nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2014‒12‒29
37 papers chosen by
Steve Ross
University of Connecticut

  1. Agglomeration theory with heterogeneous agents By Behrens, Kristian; Robert-Nicoud, Frédéric
  2. House Prices, Local Demand, and Retail Prices By Johannes Stroebel; Joseph Vavra
  3. The sensitivity of housing demand to financing conditions: evidence from a survey By Fuster, Andreas; Zafar, Basit
  4. Semi-Parametric Interpolations of Residential Location Values: Using Housing Price Data to Generate Balanced Panels By Cohen, Jeffrey P.; Coughlin, Cletus C.; Clapp, John M.
  5. The Geography of Average Income and Inequality: Spatial Evidence from Austria By Mathias Moser; Matthias Schnetzer
  6. Housing over Time and over the Life Cycle: A Structural Estimation By Fang Yang; Wenli Li; Haiyong Liu; Rui Yao
  7. Place-Based Policies By Neumark, David; Simpson, Helen
  8. The Great Mortgaging: Housing Finance, Crises, and Business Cycles By Jordà, Òscar; Schularick, Moritz; Taylor, Alan M.
  9. School quality and the performance of disadvantaged learners in South Africa By Marisa Coetzee
  10. Gender Peer Effects in School, a Birth Cohort Approach By Ciccone, Antonio; Garcia-Fontes, Walter
  11. The Geography of Development within Countries By Desmet, Klaus; Henderson, J Vernon
  12. Household Debt and Local Public Finances By Whitaker, Stephan; Cheung, Ron; Cunningham, Chris
  13. The Illusion of School Choice: Empirical Evidence from Barcelona By Calsamiglia, Caterina; Güell, Maia
  14. Mortgage risks, debt literacy and financial advice By Raun van Ooijen; Maarten van Rooij
  15. Constructing a Novel Competitiveness Index for European Regions By Marko Danon
  16. The Illusion of School Choice: Empirical Evidence from Barcelona By Caterina Calsamiglia; Maia Güell
  17. Economic Geography and Networks: Role of local and non-local ties in Cluster Evolution By Karna, Amit; Florian A. Taeube; Petra Sonderegger
  18. Does Homework Perpetuate Inequities in Education? By OECD
  19. Smart specialization and the manufacturing sector in the city regions of Hungary By Zsofia Vas; Imre Lengyel; Izabella Szakalne Kano
  20. Recessions, recoveries and regional resilience: Evidence on Italy By Di Caro, Paolo
  21. Natural Expectations and Home Equity Extraction By Roberto Pancrazi; Mario Pietrunti
  22. Roads, labor markets, and human capital : evidence from rural Indonesia By Yamauchi, Futoshi
  23. Race to the top in traffic calming By Proost, Stef; Westin, Jonas
  24. A transitions-based framework for estimating expected credit losses By Gaffney, Edward; Kelly, Robert; McCann, Fergal
  25. Demography and unemployment in East Germany : how close are the ties? By Fuchs, Michaela; Weyh, Antje
  26. Location of research-based spin-offs: how relevant are regional effects? By Oscarina Conceição; Ana Paula Faria; Margarida Fontes
  27. The behaviour of housing developers and aggregate housing supply By Łaszek, Jacek; Olszewski, Krzysztof
  28. Sorting Between and Within Industries: A Testable Model of Assortative Matching By Abowd, John M; Kramarz, Francis; Perez-Duarte, Sebastien; Schmutte, Ian M.
  29. Does Reading During the Summer Build Reading Skills? Evidence from a Randomized Experiment in 463 Classrooms By Jonathan Guryan; James S. Kim; David M. Quinn
  30. Electoral politics and regional development: assessing the geographical allocation of public investment in Turkey By Luca, Davide; Rodriguez-Pose, Andres
  31. The tax-rate elasticity of local business profits By Fossen, Frank M.; Steiner, Viktor
  32. On the Robustness of Minimum Wage Effects: Geographically-Disparate Trends and Job Growth Equations By John T. Addison; McKinley L. Blackburn; Chad D. Cotti
  33. Individual Perceptions of Local Crime Risk By Salm, Martin; Vollaard, Ben
  34. Enabling and Integrative Infrastructure Policy: The Role of Inverse Infrastructures in Local Infrastructure Provision with Special Reference to Finnish Water Cooperatives By Heino, Ossi; Anttiroiko, Ari-Veikko
  35. Wealth Shocks, Unemployment Shocks and Consumption in the Wake of the Great Recession By Christelis, Dimitris; Georgarakos, Dimitris; Jappelli, Tullio
  36. Fostering and Measuring Skills: Improving Cognitive and Non-cognitive Skills to Promote Lifetime Success By Tim Kautz; James J. Heckman; Ron Diris; Bas ter Weel; Lex Borghans
  37. The Value of Smarter Teachers: International Evidence on Teacher Cognitive Skills and Student Performance By Hanushek, Eric A.; Piopiunik, Marc; Wiederhold, Simon

  1. By: Behrens, Kristian; Robert-Nicoud, Frédéric
    Abstract: This chapter surveys recent developments in agglomeration theory within a unifying framework. We highlight how locational fundamentals, agglomeration economies, the spatial sorting of heterogeneous agents, and selection effects affect the size, productivity, composition, and inequality of cities, as well as their size distribution in the urban system.
