nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2014‒12‒08
33 papers chosen by
Steve Ross
University of Connecticut

  1. Preference Tradeoffs Across Spatial Scales: Developing a Micro Level Sorting Model By Livy, Mitchell R.; Klaiber, H. Allen
  2. Welfare and Biodiversity Tradeoffs in Urban Open Space Protection By Tajibaeva, Liaila; Haight, Robert; Stephen, Polasky
  3. The Empirics of Agglomeration Economies By Combes, Pierre-Philippe; Gobillon, Laurent
  4. Measuring the sorting effect of migration on spatial wage disparities By Kentaro Nakajima; Ryosuke Okamoto
  5. Innovation in creative cities: Evidence from British small firms By Neil Lee; Andrés Rodríguez-Pose
  6. How Did the Housing and Labor Market Crises Affect Young Adults' Living Arrangements? By Rogers, William H.; Winkler, Anne E.
  7. The Effects of Government Spending in a Small Open Economy within a Monetary Union By Clancy, Daragh; Cussen, Mary; Lydon, Reamonn
  8. Wealth differences across borders and the effect of real estate price dynamics: evidence from two household surveys By Mathä, Thomas Y.; Porpiglia, Alessandro; Ziegelmeyer, Michael
  9. Housing Equity Withdrawal in Mid-To-Late Life: Patterns and Motivations Amongst Australian Home Owners By Rachel Ong; Gavin Wood; Siobhan Austen; Therese Jefferson; Marietta E.A. Haffner
  10. A Comparative Study of Public Housing in Vienna, Austria, and Los Angeles, California By Mehgie Marcel Tabar
  11. Metro Business Cycles By Arias , Maria A.; Gascon, Charles S.; Rapach, David E.
  12. Tracking, Inequality and Education Policy. Looking for a Recipe for the Italian Case By Davide Azzolini; Loris Vergolini
  13. Local coordination and global congestion in random networks By Iván Arribas; Amparo Urbano Salvador
  14. Broken Gears: The Value Added of Higher Education on Teachers' Academic Achievement By Balcázar, Carlos Felipe; Nopo, Hugo
  15. A territorial approach to R&D subsidies: Empirical evidence for Catalonian firms By Segarra Blasco, Agustí, 1958-; Teruel, Mercedes; Bové Sans, Miquel Àngel
  16. Cross-border commuting and consuming: an empirical investigation By Mathä, Thomas Y.; Porpiglia, Alessandro; Ziegelmeyer, Michael
  17. Addiction and Network Influence By Michal Ksawery Popiel
  18. Grades and Rank: Impacts of Non-Financial Incentives on Test Performance By Jalava, Nina; Joensen, Juanna Schrøter; Pellas, Elin
  19. Stealing to Survive : Crime and Income Shocks in 19th Century France By Galbiati, Roberto; Caroli, Eve; Bignon, Vincent
  20. Impacts of Fragmentation and Neighbor Influences on Farmland Conversion: A Case Study of the Edmonton-Calgary Corridor, Canada By Qiu, Feng; Swallow, Brent; Jeffrey, Scott; Laliberté, Larry
  21. Housing Price Response to the Interaction of Positive Coastal Amenities and Negative Flood Risks By Atreya, Ajita; Czajkowski, Jeffrey
  22. On the Robustness of Minimum Wage Effects: Geographically-Disparate Trends and Job Growth Equations By Addison, John T.; Blackburn, McKinley L.; Cotti, Chad
  23. Ireland's Recession and the Immigrant/Native Earnings Gap By Barrett, Alan; Bergin, Adele; Kelly, Elish; McGuinness, Seamus
  24. Political alignment and intergovernmental transfers in parliamentary systems: Evidence from Germany By Thushyanthan Baskaran; Zohal Hessami
  25. Macroeconomic policy coordination between Japanese central and local governments By Funashima, Yoshito
  26. How IoT, AAI can contribute to smart home and smart cities services: The role of innovation By Skouby, Knud Erik; Lynggaard, Per; Windekilde, Iwona; Henten, Anders
  27. The Cost of Knowledge By Antonelli, Cristiano; Colombelli, Alessandra
  28. Do environmental concerns affect commuting choices? Hybrid choice modelling with household survey data. By Jennifer Roberts; Gurleen Popli; Rosemary J. Harris
  29. Detecting Collusion in Spatially Differentiated Markets By Agnes Kügler; Matthias Firgo
  30. A degree-distance-based connections model with negative and positive externalities By Philipp Möhlmeier; Agnieszka Rusinowska; Emily Tanimura
  31. Social Investments, Informal Risk Sharing, and Inequality By Attila Ambrus; Arun G. Chandrasekhar; Matt Elliott
  32. Household Debt: Facts, Puzzles, Theories, and Policies By Jonathan Zinman
  33. The Impact of Family Composition on Educational Achievement By Stacey H. Chen; Yen-Chien Chen; Jin-Tan Liu

  1. By: Livy, Mitchell R.; Klaiber, H. Allen
    Abstract: This paper investigates the role of spatial scale in residential location choice. While the current residential sorting literature has largely focused on a single spatial unit, we expect that homeowners face different tradeoffs across the spatial spectrum, and that these tradeoffs interact across space in different ways to shape observed outcomes. To investigate these phenomena, we implement a nested logit discrete choice model of residential household sorting. With this model, we examine residential location choice at the school attendance boundary and residential neighborhood levels, and we find that the influence of environmental amenities on the location choice of households is complex, often having different implications depending on spatial scale.
