nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2016‒08‒07
thirty-six papers chosen by
Steve Ross
University of Connecticut

  1. Mortgage Design in an Equilibrium Model of the Housing Market By Timothy McQuade; Arvind Krishnamurthy; Adam Guren
  2. The Preservation of Historic Districts - Is it Worth it? By Sevrin Waights
  3. Ethnic Minority Concentration: A Source of Productivity Growth for Italian Provinces? By Alessandra, Michelangeli; Nicola, Pontarollo
  4. The Long-lasting Shadow of the Allied Occupation of Austria on its Spatial Equilibrium By Eder, Christoph; Halla, Martin
  5. A Scale-Free Transportation Network Explains the City-Size Distribution By Berliant, Marcus; Watanabe, Hiroki
  6. Young Adults Living with Their Parents and the Influence of Peers By Adamopoulou, Effrosyni (Efi); Kaya, Ezgi
  7. Speculative bubbles or market fundamentals? An investigation of US regional housing markets By Shuping Shi
  8. Cultural Transmission and Socialization Spillovers in Education By Del Bello, Carlo; Panebianco, Fabrizio; Verdier, Thierry; Zenou, Yves
  9. Migration and Urbanisation in Post-Apartheid South Africa By Bakker, Jan David; Parsons, Christopher; Rauch, Ferdinand
  10. The Impact of Immigrant Peers on Native Students' Academic Achievement in Countries Where Parents of Immigrants Are Relatively Skilled By Seah, Kelvin
  11. The Decision to Move House and Aggregate Housing-Market Dynamics By L. Rachel Ngai; Kevin Sheedy
  12. The Three I's of Public Schools: Irrelevant Inputs, Insufficient Resources and Inefficiency By Henderson, Daniel J.; Simar, Léopold; Wang, Le
  13. Short-Run Externalities of Civic Unrest: Evidence from Ferguson, Missouri By Gershenson, Seth; Hayes, Michael S.
  14. Knowledge Shocks Diffusion and the Resilience of Regional Inequality By Alexandra López-Cermeño
  15. Wage Flexibility and Employment Fluctuations: Evidence from the Housing Sector By Pischke, Jörn-Steffen
  16. Ethnic Inequality By Alesina, Alberto Francesco; Michalopoulos, Stelios; Papaioannou, Ellias
  17. Housing Market Dynamics and Macroprudential Policy By Gabriel Bruneau; Ian Christensen; Césaire Meh
  18. What Can We Learn from Student Attitudes for International Achievement Tests? By Kyle Peyton; Chris Ryan; Justin van de Ven
  19. School Feeding and Learning Achievement: Evidence from India's Midday Meal Program By Chakraborty, Tanika; Jayaraman, Rajshri
  20. Housing mortgage lending in Russia in 2015 By Zadonsky Georgy
  21. Cash-Only Real Estate Transactions and Property Prices in San Francisco, California By Abdala Rioja, Yamile E
  22. Employment and Earning Gaps in the Early Career of Ethnic Minority British Graduates: the Importance of University Choice, Parental Background and Area Characteristics By Wouter Zwysen; Simonetta Longhi
  23. Banking development, economic structure and income inequality By Alexandra D'Onofrio; Raoul Minetti; Pierluigi Murro
  24. Demographic change and regional convergence in Canada By Geloso, Vincent; Kufenko, Vadim; Prettner, Klaus
  25. Electoral Cycles in Public Expenditures: Evidence from Czech Local Governments By Lenka Stastna
  26. Family, Community and Long-Term Earnings Inequality By Bingley, Paul; Cappellari, Lorenzo; Tatsiramos, Konstantinos
  27. Ethnic and Racial Disparities in Children's Education: Comparative Evidence from Ethiopia, India, Peru and Vietnam By Mohamed Arouri; Adel Ben Youssef; Cuong Nguyen
  28. How High Schools Explain Students’ Initial Colleges and Majors By Rajeev Darolia; Cory Koedel
  29. Stymied ambition: Does a lack of economic freedom lead to migration? By Meierrieks, Daniel; Renner, Laura
  30. Sub-metropolitan Tax Competition with Household and Capital Mobility By Tidiane Ly
  31. Housing Affordability in Austria by Age and Year of Move-in. Application of the Residual Income and Tailored Ratio Approach By Andrea Kunnert
  32. The RRI Co-Authorship Network Analysis: 1965-2014 By Randall Jackson; Jing Chen
  33. Migration and Tax Yields in a Devolved Economy By Foreman-Peck, James; Zhou, Peng
  34. Research Funding and Regional Economies By Goldschlag, Nathan; Bianchini, Stefano; Lane, Julia; SanMartin Sola, Joseba; Weinberg, Bruce A.