    Keywords: agglomeration; city-size distribution; heterogeneous agents; inequality; selection; sorting
    JEL: D31 R12
    Date: 2014–10
  2. By: Johannes Stroebel; Joseph Vavra
    Abstract: We use detailed micro data to document a causal response of local retail prices to changes in house prices, with elasticities of 15%-20% across housing booms and busts. We provide evidence that our results are driven by changes in markups rather than by changes in local costs. We argue that this markup variation arises when increases in housing wealth reduce households' demand elasticity, and firms raise markups in response. Consistent with this wealth channel, price effects are larger in zip codes with many homeowners, and non-existent in zip codes with mostly renters. In addition, shopping data confirms that house price changes have opposite effects on the price sensitivity of homeowners and renters. Our evidence has implications for monetary, labor and urban economics, and suggests a new source of markup variation in business cycle models.
    JEL: D14 D22 E31 E32 E5 L16 L66 R3
    Date: 2014–11
  3. By: Fuster, Andreas (Federal Reserve Bank of New York); Zafar, Basit (Federal Reserve Bank of New York)
    Abstract: The sensitivity of housing demand to mortgage rates and available leverage is key to understanding the effect of monetary and macroprudential policies on the housing market. However, since there is generally no exogenous variation in these variables that is independent of confounding factors (such as economic conditions or household characteristics), it is difficult to cleanly estimate these sensitivities empirically. We circumvent these issues by designing a survey in which respondents are asked for their maximum willingness to pay (WTP) for a home comparable to their current one, under different financing scenarios. We vary down payment constraints, mortgage rates, and non-housing wealth. We find that a relaxation of down payment constraints, or an exogenous increase in non-housing wealth, has large effects on WTP, especially for relatively poorer and more credit-constrained borrowers. On the other hand, changing the mortgage rate by 2 percentage points only changes WTP by about 5 percent on average. These findings have implications for theoretical models of house price determination, as well as for policy.
    Keywords: housing demand; mortgage rates; down payment requirements; user cost model; household survey
    JEL: E44 G21 R21
    Date: 2014–11–01
  4. By: Cohen, Jeffrey P. (University of Connecticut); Coughlin, Cletus C. (Federal Reserve Bank of St. Louis); Clapp, John M. (University of Connecticut)
    Abstract: We estimate location values for single family houses by local polynomial regressions (LPR), a semi-parametric procedure, using a standard housing price and characteristics dataset. As a logical extension of the LPR method, we interpolate land values for every property in every year and validate the accuracy of the interpolated estimates with an out-of-sample forecasting approach using Denver sales during 2003 through 2010. We also compare the LPR and OLS models out-of-sample and determine that the LPR model is more efficient at predicting location values. In a balanced panel application, we use GMM estimation to examine how the location value estimates are affected by airport infrastructure investments.
    Keywords: Land Values; Semi-Parametric Estimation; Local Polynomial Regressions; Balanced Panel; Fixed Effects
    JEL: C14 H41 H54 R51 R53
    Date: 2014–12–12
  5. By: Mathias Moser (Department of Economics, Vienna University of Economics and Business); Matthias Schnetzer (Austrian Chamber of Labour Vienna)
    Abstract: This paper investigates the nexus between regional income levels and inequality. We present a novel small-scale inequality database for Austrian municipalities to address this question. Our dataset combines individual tax data of Austrian wage tax payer on regionally disaggregated scale with census and geographical information. This setting allows us to investigate regional spillover effects of average income and various measures of income inequality. Using this data set we find distinct regional clusters of both high average wages and high earnings inequality in Austria. Furthermore we use spatial econometric regressions to quantify the effects between income levels and a number of inequality measures such as the Gini and 90/10 quantile ratios.
    Keywords: Regional inequality, spatial dependence, spatial autoregressive model
    JEL: C21 D31 J31
    Date: 2014–11
  6. By: Fang Yang; Wenli Li; Haiyong Liu; Rui Yao
    Abstract: We estimate a structural model of optimal life-cycle housing and nonhousing con- sumption in the presence of labor income and house price uncertainties. The model postulates constant elasticity of substitution between housing service and nonhousing consumption, and explicitly incorporates a housing adjustment cost. Our estimation fits the cross-sectional and time-series household wealth and housing profiles from the Panel Study of Income Dynamics (1984 to 2005) reasonably well, and suggests an intra- temporal elasticity of substitution between housing and nonhousing consumption of 0.487. The low elasticity estimate is largely driven by moments conditional on state house prices and moments in the later half of the sample period and is robust to differ- ent assumptions of housing adjustment cost. We then conduct policy analyses where we let house price and income take values as those observed between 2006 and 2011. We show that the responses depend importantly on the housing adjustment cost and the elasticity of substitution between housing and nonhousing consumption. In particular, compared to the benchmark, the impact of the shocks on homeownership rates is reduced but the impact on nonhousing consumption is magnied when house selling cost is large or when housing service and nonhousing consumption are highly substitutable.