    Keywords: location choice, nested logit, environmental amenities, Environmental Economics and Policy, Research Methods/ Statistical Methods, Q50, Q51, Q57, R14, R21,
    Date: 2014
  2. By: Tajibaeva, Liaila; Haight, Robert; Stephen, Polasky
    Abstract: In this paper, we analyze the optimal spatial pattern of open space and residential development in an urban model that includes provision of both local and global public goods. In our model, households choose where to live based on land prices, proximity to employment, and amenity values that include access to open space (local public good). Open space also provides habitat for biodiversity (global public good). We applied the model in the Twin Cities Metropolitan Area and include endogenous land prices, land taxes that finance the purchase of open space, heterogeneous land quality, multiple employment locations, and pre-existing spatial features, such as institutional and environmental amenities. Based on this application we develop an efficiency frontier that shows tradeoffs between maximum welfare of households, which includes provision of local public goods, and provision of habitat for biodiversity, which is assumed to not affect household welfare. We show there is the potential for a large increase in biodiversity conservation with only modest reductions in welfare when starting from a spatial pattern of development that maximizes household welfare. Biodiversity conservation can be improved by changing the spatial configuration of open space towards higher quality habitat and aggregating protected areas to increase contiguity.
    Keywords: open space, residential development, environmental amenities, urban economics, biodiversity conservation, spatial configuration, land use, Environmental Economics and Policy, Land Economics/Use, Q50, Q57, R21, R52,
    Date: 2014
  3. By: Combes, Pierre-Philippe (GREQAM, University of Aix-Marseille); Gobillon, Laurent (INED, France)
    Abstract: We propose an integrated framework to discuss the empirical literature on the local determinants of agglomeration effects. We start by presenting the theoretical mechanisms that ground individual and aggregate empirical specifications. We gradually introduce static effects, dynamic effects, and workers' endogenous location choices. We emphasise the impact of local density on productivity but we also consider many other local determinants supported by theory. Empirical issues are then addressed. Most important concerns are about endogeneity at the local and individual levels, the choice of a productivity measure between wage and TFP, and the roles of spatial scale, firms' characteristics, and functional forms. Estimated impacts of local determinants of productivity, employment, and firms' locations choices are surveyed for both developed and developing economies. We finally provide a discussion of attempts to identify and quantify specific agglomeration mechanisms.
    Keywords: agglomeration gains, density, sorting, learning, location choices
    JEL: R12 R23 J31
    Date: 2014–09
  4. By: Kentaro Nakajima (Graduate School of Economics, Tohoku University); Ryosuke Okamoto (National Graduate Institute for Policy Studies)
    Abstract: Observed spatial wage disparities reflect not only disparities in regional productivity but also an uneven geographical distribution of heterogeneous worker skills. We measure spatial skill disparities in Japan and evaluate how migration contributes to these disparities. For this purpose, we regress the individual wage on the residential region dummy variables and a series of individual characteristics to decompose the wage into regional productivity and the workers’ skills. The estimation illustrates that by removing the skill heterogeneities, the productivity disparity is approximately half of the observed wage disparity. Workers living in metropolitan areas have 9.7% higher skills than those in nonmetropolitan areas on average. The spatial skill disparity that stems from individuals’ hometowns is approximately 4.2%. Hence, migration increases the spatial skill disparity from 4.2% to 9.7%, which is an increase of 5.5 percentage points. Furthermore, we investigate migration effects in terms of the workers’ characteristics and find that most sorting effects of migration come from highly educated and regularly employed male workers.