  35. Switch towards tax centralization in Italy: a wake up for the local political budget cycle By Massimiliano Ferraresi; Umberto Galmarini; Leonzio Rizzo; Alberto Zanardi
  36. Housing Affordability in Austria. Tailoring the Ratio Approach in a Simple yet Effective Way By Andrea Kunnert

  1. By: Timothy McQuade (Stanford University); Arvind Krishnamurthy (Stanford University); Adam Guren (Boston University)
    Abstract: How can mortgages be redesigned or modified in a crisis to reduce housing market volatility, consumption volatility, and default? We answer these questions using a quantitative general equilibrium life cycle model with aggregate shocks in which households have realistic long-term mortgages and a rich set of choices as to whether to prepay, refinance, move, or default, and household and lender decisions aggregate up to determine house prices. The calibrated model is used to quantitatively assess how different mortgage contracts affect housing market volatility, particularly in busts like the Great Recession. In this preliminary draft, we focus on comparing fixed-rate mortgages (FRMs) and adjustable-rate mortgages (ARMs). Although FRMs allow homeowners to increase consumption by locking in a low rate, this effect is swamped by the insurance benefits of ARMs in a crisis. ARMs reduce default and improves consumption smoothing, particularly for young and high LTV homeowners. Quantitatively, in a crisis episode defaults are 50 percent lower with ARMs, and over five years the cumulative consumption-equivalent welfare loss under ARMs is 20 percent of annual consumption. These findings suggest that welfare could be improved dramatically by introducing the insurance features of ARMs into mortgage designs.
    Date: 2016
  2. By: Sevrin Waights
    Abstract: I investigate the welfare effect of conservation areas that preserve historic districts by regulating development. Such regulation may improve quality of life but does so by reducing housing productivity - the efficiency with which inputs (land and non-land) are converted into housing services. Using a unique panel dataset for English cities and an instrumental variable approach, I find that cities with more conservation areas have higher house prices for given land values and building costs (lower housing productivity) and higher house prices for given wages (higher quality of life). The overall welfare impact is found to be negative.
    Keywords: housing, planning, regulation, historic preservation, construction, land
    JEL: H89 L51 L74 D62 R21 R31 R38 R52 R58
    Date: 2016–07
  3. By: Alessandra, Michelangeli; Nicola, Pontarollo
    Abstract: This paper aims at assessing the contribution of ethnic minorities to the productivity of the main sectors of Italian provinces. To this end, we consider the first ten nationalities by numbers of regularised persons observed at the provincial level (NUTS-3) between 2003 and 2011. We use an empirical panel growth model with spatially augmented specifications, which allows to capture both the direct (marginal) and indirect (spillover) effects of each community on local productivity at the provincial level. Our findings show that two communities out of ten have a positive impact on economic performance of Italian provinces. Other foreign groups have significant effects only indirectly, meaning that these groups do not affect growth of provinces where they live, but the neighbouring provinces likely because of commuting.
    Keywords: productivity growth, specialisation, spatial econometrics, foreigners
    JEL: R11 R12 R23
    Date: 2016–08–02
  4. By: Eder, Christoph (University of Innsbruck); Halla, Martin (University of Innsbruck)
    Abstract: As a consequence of World War II, Austria was divided into four different occupation zones for 10 years. Before tight travel restrictions came into place, about 11 percent of the population residing in the Soviet zone moved across the demarcation line. We exploit this large internal migration shock to further our understanding of why economic activity is distributed unevenly across space. Our analysis shows that the distorted population distribution across locations has fully persisted until today (60 years after the demarcation line become obsolete). An analysis of more direct measures of economic activity shows an even higher concentration in the former non-Soviet zone. This gap in economic activity is growing over time, mainly due to commuting streams out of the former Soviet zone. This shows that a transitory shock is capable of shifting an economy to a new spatial equilibrium, which provides strong evidence for the importance of increasing returns to scale in explaining the spatial distribution of economic activity.