  7. By: Neumark, David; Simpson, Helen
    Abstract: Place-based policies commonly target underperforming areas, such as deteriorating downtown business districts and disadvantaged regions. Principal examples include enterprise zones, European Union Structural Funds, and industrial cluster policies. Place-based policies are rationalized by various hypotheses in urban and labor economics, such as agglomeration economies and spatial mismatch – hypotheses that entail market failures and often predict overlap between poor economic performance and disadvantaged residents. The evidence on enterprise zones is very mixed. We need to know more about what features of enterprise zone policies make them more effective or less effective, who gains and who loses from these policies, and how we can reconcile the existing findings. Some evidence points to positive benefits of infrastructure expenditure, and also investment in higher education and university research – likely because of the public-goods nature of these policies. However, to better guide policy, we need to know more about what policies create self-sustaining longer-run gains.
    Keywords: discretionary grants; employment; enterprise zones; higher education; industrial clusters; infrastructure; place-based policies
    JEL: R1 R23 R3 R5
    Date: 2014–09
  8. By: Jordà, Òscar; Schularick, Moritz; Taylor, Alan M.
    Abstract: This paper unveils a new resource for macroeconomic research: a long-run dataset covering disaggregated bank credit for 17 advanced economies since 1870. The new data show that the share of mortgages on banks’ balance sheets doubled in the course of the 20th century, driven by a sharp rise of mortgage lending to households. Household debt to asset ratios have risen substantially in many countries. Financial stability risks have been increasingly linked to real estate lending booms which are typically followed by deeper recessions and slower recoveries. Housing finance has come to play a central role in the modern macroeconomy.
    Keywords: business cycles; financial crises; leverage; local projections; mortgage lending; recessions
    JEL: C14 C38 C52 E32 E37 E44 E51 G01 G21 N10 N20
    Date: 2014–09
  9. By: Marisa Coetzee (Department of Econmics, University of Stellenbosch)
    Abstract: In South Africa, school quality within the public school system is heterogeneous and highly stratified along race, socio-economic status and geographic location. Because of the lingering effect of racial segregation, schools which historically served the white minority and accordingly received a much higher endowment of inputs are still out-performing schools which historically served the black population, 20 years after the end of apartheid. Under-privileged black children who select into these former white schools are typically from richer households than their counterparts who remain in the former black part of the school system, although significantly poorer than their white peers. In this paper, I use longitudinal data from the National School Effectiveness Study which collected test scores and background information on children in grades 3, 4 and 5 in both school systems in order to estimate the effect of attending a historically white school on the numeracy and literacy scores of black children. The models are estimated using a value-added approach in order to control for unobserved child-specific heterogeneity in the form of individual ability by controlling for lagged test scores. In addition, the various household covariates available in the data are used to control for household-level differences among children. I find a slightly larger effect for attending a former white school in South Africa than has previously been estimated for private schools in India and Pakistan and assess the validity of the estimates using various robustness checks. I also discuss the potential bias which may remain.
    Keywords: education, school choice, South Africa, value-added models, National School Effectiveness Study (NSES)
    JEL: I22 I24 I25 I28 J13 O15
    Date: 2014
  10. By: Ciccone, Antonio; Garcia-Fontes, Walter
    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.
    Keywords: gender; grade retention; peer effects; school
    JEL: I20
    Date: 2014–06
  11. By: Desmet, Klaus; Henderson, J Vernon
    Abstract: This chapter describes how the spatial distribution of economic activity changes as economies develop and grow. We start with the relation between development and rural-urban migration. Moving beyond the coarse rural-urban distinction, we then focus on the continuum of locations in an economy and describe how the patterns of convergence and divergence change with development. As we discuss, these spatial dynamics often mask important differences across sectors. We then turn our attention to the right tail of the distribution, the urban sector. We analyze how the urban hierarchy has changed over time in developed countries and more recently in developing countries. The chapter reviews both the empirical evidence and the theoretical models that can account for what we observe in the data. When discussing the stylized facts on geography and development, we draw on empirical evidence from both the historical evolution of today's developed economies and comparisons between today's developed and developing economies.