    Date: 2014–10
  5. By: Neil Lee; Andrés Rodríguez-Pose
    Abstract: Creative cities are seen as important sites for the generation of new ideas, products and processes. Yet, beyond case studies of a few high-profile cities, there is little empirical evidence on the link between local creative industries concentration and innovation. This paper addresses this gap with an analysis of around 1,300 UK SMEs. The results suggest that firms in local economies with high shares of creative industries employment are significantly more likely to introduce entirely new products and processes than firms elsewhere, but not innovations which are simply new to the firm. This effect is not exclusive to creative industries firms and seems to be largely due to firms in medium sized, rather than large, cities. The results imply that creative cities may have functional specialisations in new content creation and so firms are more innovative in them.
    Keywords: Creativity, Creative Cities, Creative Industries, Cities, Innovation
    JEL: O31 O38 R1 R11 R58
    Date: 2014–11
  6. By: Rogers, William H. (University of Missouri-St. Louis); Winkler, Anne E. (University of Missouri-St. Louis)
    Abstract: The housing and labor market crises of the late 2000s left few families and individuals unscathed. In the wake of these events, evidence points to more "doubling-up" of families in the same household. To what extent have these crises affected individuals' decisions to live independently? What differentiates this study from others is the careful attention paid to the role of housing market conditions – as measured by MSA-level housing prices, rents, and foreclosure rates – on this decision. The empirical analysis is conducted by appending data on area-level conditions for 85 of the largest MSAs in the United States to individual-level data from the ACS PUMS on living arrangements of young adults ages 22 to 34 living in these MSAs. The analysis spans the period 2005 (pre-crisis) through 2011. Within this time period, all MSAs experienced a rise in housing prices, a peak, and then a decline. Regarding the area-level variables, we find a robust statistically significant effect for rent only. Our broader conclusion is that it is individual-level factors, not area-level conditions that largely lie behind young adults' living arrangement decisions.
    Keywords: living arrangements, labor market, housing market, foreclosures
    JEL: J12 R23
    Date: 2014–10
  7. By: Clancy, Daragh (Central Bank of Ireland); Cussen, Mary (Central Bank of Ireland); Lydon, Reamonn (Central Bank of Ireland)
    Abstract: This paper analyses how developments in the housing market affect consumer spending. Using aggregate data, we show that housing wealth exerts a positive influence on consumption. Whilst informative, the aggregate results not allow us to identify housing wealth effects separately from credit effects, income expectations and complementarity effects. Survey data is therefore used to assess whether behaviour at the household level can further explain consumption trends at the aggregate level. We observe a strong correlation between house price levels and consumption for young, middle- and older-aged cohorts. The strong house price effects for younger cohorts in particular, who are predominantly renters, suggests that house prices are also a proxy for changes in in permanent income. However, our analysis also suggests that significant housing wealth effects are present, particularly when it comes to spending on durable goods. Our research highlights not only the benefits of combining household and aggregate level data for understanding consumption, but also the importance of decomposing consumption into its constituent parts for understanding housing wealth effects in particular.
    Keywords: consumption, wealth effects, credit conditions, income expectations, business cycle, durable goods.
    JEL: D12 E21
    Date: 2014–09
  8. By: Mathä, Thomas Y.; Porpiglia, Alessandro; Ziegelmeyer, Michael
    Abstract: Crossing borders, be it international or regional, often go together with price, wage or indeed wealth discontinuities. This paper identifies substantial wealth differences between Luxembourg resident households and cross-border commuter households despite their similar incomes. The average (median) net wealth difference is estimated to be €367,000 (€129,000) and increases for higher percentiles. Using several different regression and decomposition techniques, spatial (regional) differences in real estate price developments, and thus differences in accumulated nominal capital gains are shown to be one main driving factor for these wealth differences. Other factors contributing to the observed wealth differences are differences in age, income, education and other household characteristics. JEL Classification: D31, J61, F22, R23, R31
    Keywords: cross-border commuting, household survey, real estate price dynamics, wealth
    Date: 2014–05
  9. By: Rachel Ong (Bankwest Curtin Economics Centre, Curtin University); Gavin Wood (Centre for Urban Research, RMIT University); Siobhan Austen (School of Economics and Finance, Curtin University); Therese Jefferson (Graduate School of Business, Curtin University); Marietta E.A. Haffner (Faculty of Architecture and the Built Environment, Delft University of Technology)
    Abstract: resource that can perform a pension role in retirement. This paper assesses the extent to which Australians aged over 45 utilise housing equity withdrawal (HEW) through the three methods of in situ mortgage equity withdrawal, downsizing and selling up. We find that the incidence of HEW has increased over the last decade despite a global financial crisis. Mortgage equity withdrawal is the dominant form of equity release among those under pension age, while downsizing or selling up is relatively more frequent among those above pension age. Different motivations are associated with the decision to invoke alternative styles of equity withdrawal. Mortgage equity withdrawal is linked with financial and employment factors while downsizing and selling up seems to be prompted by adverse life events. Selling up to access equity is typically an option of last resort. Our findings offer insights into important debates around home ownership societies and the welfare role performed by owner-occupied housing in mid-to-late life.