    Keywords: spatial equilibrium, agglomeration effects, population shock, World War II, Austria
    JEL: R11 R12 R23 J61 N44 N94
    Date: 2016–07
  5. By: Berliant, Marcus; Watanabe, Hiroki
    Abstract: Zipf’s law is one of the best-known empirical regularities in urban economics. There is extensive research on the subject, where each city is treated symmetrically in terms of the cost of transactions with other cities. Recent developments in network theory facilitate the examination of an asymmetric transport network. In a scale-free network, the chance of observing extremes in network connections becomes higher than the Gaussian distribution predicts and therefore it explains the emergence of large clusters. The city-size distribution shares the same pattern. This paper decodes how accessibility of a city to other cities on the transportation network can boost its local economy and explains the city-size distribution as a result of its underlying transportation network structure. Finally, we discuss the endogenous evolution of transport networks.
    Keywords: Zipf’s law; city-size distribution; scale-free network
    JEL: L14 R12 R40
    Date: 2016–07–30
  6. By: Adamopoulou, Effrosyni (Efi) (Bank of Italy); Kaya, Ezgi (Cardiff University)
    Abstract: This paper studies the impact of peer behavior on living arrangements of young adults in the U.S. Using data from the National Longitudinal Study of Adolescent Health (Add Health) we analyze the influence of high school friends on the nest-leaving decision of young adults. We achieve identification by exploiting the differences in the timing of leaving the parental home among peers, the individual-specific nature of the peer groups that are based on friendship nominations, and by including school (network) and grade (cohort) fixed effects. Our results indicate that there are statistically significant peer effects on the decision of young adults to leave parental home. This is true even after we control for labor and housing market conditions and for a comprehensive list of individual and family-of-origin characteristics that are usually unobserved by the econometrician. We discuss various mechanisms and we confirm the robustness of our results through a placebo exercise. Our findings reconcile with the increasing fraction of young adults living with their parents that is persisting in the U.S. even after the end of the Great Recession.
    Keywords: peer effects, friends, living arrangements, leaving parental home
    JEL: D10 J12 J60 Z13
    Date: 2016–07
  7. By: Shuping Shi
    Abstract: This paper investigates the existence of speculative bubbles in the US national and in 23 regional housing markets over three decades (1978-2012). A new method for detecting exuberance in housing markets is proposed. By taking changes in the macroeconomic conditions (such as interest rate, per-capita income, employment, and population growth) into consideration, the new method provides a better control for housing market fundamentals and thereby it is expected to significantly reduce the chance of false positive identification. Compared with the method of Phillips, Shi and Yu (2015a,b), the new approach finds a dramatic reduction in the number of speculative housing markets and shorter bubble episodes in the US. It locates only one bubble episode in the early-to-mid 2000s over the whole sample period in the national housing market. At the regional level, it identifies three periods of speculation: late 1980s, early-to-mid 2000s, and the post-crisis period in 2011-2012. The early-to-mid 2000s bubble episode is the most severe one involving nine major metropolitan statistical areas.
    Keywords: Speculative bubbles, Housing market, Fundamentals, Macroeconomic conditions, Regional, Explosive
    JEL: C12 C51 R31 E31
    Date: 2016–07
  8. By: Del Bello, Carlo; Panebianco, Fabrizio; Verdier, Thierry; Zenou, Yves
    Abstract: We propose a model of the intergenerational transmission of education where children belong to either high-educated or low-educated families. Children choose the intensity of their social activities while parents decide how much educational effort to exert. We characterize the equilibrium and show under which condition cultural substitution or complementarity emerges. There is cultural substitution (complementarity) if parents decrease (increase) their education effort when their child socializes more with other children of the same type. By structurally estimating our model to the AddHealth data in the United States, we find that there is cultural complementarity for high-educated parents and cultural substitution for low-educated parents. This means that, for both parents, the more their children interact with kids from high-educated families, the more parents exert educational effort. We also perform some policy simulations. We find that policies aiming at mixing high and low educated children perform well in terms of average educational outcomes. We also show that a policy that gives vouchers to children from high-educated families have a positive and significant impact on the educational outcomes of all children while a policy that gives vouchers to children from low-educated families has a negative effect on the outcomes of both groups.
