrollment rates. Test score effects under-predict attainment effects, highlighting the importance of long-run evaluation of such a policy. Perhaps because the intervention focused on verbal exposition of mathematical concepts, the impact was largest for students with below average reading skills, emphasizing the need to target interventions toward appropriately skilled students. |
| JEL: | I20 I21 I24 J15 J24 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20211&r=ure |
| By: | Karbownik, Krzysztof (Institute for Policy Research, Northwestern University) |
| Abstract: | This paper examines the job mobility of teachers with different skills using matched employer-employee data from Swedish secondary schools. In addition to standard quality measures, I have access to population-wide data on cognitive and non-cognitive assessments of males born in 1951 or later. The results show that high-quality teachers are less mobile than others, and that there is no significant correlation between turnover and share of minority students. Interestingly, teachers with better skills are less likely to leave the profession, which suggests that the documented drop in the quality of inflowing teachers may partly be offset by a higher tendency for high quality teachers to stay in the profession. |
| Keywords: | Teacher turnover; teacher quality; student composition |
| JEL: | I21 J44 |
| Date: | 2014–06–07 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2014_014&r=ure |
| By: | Feld, Jan (Department of Economics, School of Business, Economics and Law, Göteborg University); Zölitz, Ulf (Department of Economics, Maastricht University) |
| Abstract: | This paper provides evidence on ability peer effects in university education. Identification comes from random assignment of students to sections. We find small effects of average peer quality in the linear-in-means specification: Being assigned to section peers with higher average ability, as measured by past GPA, leads to small increases in student grades. These results hide some unexpected heterogeneity: low ability students are actually harmed by being assigned to high ability peers. In our placebo analysis we quantify the estimation bias for peer effects estimates driven by the mechanisms described in Angrist (2013). |
| Keywords: | Peer effects; academic achievement |
| JEL: | I21 I24 J24 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0596&r=ure |
| By: | DeFusco, Anthony (The Wharton School, University of Pennsylvania); Paciorek, Andrew D. (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | The relationship between the mortgage interest rate and a household's demand for mortgage debt has important implications for a host of public policy questions. In this paper, we use detailed data on over 2.7 million mortgages to provide novel estimates of the interest rate elasticity of mortgage demand. Our empirical strategy exploits a discrete jump in interest rates generated by the conforming loan limit--the maximum loan size eligible for securitization by Fannie Mae and Freddie Mac. This discontinuity creates a large ``notch" in the intertemporal budget constraint of prospective mortgage borrowers, allowing us to identify the causal link between interest rates and mortgage demand by measuring the extent to which loan amounts bunch at the conforming limit. Under our preferred specifications, we estimate that a 1 percentage point increase in the rate on a 30-year fixed-rate mortgage reduces first mortgage demand by between 2 and 3 percent. We also present evidence that about one third of the response is driven by borrowers who take out second mortgages while leaving their total mortgage balance unchanged. Accounting for these borrowers suggests a reduction in total mortgage debt of between 1.5 and 2 percent per percentage point increase in the interest rate. Using these estimates, we predict the changes in mortgage demand implied by past and proposed future increases to the guarantee fees charged by Fannie and Freddie. We conclude that these increases would directly reduce the dollar volume of new mortgage originations by well under 1 percent. |
| Keywords: | Mortgage demand; interest rate elasticity; conforming loan limit; bunching |
| Date: | 2014–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2014-11&r=ure |
| By: | McCarthy, Yvonne (Central Bank of Ireland); McQuinn, Kieran (Central Bank of Ireland) |
| Abstract: | The greater use of microeconomic and survey based data in addressing key financial stability related questions is a natural outcome of the recent financial crisis. Amongst other benefits, the use of such data enables a more precise understanding of the differing attitudes and responses of individual agents such as households to financial shocks. However, some difficulties can arise with the use, in particular, of survey data in this regard. In this paper we calculate measurement error in the house prices “recalled” by a representative sample of mortgaged Irish households and illustrate the degree of attenuation bias consequently introduced into estimates of housing wealth effects, when recall as opposed to actual house prices are used. |
| Keywords: | Attenuation Bias, Recall Error, Consumption, House Prices. |
| JEL: | E21 C81 D12 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:06/rt/14&r=ure |