    Keywords: developed countries; developing countries; development; economic geography; growth; space; urban economics
    JEL: O1 O18 R1 R11 R12
    Date: 2014–09
  12. By: Whitaker, Stephan (Federal Reserve Bank of Cleveland); Cheung, Ron (Oberlin College); Cunningham, Chris (Federal Reserve bank of Atlanta)
    Abstract: In the wake of the Great Recession, steep declines in state and local government expenditures and employment were a large and persistent source of economic weakness. The business cycle was also characterized by large increases and decreases in household debt. We estimate the extent to which variation in local government revenues and expenditures can be explained by variation in the expansion of household debt from 2002 to 2007, and the contraction thereafter. We merge individual credit balance data with municipal financial data from the Census of Governments. Using Census block indicators, we are able to place approximately 12 million credit bureau records into over 6,000 cities and 4,500 school districts. Our results indicate that a one percent additional increase in mortgage debt caused a 0.15 percent increase in local governments’ own revenue and a 0.17 to 0.21 percent increase in expenditures. These relationships were evident during the expansion and contraction of mortgage debt. We also find evidence linking nonmortgage debt to municipal finances.
    Keywords: Consumer Credit; Public financial management; Leverage cycles
    JEL: H71 H72 R51
    Date: 2014–12–02
  13. By: Calsamiglia, Caterina; Güell, Maia
    Abstract: School choice aims to improve (1) the matching between children and schools and (2) students’ educational outcomes. Yet, the concern is that disadvantaged families are less able to exercise choice, which raises (3) equity concerns. The Boston mechanism (BM) is a procedure that is widely used around the world to resolve overdemands for particular schools by defining a set of priority points based on neighborhood and socioeconomic characteristics. The mechanism design literature has shown that under the BM, parents may not have incentives to provide their true preferences, thereby establishing a trade-off between preferences and perceived safety. However, the set of possible Nash equilibria arising from the BM is large and has varying properties, and what will actually happen is an empirical question. We exploit an unexpected change in the definition of neighborhood in Barcelona, which provides an exogenous change in the set of schools perceived as safe and allows us to separate housing and schooling decisions to assess the importance of this trade-off in the data. We find that safety carries a large weight in family choice. The huge majority of parents opt for schools for which they have the highest priority—the neighborhood schools—excluding other preferred schools. Similar to the previous literature, we also find that some parents seem naive, but using school registry data, we find that a significant fraction of them have the outside option of private schools, which allows them to take higher risks to access the best public schools. At the other extreme, some of the naive are not matched to any of the schools they applied for. Our results suggest that when allowing school choice under the BM with priorities: (1) the gains in terms of matching seem limited, because the equilibrium allocation is not very different from a neighborhood-based assignment, (2) estimating the effect of choice on outcomes by implementing such a mechanism may lead to a lower bound on the potential effects of having choice, and (3) important inequalities emerge beyond parents’ naivete found in the literature.
    Keywords: Boston mechanism; Priorities; school choice
    JEL: C78 D63 I24
    Date: 2014–06
  14. By: Raun van Ooijen; Maarten van Rooij
    Abstract: A limited understanding of mortgage contracts and the risks involved may have contributed to the origination of the financial crisis. We have designed a special questionnaire to relate mortgage loan decisions to financial literacy and financial advice. Our findings show that homeowners seem well aware of mortgage risks. Loans are perceived more risky when they are large compared to the home value, entail high mortgage payments compared to income and when they are linked to investment vehicles. Homeowners with riskier mortgages know they may encounter financial problems when housing prices or income declines. Individuals with a lower level of financial literacy are more likely to take out traditional mortgages which pay off the principal at maturity. Riskier mortgages are more prevalent among homeowners with a better understanding of loan contracts. Financially less sophisticated homeowners who consult intermediaries for professional financial advice hold more risky mortgages as well.
    Keywords: mortgage choice; risk-taking; financial knowledge; professional financial advice
    JEL: G21 D83 D12 D14
    Date: 2014–11
  15. By: Marko Danon (GREDEG CNRS; University of Nice Sophia Antipolis)
    Abstract: Space has only recently become a terrain of strenuous economic research. With the New Economic Geography (NEG) integrating into mainstream, many spatial subjects, including territorial, or regional, competitiveness are being increasingly inquired. In line with Krugman (2003), we argue that it is plausible to discuss competitiveness on a regional level, as a capacity of territories to attract and retain mobile factors of production, which is an increasingly important subject in an ever integrating global economy. However, this branch of economic geography is relatively underdeveloped, while it even lacks a universally accepted definition and metrics. In order to overcome this shortcoming, we propose a novel definition, along with a new index on territorial competitiveness tailored for the case of European regions at NUTS 2 level. This paper is structured as follows. In the first part, we provide a short discussion on theoretical background of the study on regional competitiveness and present in brief the key notions used in the literature. It is in that part where we propose and interpret our definition of regional competitiveness. Next, we discuss on ways of quantifying regional competitiveness and on some of the key attempts taken so far. In the third part, we present our index for European regions, by describing the territorial, temporal and methodological choices, theoretical justifications, as well results and their interpretation in the light of the NEG. The fourth part concludes and the fifth contains annexes.