    Keywords: housing equity withdrawal, mortgage equity withdrawal, downsizing, selling up, mid-to-late life
    JEL: E21 J14
    Date: 2014–11
  10. By: Mehgie Marcel Tabar
    Date: 2014–05–22
  11. By: Arias , Maria A. (Federal Reserve Bank of St. Louis); Gascon, Charles S. (Federal Reserve Bank of St. Louis); Rapach, David E.
    Abstract: We construct monthly economic-activity indices for 51 U.S. metropolitan statistical areas for 1990 to 2014. Each index is computed via a dynamic factor model that includes 14 variables measuring various aspects of economic activity in a metro area. We estimate the dynamic factor model using the recently developed maximum-likelihood approach of Bańbura and Modugno (2014), which allows for arbitrary patterns of missing data and enables us to accommodate mixed-frequency data and differences in data-publication lags. Our indices highlight important similarities and differences in business cycles across metro areas. During the national recessions of the early 1990s and early 2000s, a number of metro areas experience sizable recessions, while other areas escape recessions altogether during one or both of these periods. In contrast, all metro areas suffer severe recessions around the time of the recent Great Recession. Nevertheless, there are significant differences in the length and depth of recent recessions across metro areas, and we find that these differences are strongly related to local housing-market conditions. We also estimate each metro area’s “beta”—its sensitivity to national economic activity—and relate the betas to metro characteristics.
    Keywords: Metropolitan statistical area; Recession; Dynamic factor model; Latent variable; EM algorithm; Housing market.
    JEL: C38 E32 R11 R31
    Date: 2014–11–11
  12. By: Davide Azzolini (FBK-IRVAPP); Loris Vergolini (FBK-IRVAPP)
    Abstract: This contribution has two main goals. First, we review the most relevant empirical literature that has focused on the relationship between tracking and inequality in Italy. We address the issue of inequality in access to the different school branches paying particular attention to the role played by social background. Second, we consider policy solutions that might reduce the effects of social background on individuals' school choices in Italy. We examine empirical studies on two areas of intervention: (a) de-tracking reforms such as postponement of age at first tracking and reduction of curricula differences between tracks; (b) interventions aimed at reducing students' misallocation across schools through guidance initiatives and teacher recommendations.
    Keywords: Tracking, Inequality, Education policy, Italy
    JEL: I24 I28
    Date: 2014–11
  13. By: Iván Arribas (ERI-CES, University of Valencia, Ivie); Amparo Urbano Salvador (ERI-CES, University of Valencia)
    Abstract: This paper analyzes the impact of local and global interactions on individuals' action choices. Players are located in a network and interact with each other with perfect knowledge of their neighborhood and probabilistic knowledge of the complete network topology. Each player chooses an action, from some finite set, which imposes an externality on their neighbors as well as an externality on the complete network. Players deal with two opposing forces: they obtain utility from sharing their choices with their neighbors (positive local externality) but suiter disutility from sharing the same choice with all members of the network (negative global externality). Economic and social phenomena exhibiting these features are: the adoption of cost-reducing innovations, clusters of firms, time schedule choices, the adoption of subcultures and fads, among others. We find the conditions for the existence of all symmetric Bayesian Nash equilibria and translate them to a characterization in terms of the main properties of the network topol- ogy. The balance between local satisfaction and global dissatisfaction partially explains the equilibrium outcome. The players who finally decide on the type of equilibria are those that are either highly connected (hubs) or poorly connected (peripherals) to the others. On the one hand, hubs try to coordinate their action choices and on the other, peripherals are only worried about congestion and play the least selected actions of the network. Some examples illustrate our main results. As a by-product we also show the failure of symmetric
    Keywords: Random Network, Externalities, Action Selection, Bayesian Nash equilibria.
    JEL: C72 D71 D85 H40 R41
    Date: 2014–11
  14. By: Balcázar, Carlos Felipe (World Bank); Nopo, Hugo (Inter-American Development Bank)
    Abstract: A growing literature establishes that good teachers are essential for high quality educational systems. However, little is known about teachers' skills formation during their college years. In this paper we use a novel panel data set combining two standardized tests for Colombian students: one that is taken at the end of senior year in high school and the other when students are near graduation from college. Accounting for selection into majors we test for the extent to which education majors relatively improve or deteriorate their skills in comparison to students in other programs. We analyze three sets of skills: quantitative reasoning, native language (Spanish) and foreign language (English). After around 5 years of college, teachers' skills vis-à-vis those in other majors deteriorate in quantitative reasoning, although they deteriorate less for those in math-oriented programs. For native and foreign language we do not find evidence of robust changes in relative learning.