| By: | Joshua Goodman |
| Abstract: | Despite the fact that the average American student is absent more than two weeks out of every school year, most research on the effect of instructional time has focused not on attendance but on the length of the school day or year. Student and school fixed effects models using Massachusetts data show a strong relationship between student absences and achievement but no impact of lost instructional time due to school closures. I confirm those findings in instrumental variables models exploiting the fact that moderate snowfall induces student absences while extreme snowfall induces school closures. Prior work ignoring this non-linearity may have mis-attributed the effect of absences to such snow days. Each absence induced by bad weather reduces math achievement by 0.05 standard deviations, suggesting that attendance can account for up to one-fourth of the achievement gap by income. That absences matter but closures do not is consistent with a model of instruction in which coordination of students is the central challenge, as in Lazear (2001). Teachers appear to deal well with coordinated disruptions of instructional time like snow days but deal poorly with disruptions like absences that affect different students at different times. |
| JEL: | I20 I21 I24 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20221&r=ure |
| By: | Andersson , Tommy (Department of Economics, Lund University); Yang , Zaifu (Department of Economics and Related Studies, University of York); Zhang , Dongmo (Intelligent Systems Laboratory, University of Western Sydney) |
| Abstract: | Price controls are used in many regulated markets and well recognized as the cause of market inefficiency. This paper examines a practical housing market in the presence of price controls and provides a solution to the problem of how houses should be efficiently allocated among agents through a system of prices. We demonstrate that the dynamic auction by Talman and Yang (2008) always finds a core allocation in finitely many iterations, thus resulting in a Pareto efficient outcome. |
| Keywords: | Ascending auction; assignment market; price control; Pareto efficiency; core |
| JEL: | C71 D44 |
| Date: | 2014–06–13 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2014_024&r=ure |
| By: | Anenberg, Elliot (Board of Governors of the Federal Reserve System (U.S.)); Laufer, Steven (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | We construct a new "list-price index" that accurately reveals trends in house prices several months before existing sales price indices like Case-Shiller. Our index is based on the repeat-sales approach but for recent months uses listings data, which are available essentially in real time, instead of transactions data, which become available with signiffcant lags. Our index methodology is motivated by a simple model of the home-selling problem that shows how listings variables such as the list price and marketing time help predict the final sales price. In a sample of three large MSAs over the years 2008-2012, our index (i) accurately forecasts the Case-Shiller index several months in advance, (ii) outperforms forecasting models that do not use listings data, and (iii) outperforms the market's expectation as inferred from prices on Case-Shiller future contracts. |
| Keywords: | House price indices; house price forecasting; housing market microstructure |
| Date: | 2014–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2014-16&r=ure |
| By: | McCarthy, Yvonne (Central Bank of Ireland) |
| Abstract: | Despite various efforts to address the mortgage arrears crisis, arrears remain at an elevated level. Designing policies to deal with such high levels of distress requires a deep understanding of the precise sources of the problem. Efforts to date, however, have been hampered by a lack of appropriate data. This paper relies on two new and unique datasets which overcome such issues. Specifically, using a combination of administrative loan-level data and a detailed survey of mortgage holders, we assess the role of the labour market, income volatility and housing equity in the mortgage arrears crisis. The results provide new insights on mortgage distress in Ireland; unemployment and housing equity are key drivers, as shown by previous research. However, the results also show that many borrowers experiencing arrears are currently employed. Many of these borrowers have suffered a significant drop in their income, a change in employment conditions or are in fragile employment, i.e. they are on a temporary contract, have been with their employer for a short time or have a history of unemployment. This shows that the current mortgage crisis, and efforts to prevent a further deterioration, requires more than simply targeting unemployment. Rather, such efforts should also aim to strengthen overall labour market conditions and job security. |
| Keywords: | Mortgage Arrears, Default, Debt, Negative Equity. |
| JEL: | D14 G21 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:02/rt/14&r=ure |
| By: | Evgeniy M. Ozhegov (National Research University Higher School) |