    Keywords: cultural transmission.; education; homophily; Social Networks
    JEL: D85 I21
    Date: 2016–07
  9. By: Bakker, Jan David (University of Oxford); Parsons, Christopher (University of Western Australia); Rauch, Ferdinand (University of Oxford)
    Abstract: Under apartheid, black South Africans were severely restricted in their choice of location and many were forced to live in homelands. Following the abolition of apartheid they were free to migrate. Given gravity, a town nearer to the homelands can be expected to receive a larger inflow of people than a more distant town following the removal of mobility restrictions. Exploting this exogenous variation, we study the effect of migration on urbanisation and the distribution of population. In particular, we test if migration inflows led to displacement, path dependence, or agglomeration in destination areas. We find evidence for path dependence in the aggregate, but substantial heterogeneity across town densities. An exogenous population shock leads to an increase of the urban relative to the rural population, which suggests that exogenous migration shocks can foster urbanisation in the medium run.
    Keywords: economic geography, migration, urbanisation, natural experiment
    JEL: R12 R23 N97 O18
    Date: 2016–07
  10. By: Seah, Kelvin (National University of Singapore)
    Abstract: This study examines how exposure to immigrant students affects the academic achievement of native students in the three largest immigrant-receiving countries – United States, Australia, and Canada. Using a large cross-country dataset, variation in the share of immigrant children between different grade levels within schools is exploited to identify the impact of immigrant peers. I find that exposure to immigrant children has dissimilar effects on native students' achievements across the three countries. While exposure has a positive impact on Australian natives, it has a negative impact on Canadian natives. Exposure has no effect on U.S. natives. More importantly, I find that institutional factors, such as the way in which countries organise their educational systems, have a crucial bearing on how immigrant students affect their peers.
    Keywords: academic achievement, immigrant children, peer effects, within-school estimation
    JEL: I21 J15
    Date: 2016–07
  11. By: L. Rachel Ngai (Centre for Economic Policy Research (CEP); Economics Department London School of Economics (LSE); Centre for Macroeconomics (CFM)); Kevin Sheedy (Centre for Economic Policy Research (CEP); Economics Department London School of Economics (LSE); Centre for Macroeconomics (CFM))
    Abstract: Using data on house sales and inventories, this paper shows that housing-market dynamics are driven mainly by listings and less so by transaction speed, thus the decision to move house is key to understanding the housing market. The paper builds a model where moving house is essentially an investment in match quality, implying that moving depends on macroeconomic developments and housing-market conditions. The endogeneity of moving means there is a cleansing effect - those at the bottom of the match quality distribution move first - which generates overshooting in aggregate variables. The model is applied to the 1995{2004 housing-market boom.
    Keywords: Housing market, Search and Matching, Endogenous moving, Match quality investment
    JEL: D83 E22 R31
    Date: 2016–06
  12. By: Henderson, Daniel J. (University of Alabama); Simar, Léopold (Université catholique de Louvain); Wang, Le (University of Alabama)
    Abstract: We examine the educational production function and efficiency of public school districts in Illinois. Using nonparametric kernel methods, we find that most traditional schooling inputs are irrelevant in determining test scores (even in a very general setting). Property tax caps are the only relevant factor that is related to districts' financial constraints and have predominantly negative associations with test scores. Therefore, insufficient resources may be partially responsible for the lack of growth in test scores. For most other relevant inputs, we find substantial heterogeneity in the returns, which helps reconcile some of the puzzling results in the literature. We further find that there exist inefficiencies in school districts. Moreover, the level of test scores, commonly used as a measure of school effectiveness, (while related) differs substantially from our efficiency scores, and standard parametric approaches drastically underestimate school efficiency. We discuss the policy implications of our results.
    Keywords: educational production function, irrelevant inputs, nonparametric kernel, panel data, property tax caps, school inputs, stochastic frontier analysis, student achievement, technical efficiency
    JEL: C14 C44 I21
    Date: 2016–07
  13. By: Gershenson, Seth (American University); Hayes, Michael S. (Rutgers University)
    Abstract: We document externalities of the civic unrest experienced in Ferguson, MO following the police shooting of an unarmed black teenager. Difference-in-differences and synthetic control method estimates compare Ferguson-area schools to neighboring schools in the greater St. Louis area and find that the unrest led to statistically significant, arguably causal declines in students' math and reading achievement. Attendance is one mechanism through which this effect operated, as chronic absence increased by five percent in Ferguson-area schools. Impacts were concentrated in elementary schools and at the bottom of the achievement distribution and spilled over into majority black schools throughout the area.