    Keywords: teacher performance, career choice, self-selection, relative learning mobility
    JEL: I2 I21 J24
    Date: 2014–09
  15. By: Segarra Blasco, Agustí, 1958-; Teruel, Mercedes; Bové Sans, Miquel Àngel
    Abstract: Using a database of 2,263 responses to R&D public calls in Catalonia, during the period 2007–2010, this paper proceeds to analyse the potential interaction of the territorial and policy dimensions with the propensity to apply for, and be awarded, a public R&D subsidy. Controlling for characteristics at the firm and project level, we estimate models using a two-step procedure. In the first step, our results suggest that large firms which export and which belong to high-tech manufactures are more likely to participate in a public R&D call. Furthermore, both urban location and past experience of such calls have a positive effect. Our territorial proxy of information spillovers shows a positive sign, but this is only significant at intra-industry level. Membership of one of the sectors prioritized by the Catalan government, perhaps surprisingly, does not have a significant impact. In the second step, our results show that cooperative projects, SMEs or old firms shows a positive effect on the probability of obtaining a public subsidy. Finally, the cluster policy does not show a clear relationship with the public R&D call, suggesting that cluster policies and R&D subsidies follow different goals. Our results are in line with previous results in the literature, but they highlight the unequal territorial distribution of the firms which apply and the fact that policymakers should interlink the decision criteria for their public call with other policies. Keywords: Evaluation, R&D policies, territorial approach, clusters JEL Classifications: L53, L25, O38
    Keywords: Innovacions tecnològiques -- Política governamental, Sistemes productius locals, Política industrial, Empreses -- Dimensió -- Catalunya, 332 - Economia regional i territorial. Economia del sòl i de la vivenda,
    Date: 2014
  16. By: Mathä, Thomas Y.; Porpiglia, Alessandro; Ziegelmeyer, Michael
    Abstract: This paper analyses empirically how cross-border consumption varies across product and services categories and across household characteristics. It focuses on the part of cross-border sales that arise due to work-related cross-border crossings; it analyses the cross-border consumption behaviour of cross-border commuter households residing in Belgium, France and Germany and working in Luxembourg. In total, it is estimated that these households spend €925 million per annum in Luxembourg, reflecting about 17% of their gross annual income from Luxembourg and contributing about 10% to total household final consumption expenditure in Luxembourg. Cross-border consumption expenditure is shown to depend on individual and household characteristics, such as total household income, the number of cross-border commuters in the household, distance between home and work, as well as price level (index) differences between Luxembourg and its neighbouring countries. Cross-border commuters take advantage of existing arbitrage opportunities. JEL Classification: F15, R12, R23, J61
    Keywords: commuting, consumption, cross-border shopping, expenditure, households
    Date: 2014–03
  17. By: Michal Ksawery Popiel (Queen's University)
    Abstract: Social networks are an important component in understanding the decision to consume addictive substances. They capture the role of limited access, peer influence, and social acceptance and tolerance. However, despite the empirical evidence of their role, they have been absent from theoretical models. This paper proposes a mechanism through which agents can influence each other in their decision to consume an addictive good. An agent's decision is sensitive to her state of addiction as well as to the composition of her neighbourhood. The model is consistent with the empirical evidence that peer influence can work in both ways: influencing an individual to use and helping them to quit. The structure of the network has important implications on the outcome of agents' decisions as well as the effectiveness of policies aimed at limiting use of addictive substances through deterrence. I provide a network-based explanation of why usage rates can vary across otherwise similar agents and show how in some situations encouraging network ties can lead to lower use while in others it can have the opposite effect. Furthermore, I explore the effect of networks on diffusion of addiction and, using simulations, find that addiction spreads faster in an environment where there are few strong links than in one with many weak links.
    Keywords: addiction, dual-self, networks, random utility
    JEL: C70 D01 I18
    Date: 2014–11
  18. By: Jalava, Nina (Stockholm School of Economics); Joensen, Juanna Schrøter (Stockholm School of Economics); Pellas, Elin (Stockholm School of Economics)
    Abstract: How does effort respond to being graded and ranked? This paper examines the effects of non-financial incentives on test performance. We conduct a randomized field experiment on more than a thousand sixth graders in Swedish primary schools. Extrinsic non-financial incentives play an important role in motivating highly skilled students to exert more effort. We find significant differences in test scores between the intrinsically motivated control group and three of four extrinsically motivated treatment groups. The only treatment not increasing test performance is criterion-based grading on an A-F scale, which is the typical grading method. Test performance is significantly higher if employing rank-based grading or giving students a symbolic reward. The motivational strengths of the non- financial incentives differ across the test score distribution, across the skill distribution, with peer familiarity, and with respect to gender. Boys are only motivated by rank-based incentives, while girls are also motivated by receiving a symbolic reward. Rank-based grading and symbolic rewards tend to crowd out intrinsic motivation for students with low skills, while girls also respond less to rank-based incentives if tested with less familiar peers.