| Abstract: | This paper analyzes the mortgage borrowing process from a Russian state-owned provider of residential housing mortgages concentrating on the choice of having government insurance. This analysis takes into account the underwriting process and the choice of loan limit by the bank, the choice of contract terms and the performance of all loans issued from 2008 to 2012. Our dataset contains demographic, financial, loan terms and the performance information for all applications. We use a multistep nonparametric approach to estimate the determinants of bank and borrower choice. The main finding that the probability of having government insurance is linked to riskier loans, but insured loans also are more likely to be approved by the bank. The bank, when approving a borrower, takes into account not the probability of default but the difference between the probability of default and having government insurance. |
| Keywords: | mortgage, terms choice, default, nonparametrics. |
| JEL: | C14 C30 C51 G21 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:31/fe/2014&r=ure |
| By: | Manuel Förster (CES, Université Paris 1 Panthéon-Sorbonne, France, and CORE, University of Louvain Louvain-la-Neuve, Belgium); Ana Mauleon (CEREC, Saint-Louis University, Brussels, CORE, University of Louvain, Louvain-la-Neuve, Belgium); Vincent J. Vannetelbosch (CORE, University of Louvain, Louvain-la-Neuve, CEREC, Saint-Louis University, Brussels, Belgium) |
| Abstract: | We investigate the role of manipulation in a model of opinion formation. Agents repeatedly communicate with their neighbors in the social network, can exert effort to manipulate the trust of others, and update their opinions about some common issue by taking weighted averages of neighbors' opinions. The incentives to manipulate are given by the agents' preferences. We show that manipulation can modify the trust structure and lead to a connected society. Manipulation fosters opinion leadership, but the manipulated agent may even gain influence on the long-run opinions. Finally, we investigate the tension between information aggregation and spread of misinformation. |
| Keywords: | Social networks, Trust, Manipulation, Opinion leadership, Consensus, Wisdom of Crowds |
| JEL: | D83 D85 Z13 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.50&r=ure |
| By: | Hancock, Diana (Board of Governors of the Federal Reserve System (U.S.)); Passmore, Wayne (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | We conduct an empirical analysis of the Federal Reserve's large-scale asset purchases (LSAPs) on MBS yields and mortgage rates. The Federal Reserve's accumulation of MBS and Treasury securities lowered MBS yields and mortgage rates by more than what would have been suggested by changes in market expectations alone, suggesting that portfolio rebalancing effects of LSAPs are an important consideration for monetary policy transmission. Our estimates also suggest that the Federal Reserve must hold a substantial market share of agency MBS or of Treasury securities to significantly lower MBS yields and in turn significantly lower mortgage rates. |
| Keywords: | Monetary policy; QE1; QE2; QE3; LSAP; MBS; mortgages |
| Date: | 2014–02–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2014-12&r=ure |
| By: | McCarthy, Yvonne (Central Bank of Ireland); McQuinn, Kieran (Central Bank of Ireland) |
| Abstract: | A distinguishing feature of the period preceding the 2007/08 financial crisis was the sizeable increase in private sector debt observed across many countries. A key component of household liabilities is mortgage debt and with many countries experiencing persistent increases in house prices from the mid-1990s onwards, a marked increase in this aspect of household leverage was observed. While aggregate statistics across countries confirm reductions in personal debt levels in recent years, relatively few sources of micro data are available to examine the nature of the deleveraging process at the household level. In this paper, using a unique combination of regulatory and survey data, we examine deleveraging amongst a representative sample of mortgaged Irish households. In particular, we examine the characteristics of households presently reducing their debt levels and empirically assess whether the subsequent balance sheet adjustments have implications for key economic decisions. Our analysis suggests that, typically, it is those households who can deleverage, who do, and furthermore the decision to deleverage has negative implications for household consumption. |
| Keywords: | Deleveraging, Debt, House Prices, Consumption. |
| JEL: | D12 D14 E21 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:05/rt/14&r=ure |
| By: | Sanjeev Goyal (Faculty of Economics and Christ's College, University of Cambridge); Stephanie Rosenkranz (Department of Economics, Utrecht University); Utz Weitzel (Department of Economics, Radboud University Nijmegen); Vincent Buskens (Department of Sociology, Utrecht University) |