    Keywords: Regional Competitiveness, Composite Index, New Economic Geography, Agglomerations, Clustering
    JEL: R11 R12
    Date: 2014–12
  16. By: Caterina Calsamiglia; Maia Güell
    Abstract: The Boston mechanism is a school allocation procedure that is widely used around the world. To resolve overdemands, priority is often given to families who live in the neighborhood school. We note that such priorities define some schools as being safer. We exploit an unexpected change in the definition of neighborhood in Barcelona to show that when allowing school choice under the BM with priorities: (1) the resulting allocation is not very different from a neighborhood-based assignment, and (2) important inequalities emerge beyond parents' naivete found in the literature.
    Date: 2014–12
  17. By: Karna, Amit; Florian A. Taeube; Petra Sonderegger
    Abstract: The organization of geographic clusters plays an increasingly significant role due to the presence of network ties that exist within the location and beyond. This has proven to be particularly true for knowledge-intensive industries, where the organization of resources – people and technology – has been a primary driver for firm and regional performance. With the help of a longitudinal case study of the IT cluster in Bangalore (India), we investigate the effect of local and non-local network ties on its evolution. We argue that local and non-local networks play a clear role in cluster evolution. We propose a U-shaped relationship between cluster evolution phases and the distance among the network tie members. Our study also outlines the role that embedding, expansion, and extension of ties plays in transitioning cluster from one phase to the other. The consideration of non-local ties is rather nascent in the cluster literature and promises to enhance the understanding of how clusters develop at both levels - policy as well as firm.
  18. By: OECD
    Abstract: <ul> <li> While most 15-year-old students spend part of their after-school time doing homework, the amount of time they spend on it shrank between 2003 and 2012. </li> <li> Socio-economically advantaged students and students who attend socio-economically advantaged schools tend to spend more time doing homework.</li> <li> While the amount of homework assigned is associated with mathematics performance among students and schools, other factors are more important in determining the performance of school systems as a whole. </li></ul>
    Date: 2014–12
  19. By: Zsofia Vas; Imre Lengyel; Izabella Szakalne Kano
    Abstract: By today smart specialization has become a crucial part of the growth strategy of the European Union. Smart specialization is an innovative approach for the economic transformation of regions, a complex development strategy that builds on the unique characteristics and values of regions, and contributes to increasing the competitiveness of regions. The basis of Smart Specialization Strategy (S3) is identifying the competitive advantages of regions, including the identification of all economic activities that have determining weight, show growth and stand out due to their innovation capacity and performance in a region. In traded sectors capable of dynamic development, enterprises are able to continuously expand their production and satisfy substantial local and extra-regional demand. In Hungary a significant part of the traded sector consists of the manufacturing sector. The manufacturing sector is one of the determining scopes of economic activities, which provides a considerable proportion of the Gross National Product, and involves economic activities that are associated with consumer expenditures, persons employed, exports and a substantial part of technological innovations. The present study aims to prove the significance of the manufacturing sector in the city regions of Hungary. Given that place-based policies place a particular emphasis on the spatiality of economic activities, we examine the spatial distribution of the manufacturing sector by means of employment location quotient (LQ). The study centres on 13 sub-sections distinguished in the manufacturing sector and the analysis of their geographical concentration in the Hungarian city regions at the time of and following the accession to the European Union. The results show which activities in the manufacturing sector are worth specializing in by the city regions and whose support contributes to the further development of the regions.
    Keywords: specialization; city regions; manufacturing industries; Hungary
    JEL: O14 R12
    Date: 2014–11
  20. By: Di Caro, Paolo
    Abstract: This paper analyses regional resilience and local economic growth patterns in Italy over the past four decades. Place-specific transient and permanent effects of aggregate employment shocks are studied. Geographical asymmetries in engineering and ecological resilience are found, providing auxiliary insights on the rooted Italian regional inequalities. The territorial impact of different crises is investigated and a direct comparison with the UK case is offered. The importance of manufacturing activities for explaining economic resilience is assessed, finding out a positive relation between the resilience of the industrial sector and the overall local economic development. Some policy implications are conclusively discussed.
    Keywords: recessions, recoveries, regional resilience, local economic growth
    JEL: E32 R1
    Date: 2014
  21. By: Roberto Pancrazi (University of Warwick); Mario Pietrunti (Bank of Italy)
    Abstract: In this paper we show that long-run expectations about future housing prices of both households and, especially, financial intermediaries had a large impact on households' indebtedness during the recent boom in U.S. housing prices. We introduce the theory of natural expectations in a collateralized credit market model populated by households and banks and find: (1) that mild variations in long-run forecasts of housing prices result in large differences in the amount of home equity extracted during the boom; and (2) that the equilibrium level of debt and the interest rate are particularly sensitive to financial intermediaries' naturalness.