    Keywords: civic unrest, Ferguson, achievement gaps, natural experiment, externalities
    JEL: I2 R00
    Date: 2016–07
  14. By: Alexandra López-Cermeño (Universidad Carlos III de Madrid)
    Abstract: This paper provides a simplified method of exploring the geographical limits of a knowledge shock over the long run. Using a geographically decomposable distanceweighed sum of world GDPs by county, differences in differences regression analysis shows that a new university will not only have a positive impact on the local economy, but also on the GDP of nearby counties. Furthermore, challenging the conventional wisdom that knowledge spillovers affect the local economy, this study provides evidence that the effect expands to the whole nation although its strength dilutes with distance. Consistent with the education literature, this investigation provides evidence that the shock will make the relative GDP of foreign competitors worse-off. Results are persistent in the long run, although the effect of time is also decreasing. Results are robust to potential endogeneity related to the self-selection of prosperous allocations for new academic institutions.
    Keywords: New Economic Geography, Spillovers, U.S Counties
    JEL: L8 N72 R11 O18
    Date: 2016–07
  15. By: Pischke, Jörn-Steffen (London School of Economics)
    Abstract: Many economists suspect that downward nominal wage rigidities in ongoing labor contracts are an important source of employment fluctuations over the business cycle but there is little direct empirical evidence on this conjecture. This paper compares three occupations in the housing sector with very different wage setting institutions, real estate agents, architects, and construction workers. I study the wage and employment responses of these occupations to the housing cycle, a proxy for labor demand shocks to the industry. The employment of real estate agents, whose pay is far more flexible than the other occupations, indeed reacts less to the cycle than employment in the other occupations. However, unless labor demand elasticities are large, the estimates do not suggest that the level of wage flexibility enjoyed by real estate agents would buffer employment fluctuations in response to demand shocks by more than 10 to 20 percent compared to completely rigid wages.
    Keywords: wage setting, wage rigidity, commissions, real estate agents, architects, construction workers
    JEL: E24 J20 J44
    Date: 2016–07
  16. By: Alesina, Alberto Francesco; Michalopoulos, Stelios; Papaioannou, Ellias
    Abstract: This study explores the consequences and origins of between-ethnicity economic inequality across countries. First, combining satellite images of nighttime luminosity with the historical homelands of ethnolinguistic groups we construct measures of ethnic inequality for a large sample of countries. We also compile proxies of overall spatial inequality and regional inequality across administrative units. Second, we uncover a strong negative association between ethnic inequality and contemporary comparative development; the correlation is also present when we condition on regional inequality, which is itself related to under-development. Third, we investigate the roots of ethnic inequality and establish that differences in geographic endowments across ethnic homelands explain a sizable fraction of the observed variation in economic disparities across groups. Fourth, we show that ethnic-specific inequality in geographic endowments is also linked to under-development.
    Date: 2016
  17. By: Gabriel Bruneau; Ian Christensen; Césaire Meh
    Abstract: We perform an analysis to determine how well the introduction of a countercyclical loanto- value (LTV) ratio can reduce household indebtedness and housing price fluctuations compared with a monetary policy rule augmented with house price inflation. To this end, we construct a New Keynesian model in which a fraction of households borrow against the value of their houses and we introduce news shocks on housing demand. We estimate the model with Canadian data using Bayesian methods. We find that the introduction of news shocks can generate a housing market boom-bust cycle, the bust following unrealized expectations on housing demand. Our study also suggests that a countercyclical LTV ratio is a useful policy to reduce the spillover from the housing market to consumption, and to lean against news-driven boom-bust cycles in housing price and credit generated by expectations of future macroeconomic developments.