| Abstract: | The explosion in online social networks motivates an enquiry into their structure and their welfare effects. A central feature of these networks is information sharing: online social networks lower the cost of getting information from others. These lower costs affect the attractiveness of individual search vis-a-vis a reliance on social networks. The paper reports the findings of an experiment on these effects. Our experiment shows that online networks can have large effects. Information acquisition is more dispersed and it is accompanied by denser social networks. Aggregate investment in information acquisition falls, but information available to individuals remains stable, due to increased networking. The overall effect is a significant increase in individual utility and aggregate welfare. |
| Keywords: | Social networks |
| JEL: | D83 D85 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2014.49&r=ure |
| By: | Mach, Traci L. (Board of Governors of the Federal Reserve System (U.S.)); Carter, Courtney M. (Board of Governors of the Federal Reserve System (U.S.)); Slattery, Cailin R. (University of Pennsylvania) |
| Abstract: | The current paper examines loan-level data from Lending Club to look at peer-to-peer borrowing by small businesses. We begin by looking at characteristics of loan applications that were and were not funded and then take a more in-depth look at funded applications. Summary statistics show an increasing number of small business loan applications over time. Beginning in 2010—when consistent measures of loan purpose were recorded for all applications--loan applications for small businesses were on average less likely than loans for other purposes to have been funded. However, logistic regression results that control for the quality of the application show that, holding all else constant, applications for a loan for a small business were almost twice as likely to have been funded than loans for other purposes. Focusing on funded applications, we note that funded business loans were slightly larger on average than loans funded for other purposes but paid similar interest rates. However, relative to small business loans from traditional sources, peer-to-peer small business borrowers paid an interest rate that was about two times higher. Regression results that control for application quality show that peer-to-peer loans for small businesses were charged almost a percentage point interest rate premium over non-business loans. Logistic regression results that look at loan performance indicate that loans for small businesses were much more likely to be delinquent or charged off. |
| Keywords: | Peer-to-peer lending; small business; alternative small business borrowing; lending club |
| Date: | 2014–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2014-10&r=ure |
| By: | Enys Mones; Nuno A. M. Ara\'ujo; Tam\'as Vicsek; Hans J. Herrmann |
| Abstract: | Power grids, road maps, and river streams are examples of infrastructural networks which are highly vulnerable to external perturbations. An abrupt local change of load (voltage, traffic density, or water level) might propagate in a cascading way and affect a significant fraction of the network. Almost discontinuous perturbations can be modeled by shock waves which can eventually interfere constructively and endanger the normal functionality of the infrastructure. We study their dynamics by solving the Burgers equation under random perturbations on several real and artificial directed graphs. Even for graphs with a narrow distribution of node properties (e.g., degree or betweenness), a steady state is reached exhibiting a heterogeneous load distribution, having a difference of one order of magnitude between the highest and average loads. Unexpectedly we find for the European power grid and for finite Watts-Strogatz networks a broad pronounced bimodal distribution for the loads. To identify the most vulnerable nodes, we introduce the concept of node-basin size, a purely topological property which we show to be strongly correlated to the average load of a node. |
| Keywords: | Shock wave, complex network |
| URL: | http://d.repec.org/n?u=RePEc:stz:wpaper:eth-rc-14-008&r=ure |
| By: | Boyarchenko, Nina (Federal Reserve Bank of New York); Fuster, Andreas (Federal Reserve Bank of New York); Lucca, David O. (Federal Reserve Bank of New York) |
| Abstract: | Spreads of agency mortgage-backed securities (MBS) vary significantly in the cross section and over time, but the sources of this variation are not well understood. We document that, in the cross section, MBS spreads adjusted for the prepayment option show a pronounced smile with respect to the MBS coupon. We propose prepayment model risk as a candidate driver of MBS spreads and present a new pricing model that uses “stripped” MBS prices to identify the contribution of this risk to option-adjusted spreads. With this pricing model, we find that prepayment model risk explains the smile, while the variation in the time series is mostly accounted for by a non-prepayment-risk component, which is related to credit risk in fixed- income markets and MBS supply. Finally, we study the MBS market response to the Fed’s large-scale asset purchases and show that the model is consistent with spread movements following the initial announcement and, in particular, the fanning out of option-adjusted spreads across different coupons. |
| Keywords: | agency mortgage-backed securities; option-adjusted spreads; prepayment model risk; OAS smile |
| JEL: | G10 G12 G13 |
| Date: | 2014–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:674&r=ure |
| By: | Pablo Fajgelbaum; Stephen J. Redding |