    Keywords: natural expectations, home equity extraction, consumption/saving decision, housing price
    JEL: E21 E32 E44 D84
    Date: 2014–10
  22. By: Yamauchi, Futoshi
    Abstract: This paper uses household panel data from rural Indonesia to examine the impact of road quality on labor supply and wages. First, road projects are found to increase transportation speed. Second, the empirical results from intra-village variations of household endowments and labor market behavior show that an increase in transportation speed raised wages in nonagricultural and agricultural employment, and was associated with a decline in working time in agricultural employment, for households whose members are relatively educated. The findings support potential complementarity between road quality and education.
    Keywords: Transport Economics Policy&Planning,Roads&Highways,Housing&Human Habitats,Labor Policies,Road Safety
    Date: 2014–12–01
  23. By: Proost, Stef (Katholieke Universiteit Leuven); Westin, Jonas (Centre for Regional Science, Umeå University)
    Abstract: We study the competition of two suburbs that are facing transit traffic flows. We show that in the absence of toll measures, the Nash equilibrium leads to a race to the top in traffic calming, except for the measures that do not affect the generalized cost of traffic. The Nash equilibrium is compared to two types of centralized decisions: the symmetric solution and the asymmetric solution. It is shown how the asymmetric solution that concentrates all transit traffic in one suburb is better but can only be realized if the authority over the local roads is transferred to the central authority.
    Keywords: Transport; Externalities; Traffic calming; Multi-level government; Regulation
    JEL: H23 H77 Q58 R41 R48
    Date: 2014–12–02
  24. By: Gaffney, Edward (Central Bank of Ireland); Kelly, Robert (Central Bank of Ireland); McCann, Fergal (Central Bank of Ireland)
    Abstract: This paper presents a framework for estimating losses for residential mortgage loans.At the core is a transitions-based probability of default model which yields directly observ- able cash-fl ows at the loan level. The estimated model includes coefficients on unemployment, Loan to Value ratio and interest rates, all of which allow a macroeconomic scenario to be fed through the model and impact loans' probability of default and cure. Other loan-level covariates such as bank, Buy-to-Let status, and vintage also impact loans' transition probabilities. Loss Given Default is also modelled over a three-year horizon combining loan-level collateral information with macroeconomic house price forecasts. The breakout of ows from the stock of defaults allows the impact of loan modications on recovery rates to be modelled. Unlike other models of mortgage credit risk, this framework allows a hysteresis eect of the time spent in default on the probability of loan cure to be modelled explicitly. In Ireland, an increase in the time spent in default from three months to one year leads to a decrease in the probability of loan cure from 30 to 12 per cent.
    Keywords: Mortgages, default, credit risk, Markov multi-state model.
    Date: 2014–11
  25. By: Fuchs, Michaela (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Weyh, Antje (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "We analyze the relation between population aging and the decline of unemployment in East Germany for the years from 1996 to 2012. To this we scrutinize both a direct and an indirect effect of aging on unemployment. The direct effect includes a decomposition of the East German unemployment rate into three components considering changes in the workforce's age structure, labor market participation, and age-specific unemployment rates. Results show that changes in the age structure of the workforce counteracted unemployment decline since 2005. Spatial panel regressions on the small-scale regional level, however, point towards an indirect effect of aging on unemployment that works through the increasing competition for labor. Overall results show that the declining unemployment rate in East Germany is indeed affected by aging as evidenced by a declining youth share and an increasing old-age share. This indicates that a reversed cohort crowding effect has taken place." (Author's abstract, IAB-Doku) ((en))
    Keywords: Bevölkerungsentwicklung, demografischer Wandel - Auswirkungen, Arbeitslosigkeitsentwicklung, Beschäftigungseffekte, Erwerbsbevölkerung, Altersstruktur, Arbeitslosenquote, Ostdeutschland
    JEL: C33 J11 J64 O18
    Date: 2014–11–27
  26. By: Oscarina Conceição (DINÂMIA-CET, University Institute of Lisbon, Lisbon, Portugal & Polytechnic Institute of Cavado and Ave); Ana Paula Faria (Universidade do Minho - NIPE); Margarida Fontes (LNEG – National Laboratory of Energy and Geology. Lisbon, Portugal & DINÂMIA-CET, University Institute of Lisbon, Lisbon, Portugal)
    Abstract: Using a unique self-collected dataset that comprehends the population of research-based spin-offs created in Portugal from 1995 until to 2007, we investigate the location choices of these firms. In order to do so we control for both university- and region-related mechanisms. Our results suggest that the latter play a lesser role than university-related mechanisms. Although the availability of qualified human capital and urbanization economies seem to exert some effect on the location choices of research-based spin-offs, our results suggest that the quality and prestige of the universities located in a region, as well as the presence of university-affiliated incubators and/or university research parks have a stronger impact on the intensity of RBSO location across regions.