    Keywords: Business fluctuations and cycles, Financial stability, Housing, Monetary policy framework, Transmission of monetary policy
    JEL: E31 E42 H23
    Date: 2016
  18. By: Kyle Peyton (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Chris Ryan (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; ARC Centre for Excellence for Children and Families over the Life Course); Justin van de Ven (ARC Centre for Excellence for Children and Families over the Life Course)
    Abstract: This study looks at whether differences in student attitudes towards mathematics and science between Victorian students and those in selected other countries can explain differences in student achievement between them. We find that they cannot. In general, in the 2011 Trends in Mathematics and Science Study (TIMSS) data used here, Victorian school students have more positive attitudes towards mathematics and science than students in high achievement countries. These results also hold where we remove any language effects from the way people respond to attitudinal questions, or any cultural or social-desirability induced elements of the responses. Further, the most reliable estimates of the relationship between attitudes and achievement point to quite small effects, suggesting any increase in achievement associated with improved student attitudes could only be small.
    Keywords: International tests, achievement, student attitudes
    JEL: I21 I28
    Date: 2016–07
  19. By: Chakraborty, Tanika (Indian Institute of Technology Kanpur); Jayaraman, Rajshri (European School of Management and Technology (ESMT))
    Abstract: We study the effect of the world's largest school feeding program on children's learning outcomes. Staggered implementation across different states of a 2001 Indian Supreme Court Directive mandating the introduction of free school lunches in public primary schools generates plausibly exogenous variation in program exposure across different birth cohorts. We exploit this to estimate the effect of program exposure on math and reading test scores of primary school-aged children. We find that midday meals have a dramatic positive effect on learning achievement: children with up to 5 years of primary school exposure improve their test scores by approximately 10-20%. We further investigate various channels that may account for this improvement including enrollment and nutrition-learning effects, heterogeneous responses by socio-economic status, complementary schooling inputs, and intra-household redistribution.
    Keywords: school feeding, learning, midday meal, primary school education
    JEL: I21 I25 O12
    Date: 2016–07
  20. By: Zadonsky Georgy (Gaidar Institute for Economic Policy)
    Abstract: In 2015, according to the data released by the Central Bank of the Russian Federation, credit institutions extended 691,943 housing mortgage loans (HML) to the tune of Rb 1,147.339bn, which constituted 68.32% of the total amount of HML extended in 2014 and 65.04% in monetary terms. In the same period, 706,786 housing loans were originated totaling to Rb 1,168.222bn, which in quantity of loans comes to 66.71% and in monetary terms 64.14% of the extended loans.
    Keywords: Russian economy, mortgage market, new housing construction
    JEL: R14 R21 R52 G21 K11 L74 L85
    Date: 2016
  21. By: Abdala Rioja, Yamile E
    Abstract: In recent years, there has been the common shared belief that international investors and other buyers of real estate in cash-only transactions have exercised an upward pressure in property prices in the city of San Francisco in California, the consequence being the crowding-out on buyers requiring access to credit. This paper examines real estate prices and cash sales for the period beginning after the last recession to the year 2015, as well as other significant drivers since the year 1998. The results suggest a contradiction to the cash-only claim, at the same time that they reveal a strong relationship between the technology sector and the real estate prices in the city.
    Keywords: Real Estate, Mortgage, San Francisco Tech Pulse, Business Cycles, Interest Rates
    JEL: E32 E4 R31
    Date: 2016–06–15
  22. By: Wouter Zwysen (University of Essex); Simonetta Longhi (University of Essex)
    Abstract: We compare employment and earnings of British graduates belonging to ethnic minorities to those of white British six months and three and a half years after graduation. Six months after graduation all ethnic minority graduates are less likely than whites to be employed but those who have a job earn similarly or more than whites. University choice, parental background and area characteristics account for a large part of the ethnic differences in earnings but do not explain ethnic differences in employment. Three and a half years after graduation the ethnic advantages in earnings disappear while employment penalties reduce. Both employment probability and earnings increase over the career in a similar way for whites and minorities, with only few exceptions.
    Keywords: School-to-work transitions; graduates; ethnic gaps; UK; longitudinal analysis
    JEL: I24 J15 R23
    Date: 2016–07
  23. By: Alexandra D'Onofrio (ASSONIME); Raoul Minetti (Michigan State University); Pierluigi Murro (LUMSA University)
    Abstract: Using rich data from the Italian local credit markets (provinces), this paper investigates the impact of local banking development on income inequality and the role of the socioeconomic structure in this link. Exploiting the Italian historical banking regulationtoin strument for the local presence of bank branches, we find that local banking development mitigates income inequality and poverty. However, the finance-inequality nexus manifests itself only in relatively advanced areas, suggesting important non-linearities. When we study the structural channels of influence, we obtain evidence that banking development can reduce inequality by affecting geographical mobility and urbanization, while it has modest effects through the development of material infrastructures and human capital.