| Abstract: | This paper uses the natural experiment of Argentina's integration into world markets in the late-nineteenth century to provide evidence on the role of internal geography in shaping the effects of external integration. We develop a quantitative model of the distribution of economic activity across regions and sectors. The model predicts a spatial Balassa-Samuelson effect, in which locations with better access to world markets have higher population densities, higher shares of employment in the non-traded sector, higher relative prices of non-traded goods, and higher land prices relative to wages. We use the model and data on population density and sectoral employment shares to recover sufficient statistics that isolate the economic mechanisms through which external and internal integration affect economic development. Our analysis highlights the role of complementary investments in internal infrastructure and technology adoption in mediating the economy's response to external integration. |
| JEL: | F11 F14 O13 O14 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20217&r=ure |
| By: | Marcelo Arbex (Department of Economics, University of Windsor); Dennis O'Dea (Department of Economics, University of Washington) |
| Abstract: | We study the welfare costs of inflation in a monetary general equilibrium model with networks in the labor market. Unemployment results when individuals are unsuccessful in hearing about job opportunities, either directly or through their peers. Inflation affects the consumption-leisure choice differently depending on job network structure; inflation hits harder in more connected networks. In these networks, people consume more and enjoy more leisure, leading to higher welfare. Inflation reduces consumption and hurts households more, when labor markets are more effective. |
| Keywords: | Social networks, Labor market frictions, Inflation, Welfare costs of inflation |
| JEL: | D85 E31 E40 J64 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:wis:wpaper:1401&r=ure |
| By: | Brown, W. Mark |
| Abstract: | Using data from the Provincial KLEMS database, this paper asks whether provincial economies have undergone structural change in their business sectors since 2000. It does so by applying a measure of industrial change (the dissimilarity index) using measures of output (real GDP) and hours worked. The paper also develops a statistical methodology to test whether the shifts in the industrial composition of output and hours worked over the period are due to random year-over-year changes in industrial structure or long-term systematic change in the structure of provincial economies. The paper is designed to inform discussion and analysis of recent changes in industrial composition at the national level, notably, the decline in manufacturing output and the concomitant rise of resource industries, and the implications of this change for provincial economies. |
| Keywords: | Business performance and ownership, Economic accounts, Industries, Labour, Manufacturing, Productivity accounts, Regional and urban profiles, Statistical methods, Statistical techniques |
| Date: | 2014–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp5e:2014092e&r=ure |
| By: | Giuliani, Elisa (Department of Economics and Management, University of Pisa; CIRCLE, Lund University); Pietrobelli, Carlo (Inter-American Development Bank) |
| Abstract: | Cluster development programs (CDPs) have been adopted widely in many countries worldwide. Many such programs aim to promote economic development by forming and strengthening inter-organizational networks. Despite their widespread diffusion, we know very little about CDP outputs or the impact CDPs have on host regions and their populations. Evaluation studies are beginning to appear, but the overall concern is that a distinct evaluation concept and method with a focus on CDPs is not yet available. The objective of this paper is to address this limitation, by proposing a novel methodological approach in the evaluation of CDPs based on the application of concepts and methods of social network analysis (SNA). |
| Keywords: | cluster development programs; policy evaluation; social network analysis |
| JEL: | O22 O29 Z13 |
| Date: | 2014–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2014_011&r=ure |
| By: | Ishimura, Yuichi (Graduate School of Economics, Kobe University); Takeuchi, Kenji (Graduate School of Economics, Kobe University); Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | This study investigates the determinants of transfer of waste between the affected areas and other municipalities that resulted from the Great East Japan Earthquake. In particular, we investigate to what extent economic factors, but also social factors such as reciprocity and pro-social concerns, affect municipalities’ decision to accept disaster waste. We find some evidence that economic factors affect the decision, but the main factors that explain the decision are related to concerns about radiation and social concerns about the affected area. Our results suggest that it is primarily social concerns, both about the own municipality but also about the affected municipalities that explain behavior. |
| Keywords: | disaster waste; social preferences; wide area treatment |
| JEL: | Q53 R50 |