    Keywords: test-taking, performance incentives, effort, extrinsic and intrinsic motivation, randomized experiment
    JEL: I20 I21 D03 C93
    Date: 2014–08
  19. By: Galbiati, Roberto; Caroli, Eve; Bignon, Vincent
    Abstract: Using local administrative data from 1826 to 1936, we document the evolution of crime rates in 19th century France and we estimate the impact of a negative income shock on crime. Our identification strategy exploits the phylloxera crisis. Between 1863 and 1890, phylloxera destroyed about 40% of French vineyards. We use the geographical variation in the timing of this shock to identify its impact on property and violent crime rates, as well as minor offences. Our estimates suggest that the phylloxera crisis caused a substantial increase in property crime rates and a significant decrease in violent crimes.
    Keywords: Crime; income shock; phylloxera; 19th century France;
    JEL: K42 N33 R11
    Date: 2014–10
  20. By: Qiu, Feng; Swallow, Brent; Jeffrey, Scott; Laliberté, Larry
    Abstract: Under heavy development pressure, farmland is rapidly being converted to non-agricultural uses such as houses, roads, and recreational facilities. A great deal of research has investigated these farmland losses and their associated drivers. However, the existing empirical studies have neglected two important issues related to farmland conversion: spillover effects from neighboring areas and the impacts of farmland fragmentation. This study incorporates fragmentation and neighboring impacts into the farmland conversion analysis and provides new insights for the land-use/cover change literature. Empirical results indicate that increases in fragmentation further encourage farmland conversion to urban uses, but the effects are not linear with decreasing marginal influences. Land-use activities and decisions have strong spillover effects on neighboring areas. Ignoring this externality could result in biased results and thus misleading policy decisions and recommendations.
    Keywords: Farmland conversion Fragmentation Neighbor influences Spatial regression, Land Economics/Use,
    Date: 2014
  21. By: Atreya, Ajita; Czajkowski, Jeffrey
    Abstract: Since 1968 homeowners’ flood insurance in the United States has been mainly provided through the federally-run National Flood Insurance Program (NFIP), which as of December 2012 had 5.55 million NFIP policies-in-force nationwide with a total of $1.28 trillion of insured coverage (Michel-Kerjan et al, 2014). In 2012, Congress passed the Biggert-Waters Flood Insurance Reform Act (BW-12) in order to address a number of the well-documented structural and fiscal issues of the program, including key provisions of the bill that would increase existing discounted premiums to full-risk levels. However, BW-12 was itself reformed in March 2014 with the passage of Homeowner Flood Insurance Affordability Act (HFIAA-14) that importantly curbed many of the planned BW-12 rate increases. Realtors, homebuilders, and lenders had provided steep opposition to BW-12 (WSJ, 2013) decrying the movement toward risk-based premiums as causing “property values to steeply decline and made many homes unsellable, hurting the real estate market” (Insurance Journal, March 2014). In this paper we aim to shed some further light on this depressed property value assertion through a hedonic property analysis that accounts for the potential negative housing price effects of higher flood risk (and thus higher risk-based flood insurance rates), as well as the potential positive housing price effects of living close to the water, acting together on housing sales prices in a coastal community in Texas.
    Keywords: Coastal Amenity, Flood Risk, Return Periods, Interaction, Environmental Economics and Policy, Land Economics/Use, Risk and Uncertainty,
    Date: 2014
  22. By: Addison, John T. (University of South Carolina); Blackburn, McKinley L. (University of South Carolina); Cotti, Chad (University of Wisconsin, Oshkosh)
    Abstract: Just as the standard two-way fixed effects model for estimating the impact of minimum wages on employment has been sharply criticized for its neglect of spatial heterogeneity so, too, have the latest models been attacked for their uncritical use of state- or county-specific linear trends (and other spatial counterfactuals). Further attenuation of the effects of policy is also alleged to obtain in such circumstances where the true effect of minimum wages is upon employment growth rather than levels. This paper investigates whether such considerations call into question our earlier findings of statistically insignificant employment effects for an archetypal low-wage sector. We report that a continued focus on employment levels is indicated and that while experimentation with nonlinear trends may be productive their use is unlikely to dislodge the finding of considerably reduced negative employment effects.