    Keywords: Income inequality; Financial development; Socio economic structure
    JEL: G21 G38 O15
    Date: 2016–07
  24. By: Geloso, Vincent; Kufenko, Vadim; Prettner, Klaus
    Abstract: We examine the role of demographic change for regional convergence in living standards in Canada. Due to economies of scale within a family, decreasing household size has an impact on convergence in living standards, while per capita income convergence remains unaffected. We find that, by relying on per capita income, the dispersion of living standards between Canadian regions is overestimated prior to the 1990s and underestimated thereafter. As a consequence, relying on income per capita results in overestimating the speed of convergence in living standards.
    Keywords: regional convergence,living standards,demographic change,household size
    JEL: O47 J12 N12
    Date: 2016
  25. By: Lenka Stastna (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic)
    Abstract: This paper analyzes local political cycle in Czech municipalities over the period between 1997 and 2013. We apply the system GMM and the difference GMM estimators to identify distortion in current and capital expenditures per capita in electoral and pre-electoral years, while focusing on various spending groups (infrastructure, leisure, housing, education, etc.). We also test specific effects of local governments' characteristics (partisanship, strength, experience). In general, municipalities increase capital spending (primarily on infrastructure, housing, leisure activities) and decrease current spending (administration) before elections. Rightist governments target leisure activities and save more on administration, whereas leftist governments target current spending on social services. Stronger governments and those with newly elected mayors have lower incentive to create an electoral cycle. Voters' involvement in local policies and also success of ruling local (and parliamentary) parties in nat ional parliamentary elections diminish local electoral cycles.
    Keywords: political cycle, local government expenditures, municipalities
    JEL: H72 D72 R50
    Date: 2015–12
  26. By: Bingley, Paul (Danish National Centre for Social Research (SFI)); Cappellari, Lorenzo (Università Cattolica del Sacro Cuore); Tatsiramos, Konstantinos (University of Nottingham)
    Abstract: This paper studies the influence of family, schools and neighborhoods on life-cycle earnings inequality. We develop an earnings dynamics model linking brothers, schoolmates and teenage parish neighbors using population register data for Denmark. We exploit differences in the timing of family mobility and the partial overlap of schools and neighborhoods to separately identify sorting from community and family effects. We find that family is far more important than community in influencing earnings inequality over the life cycle. Neighborhoods and schools influence earnings only early in the working life and this influence falls rapidly and becomes negligible after age 30.
    Keywords: sibling correlations, neighborhoods, schools, life-cycle earnings, inequality
    JEL: D31 J62
    Date: 2016–07
  27. By: Mohamed Arouri (Centre Clermontois de Recherche en Gestion et Management (CRCGM)); Adel Ben Youssef (Université Côte d'Azur, France; GREDEG CNRS); Cuong Nguyen (National Economic University, Hanoi, Vietnam)
    Abstract: We investigate whether there are racial and ethnic disparities in children's education in Ethiopia, India, Peru and Vietnam. We find that in all four countries, and especially Vietnam, children from small ethnic groups have lower education attainment and cognitive ability. The gap in educational attainment and cognitive ability among ethnic children is larger than the gap in school enrolment, and the gap tends to be wider for older children. Using the Oaxaca-Blinder decomposition, we find that the main contribution to the gap in education between children from small ethnic groups and children from large ethnic groups in India, Peru and Vietnam is the difference in endowments (i.e., characteristics of children and their families) rather than a in the coefficients of endowments. However, in Ethiopia, the difference in the coefficients contributes more than the difference in endowments to the gap in education. Child health, parental education, household expenditure and an urban environment are important variables for explaining the gap in education between children from small and large ethnic groups.