    Keywords: academic spin-offs; firm creation; location decision; count data analysis
    Date: 2014
  27. By: Łaszek, Jacek; Olszewski, Krzysztof
    Abstract: The article presents an analysis of the developer sector, which takes into account the ob-served functioning of the market. The analysis is based on the assumption that the housing developer, due to the asymmetry of information, is able to take advantage of a local monopoly and differentiate prices. This allows him to sell apartments of a similar construction to each client at a different price, thanks to which he maximizes profits. However, when the developer overestimates demand or the competition gets tougher, his production costs grow and the possibility to differentiate prices is reduced. This has a direct impact on the profits that he can generate. The consequence of this phenomenon is a more flexible ex post curve of developer supply. As a result, there is a tendency to overproduction in the developer sector, which deepens the cyclical nature of the housing market.
    Keywords: Real and virtual supply curve; Monopolistic competition; price discrimination; acceleration of demand; overproduction.
    JEL: M2 O18 R31
    Date: 2014–07
  28. By: Abowd, John M; Kramarz, Francis; Perez-Duarte, Sebastien; Schmutte, Ian M.
    Abstract: We test for sorting of workers between and within industrial sectors in a directed search model with coordination frictions. We fit the model to sector-specific vacancy and output data along with publicly-available statistics that characterize the distribution of worker and employer wage heterogeneity across sectors. Our empirical method is general and can be applied to a broad class of assignment models. The results indicate that industries are the loci of sorting - more productive workers are employed in more productive industries. The evidence confirms assortative matching can be present even when worker and employer components of wage heterogeneity are weakly correlated.
    Keywords: industries; sorting
    JEL: J30
    Date: 2014–09
  29. By: Jonathan Guryan; James S. Kim; David M. Quinn
    Abstract: There are large gaps in reading skills by family income among school-aged children in the United States. Correlational evidence suggests that reading skills are strongly related to the amount of reading students do outside of school. Experimental evidence testing whether this relationship is causal is lacking. We report the results from a randomized evaluation of a summer reading program called Project READS, which induces students to read more during the summer by mailing ten books to them, one per week. Simple intent-to-treat estimates show that the program increased reading during the summer, and show significant effects on reading comprehension test scores in the fall for third grade girls but not for third grade boys or second graders of either gender. Analyses that take advantage of within-classroom random assignment and cross-classroom variation in treatment effects show evidence that reading more books generates increases in reading comprehension skills, particularly when students read carefully enough to be able to answer basic questions about the books they read, and particularly for girls.
    JEL: I24 J24
    Date: 2014–11
  30. By: Luca, Davide; Rodriguez-Pose, Andres
    Abstract: One of the most important decisions that governments face is how to allocate the public resources necessary for development, given each country’s budget constraints. According to the literature on the links between wealth and institutional performance, highly kleptocratic countries are expected to show higher levels of politicisation of the public purse. The article tests the extent to which socioeconomic criteria (equity and efficiency) or electoral concerns determined the geographical distribution of public investment in the 81 provinces of Turkey between 2004 and 2012. Our results show that, although electoral concerns mattered for the allocation, socioeconomic measures remained the most relevant predictors of investment. Moreover, in contrast to official regional development policy principles, the Turkish state tended to favour areas with a higher level of development over those with greater ‘socioeconomic need’. Our results therefore challenge much of the distributive politics literature, which has overly emphasised the role of pork-barrel in public policy-making. At the same time, they underline the need of paying more attention to the political economy of regional development strategies.
    Keywords: distributive politics; political geography; public investments; regional development policies; Turkey
    JEL: H76 O12 O53 R12 R58
    Date: 2014–06
  31. By: Fossen, Frank M.; Steiner, Viktor
    Abstract: Local business profits respond to local business tax (LBT) rates that vary across municipalities. We estimate that a one percent increase in the LBT rate decreases the LBT base by 0.45 percent, based on the universe of German LBT return files, which include corporations and unincorporated businesses. However, the fiscal equalization scheme largely compensates municipalities for the loss in the LBT base when they increase the LBT rate. Our estimates suggest that using tax revenue data instead of tax return data, as commonly done in the literature, results in a significant bias of the elasticity away from zero.
    Keywords: local business tax,corporate tax,tax responsiveness,tax-rate elasticity
    JEL: H25 H71
    Date: 2014
  32. By: John T. Addison (University of South Carolina, Durham University, and IZA Bonn); McKinley L. Blackburn (University of South Carolina); Chad D. Cotti (University of Wisconsin-Oshkosh and University of Connecticut)
    Abstract: Recent attempts to incorporate spatial heterogeneity in minimum-wage employment models have been attacked for using overly simplistic trend controls, and for neglecting the potential impact on employment growth. We investigate whether such considerations call into question our earlier findings of statistically insignificant employment effects for the restaurant-and-bar sector. We find that a focus on employment levels is still appropriate, and nonlinear trend controls do not dislodge our limited support for the existence of minimum-wage effects.