    Keywords: minimum wages, employment, employment change, spatial controls
    JEL: J23 J38
    Date: 2014–08
  23. By: Barrett, Alan (ESRI, Dublin); Bergin, Adele (ESRI, Dublin); Kelly, Elish (Economic and Social Research Institute, Dublin); McGuinness, Seamus (Economic and Social Research Institute, Dublin)
    Abstract: The economic collapse was more severe in Ireland relative to elsewhere. Many questions have arisen concerning the impacts of the collapse, including the impacts on immigrants and their subsequent reactions. Previous research shows that immigrant employment contracted sharply over the recession, thereby suggesting reduced demand for immigrant labour. In this paper, we ask whether immigrants' earnings also fell, relative to natives. Although the raw data shows a widening of the immigrant/native pay gap, when we control for relevant characteristics the adjusted wage gap narrows. A decomposition analysis shows that most of the change in the raw wage gap is generated by the changing composition of the immigrants who were employed.
    Keywords: recession, immigrant earnings, Ireland
    JEL: J61
    Date: 2014–09
  24. By: Thushyanthan Baskaran (Department of Economics, University of Göttingen, Germany); Zohal Hessami (Department of Economics, University of Konstanz, Germany)
    Abstract: We study partisan favoritism in the allocation of intergovernmental transfers. Our dataset combines local council election data with fiscal data on grant allocations in the German state of Hesse. Our identification strategy is a regression discontinuity design that relies on a perturbation procedure to classify close elections. We find that left-wing state governments favored aligned municipalities while right-wing state governments favored unaligned ones. One plausible explanation for this difference in the behavior of left- and right-wing governments is that only few local councils had absolute right-wing majorities during the tenure of the right-wing state governments. Therefore, right-wing state governments had to use transfers to “buy off” unaligned municipalities, while left-wing state governments could use transfers to enhance their electoral prospects.
    Keywords: Intergovernmental transfers, political alignment, partisan behavior, state and local governments
    JEL: D72 H72 H77
    Date: 2014–09–02
  25. By: Funashima, Yoshito
    Abstract: It is commonly believed that public investments play a central role in Japan's discretionary fiscal policies, but the majority is implemented by local governments. After distinguishing between public investment by the central government and that by local governments, this paper utilizes wavelet techniques to examine macroeconomic policy coordination between Japanese central and local governments. We demonstrate that local government investments fail to coordinate with central government investments during the lost two decades, and such a coordination failure is a one-time phenomenon in nearly a half-century. In this period, local government investments exhibit no countercyclical behavior to business cycles, which is contributory to the ineffectiveness of fiscal stimulus that is pointed out by our predecessors.
    Keywords: Public investment; Wavelet; Central government; Local government
    JEL: E32 E62
    Date: 2014–11–10
  26. By: Skouby, Knud Erik; Lynggaard, Per; Windekilde, Iwona; Henten, Anders
    Date: 2014
  27. By: Antonelli, Cristiano; Colombelli, Alessandra (University of Turin)
    Abstract: This paper contributes the economics of knowledge and innovation with the analysis of the knowledge cost function and sheds light on the determinants of the large variance in the cost of innovation across firms. The amount and the structure of external knowledge and the internal stocks of knowledge that firms can access and use in the generation of new technological knowledge help firms to reduce the costs of innovations. The empirical section is based upon a panel of companies listed on UK and the main continental Europe financial markets (Germany, France and Italy) for the period 1995 – 2006, for which information about patents have been gathered. The econometric analysis of the costs of knowledge considers the unit costs of patents on the right hand side, and on the left hand side next to R&D expenditures, the stock of knowledge internal and external to each firm. In order to articulate the different facets of the external knowledge that is made accessible by proximity with firms co-localized in the same region (NUTS2), we further include other variables proxying for regional variety, complementarity and similarity. The results confirm that the stock of internal knowledge and the access to external knowledge play a key role in reducing the actual cost of the generation of new technological knowledge at the firm level.
    Date: 2014–10
  28. By: Jennifer Roberts (University of Sheffield); Gurleen Popli (University of Leicester); Rosemary J. Harris (Queen Mary University of London)
    Abstract: In order to meet their ambitious climate change goals governments around the world will need to encourage behaviour change as well as technological progress; and in particular they need to weaken our attachment to the private car. A prerequisite to designing effective policy is a thorough understanding of the factors that drive behaviours and decisions. In an effort to better understand how the public’s environmental attitudes affect their behaviours we estimate a hybrid choice model (HCM) for commuting mode choice using a large household survey data set. HCMs combine traditional discrete choice models with a structural equation model to integrate latent variables, such as attitudes and other psychological constructs, into the choice process. To date HCMs have been estimated on small bespoke data sets, beset with problems of sample selection, focusing effects and limited generalizability. To overcome these problems we demonstrate the feasibility of using this valuable modelling approach with nationally representative data. Our estimates suggest that environmental attitudes and behaviours are separable constructs, and both have an important influence on commute mode choice. These psychological factors can be exploited by governments looking to add to their climate change policy toolbox in an effort to change travel behaviours.