| Date: | 2014–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0597&r=ure |
| By: | Kandrac, John (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | Whether bank failures have adverse effects on local economies is an important question for which there is conflicting and relatively scarce evidence. In this study, I use county-level data to examine the effect of bank failures and resolutions on local economies. Using quasi-experimental techniques as well as cross-sectional variation in bank failures, I show that recent bank failures lead to lower income and compensation growth, higher poverty rates, and lower employment. Additionally, I find that the structure of bank resolution appears to be important. Resolutions that include loss-sharing agreements tend to be less deleterious to local economies, supporting the notion that the importance of bank failure to local economies stems from banking and credit relationships. Finally, I show that markets with more inter-bank competition are more strongly affected by bank failure. |
| Keywords: | Bank failure; relationship lending; bank regulation; financial crisis |
| Date: | 2014–05–23 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2014-41&r=ure |
| By: | Haltenhof, Samuel (University of Michigan); Lee, Seung Jung (Board of Governors of the Federal Reserve System (U.S.)); Stebunovs, Viktors (Board of Governors of the Federal Reserve System (U.S.)) |
| Abstract: | We study the existence and economic significance of bank lending channels that affect employment in U.S. manufacturing industries. In particular, we address the question of how a dramatic worsening of firm and consumer access to bank credit, such as the one observed over the Great Recession, translates into job losses in these industries. To identify these channels, we rely on differences in the degree of external finance dependence and of asset tangibility across manufacturing industries and in the sensitivity of these industries' output to changes in the supply of consumer credit. We show that household access to bank loans matters more for employment than firm access to local bank loans. Our results suggest that, over the recent financial crisis, tightening access to commercial and industrial loans and consumer installment loans explains jointly about a quarter of the drop in employment in the manufacturing sector. In addition, a decrease in the availability of home equity loans explains an extra one-tenth of the drop. |
| Keywords: | Bank credit channels; bank lending standards; home equity extraction; credit crunch; employment; job losses; Great Recession |
| Date: | 2013–10–29 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2014-06&r=ure |
| By: | Felipe Carozzi (CEMFI, Centro de Estudios Monetarios y Financieros); Luca Repetto (CEMFI, Centro de Estudios Monetarios y Financieros) |
| Abstract: | We ask whether the birthplaces of Italian members of Parliament are favoured in the allocation of central government transfers. Using a panel of municipalities for the years between 1994 and 2006, we find that municipal governments of legislators' birth towns receive larger transfers per capita. Exploiting the fact that some birth towns are outside of the district of election, we conclude that this result cannot be driven by re-election incentives. On the contrary, we show that these incentives discourage legislators from diverting resources to their birthplace. We present evidence that those transfers are a way for a politician to prepare the ground for a post-congressional career in the municipal administration. |
| Keywords: | Pork-barrel, distributive policies, political economy. |
| JEL: | H72 H77 D72 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2014_1401&r=ure |
| By: | Gavrilova, Evelina (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | I identify a discriminatory bias in partnership formation within the property crime market in the United States. Theoretically, the prisoner's dilemma creates an incentive for a criminal to form a partnership with a counterpart with the same probability of success, resulting in an equilibrium pattern of positive assortative matching. Using individual matched report-arrest data from the National Incident Based Reporting System and a novel empirical strategy, I pinpoint matches where the underlying probability of success of two partners differ. This difference in probability is correlated with observable characteristics, which could be evidence for discrimination and search frictions. I find patterns consistent with discrimination in male-female partnerships and patterns consistent with search frictions in black-white matches. In particular, females in a male-female partnership are more likely to evade law-enforcement than males, even though on average males are more successful as a group. This results is robust to controlling for the criminal earnings, individual criminal offenses and market characteristics. Furthermore, these patterns are found also in criminal groups of a size bigger than 2. The result could be either due to pre-crime marital matching or discrimination. |
| Keywords: | Organized Crime; Assortative Matching; Discrimination |
| JEL: | C78 J16 J71 K42 |
| Date: | 2014–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2014_025&r=ure |