    Keywords: minimum wages, employment, employment change, spatial controls
    JEL: J23 J38
    Date: 2014–09
  33. By: Salm, Martin (Tilburg University); Vollaard, Ben (Tilburg University)
    Abstract: We provide evidence that perceptions of crime risk are severely biased for many years after a move to a new neighborhood. Based on four successive waves of a large crime survey, matched with administrative records on household relocations, we find that the longer an individual lives in a neighborhood, the higher their perception of the crime rate in the neighborhood. This finding holds irrespective of whether the move is from a relatively low-crime to a relatively high-crime area or vice versa. We find that avoidance behavior adjusts in line with the observed changes in beliefs.
    Keywords: heuristic, victimization, crime
    JEL: D81 K42 K14
    Date: 2014–11
  34. By: Heino, Ossi; Anttiroiko, Ari-Veikko
    Abstract: Infrastructures are necessary to support the functionality of urban communities. Globalization, increased polycentricity, new trends in governance and tightening public budgets have increased interest in alternative ways of providing such infrastructures. One product of this trend is the ‘inverse infrastructure,’ which refers to a modularized, semi-autonomous and user-driven infrastructure that is a result of the self-organization of local actors. In this study, we discuss the nature of such infrastructures and the challenges they pose to local infrastructure policy with special reference to the case of water cooperatives in Finland. Our conclusion is that inverse infrastructures have a potential to contribute to local infrastructure services either as cost-effective alternative or as supplement to large technical systems. Their full utilization requires, however, enabling and integrative infrastructure policy.
    Keywords: infrastructure, infrastructure policy, public policy, local government, inverse infrastructure, complex adaptive system, adaptation, self-organization, resilience, volunteering, water services, water cooperative, Finland
    JEL: H41 H54 H76 L95 L98 O18 P13
    Date: 2014–11–28
  35. By: Christelis, Dimitris; Georgarakos, Dimitris; Jappelli, Tullio
    Abstract: We use data from the 2009 Internet Survey of the Health and Retirement Study to examine the consumption impact of wealth shocks and unemployment during the Great Recession in the US. We find that many households experienced large capital losses in housing and in their financial portfolios, and that a non-trivial fraction of respondents have lost their job. As a consequence of these shocks, many households reduced substantially their expenditures. We estimate that the marginal propensities to consume with respect to housing and financial wealth are 1 and 3.3 percentage points, respectively. In addition, those who became unemployed reduced spending by 10 percent. We also distinguish the effect of perceived transitory and permanent wealth shocks, splitting the sample between households who think that the stock market is likely to recover in a year’s time, and those who do not. In line with the predictions of standard models of intertemporal choice, we find that the latter group adjusted much more than the former its spending in response to financial wealth shocks.
    Keywords: consumption; great recession; unemployment; wealth shocks
    JEL: D91 E21
    Date: 2014–10
  36. By: Tim Kautz; James J. Heckman; Ron Diris; Bas ter Weel; Lex Borghans
    Abstract: IQ tests and achievement tests do not capture non-cognitive skills — personality traits, goals, character and motivations that are valued in the labour market, in school and elsewhere. For many outcomes, their predictive power rivals or exceeds that of cognitive skills. Skills are stable across situations with different incentives. Skills are not immutable over the life cycle. While they have a genetic basis they are also shaped by environments, including families, schools and peers. Skill development is a dynamic process. The early years are important in shaping all skills and in laying the foundations for successful investment and intervention in the later years. During the early years, both cognitive and non-cognitive skills are highly malleable. During the adolescent years, non-cognitive skills are more malleable than cognitive skills. The differential plasticity of different skills by age has important implications for the design of effective policies.<P> This paper reviews a variety of interventions across different stages of the life cycle. We interpret these studies using an economic model of skill development. Many effective programs work because they foster non-cognitive skills. Some have annual rates of return that are comparable to those from investments in the stock market. Parental involvement is an important component of successful early interventions just as successful adolescent mentoring is an age-appropriate version of parental involvement. Building an early base of skills that promote later-life learning and engagement in school and society is often a better strategy than waiting for problems to occur.
    Keywords: technology of skill formation, skills beget skills, early childhood investment, mentoring, non-cognitive skills, character, personality
    Date: 2014–11–25
  37. By: Hanushek, Eric A.; Piopiunik, Marc; Wiederhold, Simon
    Abstract: Differences in teacher quality are commonly cited as a key determinant of the huge international student performance gaps. However, convincing evidence on this relationship is still lacking, in part because it is unclear how to measure teacher quality consistently across countries. We use unique international assessment data to investigate the role of teacher cognitive skills as one main dimension of teacher quality in explaining student outcomes. Our main identification strategy exploits exogenous variation in teacher cognitive skills attributable to international differences in relative wages of nonteacher public sector employees. Using student-level test score data, we find that teacher cognitive skills are an important determinant of international differences in student performance. Results are supported by fixed-effects estimation that uses within-country between-subject variation in teacher skills.
    Keywords: teacher cognitive skills; student performance; instrumental variable; PIAAC; PISA
    JEL: I20 H40 H52
    Date: 2014

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