    Keywords: hybrid choice model, structural equation modelling, environment
    JEL: C38 Q50 R41
    Date: 2014–11
  29. By: Agnes Kügler (Department of Economics, Vienna University of Economics and Business); Matthias Firgo (WIFO - Austrian Institute of Economic Research)
    Abstract: The empirical literature on mergers, market power and collusion in differentiated markets has mainly focused on methods relying on output and/or panel data. In contrast to this literature we suggest a novel approach that allows for the detection of collusive behavior among a group of firms making use of information on the spatial structure of horizontally differentiated products. By estimating best response functions using a spatial econometrics approach, we focus on differences in the strategic interaction in pricing between different groups of firms as well as on differences in price levels. We apply our method to the market for ski lift tickets using a unique data set on ticket prices and detailed resort-specific characteristics covering all ski resorts in Austria.
    Keywords: tacit collusion, strategic alliances, spatial differentiation, ski lift ticket prices
    JEL: C21 D43 L11 L41 L83 R32
    Date: 2014–10
  30. By: Philipp Möhlmeier (BiGSEM - Bielefeld University - Center for Mathematical Economics); Agnieszka Rusinowska (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); Emily Tanimura (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: We develop a modification of the connections model by Jackson and Wolinsky (1996) that takes into account negative externalities arising from the connectivity of direct and indirect neighbors, thus combining aspects of the connections model and the co-author model. We consider a general functional form for agents' utility that incorporates both the effects of distance and of neighbors' degree. Consequently, we introduce a framework that can be seen as a degree-distance-based connections model with both negative and positive externalities. Our analysis shows how the introduction of negative externalities modifies certain results about stability and efficiency compared to the original connections model. In particular, we see the emergence of new stable structures, such as a star with links between peripheral nodes. We also identify structures, for example, certain disconnected networks, that are efficient in our model but which could not be efficient in the original connections model. While our results are proved for the general utility function, some of them are illustrated by using a specific functional form of the degree-distance-based utility.
    Keywords: Connections model; degree; distance; negative externalities; positive externalities; pairwise stability; efficiency
    Date: 2013–04
  31. By: Attila Ambrus; Arun G. Chandrasekhar; Matt Elliott
    Abstract: This paper studies costly network formation in the context of risk sharing. Neighboring agents negotiate agreements as in Stole and Zwiebel (1996), which results in the social surplus being allocated according to the Myerson value. We uncover two types of inefficiency: overinvestment in social relationships within group (e.g., caste, ethnicity), but underinvestment across group. We find a novel tradeoff between efficiency and equality. Both within and across groups, inefficiencies are minimized by increasing social inequality, which results in financial inequality and increasing the centrality of the most central agents. Evidence from 75 Indian village networks is congruent with our model.
    JEL: C78 D31 D61 D86 L14 Z13
    Date: 2014–11
  32. By: Jonathan Zinman
    Abstract: Borrowing decisions affect most households, with large stakes and implications for subfields as varied as macroeconomics and industrial organization. I review theoretical and empirical work on household debt: its prevalence, level, growth, and composition, as well as various measures of consumer choice and market (in)efficiency, elasticities, and prices, including new evidence on how borrowing heterogeneity affects the distribution of the opportunity cost of consumption. I also discuss opportunities and challenges in policy evaluation. A key takeaway is that puzzles outstrip stylized facts, and I highlight numerous avenues for further research.
    JEL: D03 D14 D18 D83 D91 E21 E32 G01 G02 G11 G21 G23 G28 R31
    Date: 2014–09
  33. By: Stacey H. Chen; Yen-Chien Chen; Jin-Tan Liu
    Abstract: Parents preferring sons tend to go on to have more children until one or more boys are born, and to concentrate investment in boys for a given sibsize. Therefore, having a brother may affect child outcomes in two ways: indirectly, by decreasing sibsize, and directly, where sibsize remains constant. We develop an identification strategy that allows us to separate these two effects. We then apply this to capture the heterogeneous effects of male siblings in both direct and indirect channels, using 0.8 million Taiwanese first-borns. Our empirical evidence indicates that neither effect is important in explaining first-born boys' education levels. In contrast, both effects for first-born girls are evident but go in opposite directions, resulting in a near-zero total effect which has previously been a measure of gender bias. These results offer new evidence of sibling rivalry and gender bias in family settings that has not been detected in the literature.
    JEL: I20 J13 J16 J24 O10 R20
    Date: 2014–08

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