    Keywords: Children's education, racial disparities, low-income countries
    JEL: J13 J15 I21
    Date: 2016–08
  28. By: Rajeev Darolia (University of Missouri); Cory Koedel (University of Missouri)
    Abstract: We use statewide administrative data from Missouri to examine the role of high schools in explaining students’ initial college and major placements at 4-year public universities. Conditional on a student’s own academic preparation, the high school attended predicts the rigor of the initial university, and within the university, the rigor of the initial major. We identify a relatively sparse set of school characteristics – and characteristics of schools’ local communities – that account for much of the explanatory power of high schools. Complementing previous studies, we show that students from low-SES high schools enroll in less rigorous universities than their similarly-qualified peers from high-SES high schools. Students from low-SES schools also enroll in less rigorous majors within universities. Black-white gaps in the rigor of the initial college and major can be explained entirely by students’ own pre-entry academic preparation and a small number of high school and neighborhood characteristics.
    Keywords: college sorting, major sorting, university sorting, college major choice, STEM degrees
    JEL: I23 I24 J24
    Date: 2016–07
  29. By: Meierrieks, Daniel; Renner, Laura
    Abstract: This contribution investigates the relationship between economic freedom and international migration. We argue that higher levels of economic freedom in the source countries of migration may discourage migration by generating more economic security, providing more economic opportunities and stimulating overall economic activity. Using a panel dataset on migration from 91 developing and emerging to the 20 most attractive OECD destination countries for the 1980-2010 period, we find that more economic freedom at home discourages high-skilled migration but does not matter to low-skilled migration. The negative association between economic freedom and high-skilled emigration also holds when we estimate (dynamic) panel models that allow for endogeneity in the economic freedom-migration nexus. Our findings suggest that high-skilled individuals are especially responsive to the economic incentives arising from economic freedom. This is especially true for those components of economic freedom associated with the provision of economic security in the form of wellprotected property rights, sound money and limited government involvement in the economic life.
    Keywords: economic freedom,international migration,low-skilled and high-skilled migration
    JEL: F22 J61
    Date: 2016
  30. By: Tidiane Ly (Univ Lyon, CNRS, GATE UMR 5824, F-69130 Ecully, France)
    Abstract: This paper investigates the efficiency properties of tax competition between submetropolitan jurisdictions when capital, residents and workers are mobile, and both households and firms compete for local land markets. We analyze two decentralized equilibria: (1) with a local tax on residents and two separate local taxes on capital and land inputs, efficiency is achieved and the existence of a marginal fiscal cost due to residents’ mobility is revealed; (2) combination of the taxes on capital and land inputs into a single business property tax leads local authorities to charge inefficiently high taxation on capital. We show that capital mobility induces a reduction in the business land taxation and local public inputs are used to offset the distorting effects of the property tax, accounting for the distorting impact of workers’ mobility.
    Keywords: Tax competition, Mobility, Public goods, Public inputs
    JEL: H71 H72 R50 R51
    Date: 2016
  31. By: Andrea Kunnert (WIFO)
    Abstract: Housing affordability problems are expected to increase for Austrian households because housing costs have been rising dynamically over the last years. Households who moved more recently are expected to be affected the most. Previous research has identified younger households as also being prone to housing affordability problems because they have relatively lower incomes. There is a strong correlation between the year of move-in and age – young households comprise a large share of households who moved recently. This paper applies the tailored ratio and residual income approach to Austrian households for 2014 to analyse housing affordability by age group and also by year of move-in. To identify whether age (lifecycle) or prevailing market conditions cause affordability problems, affordability measures are compared for age groups at different intervals of move-in. The results suggest that both effects are at work: young households who moved recently have the highest incidence of affordability problems compared to older households. For other age groups, affordability problems also mostly occur for households who moved recently. The price distortion between below-market rents due to long-term contracts and market rents becomes more pronounced. This adversely affects newcomers and dis-incentivises mobility of incumbents.
    Keywords: housing affordability, ratio approach, residual income approach, lifecycle, Austria
    Date: 2016–08–01
  32. By: Randall Jackson (Regional Research Institute, West Virginia University); Jing Chen (Regional Research Institute, West Virginia University)
    Abstract: The year 2015 marks the West Virginia University (WVU) Regional Research Institute’s (RRI) 50th year anniversary and this article conducts a case study to explore the scholarly collaborations by social network analysis (SNA) in the RRI research community since its inception in 1965. We have discovered that the evolving endogenous and exogenous co-authorship networks grow and gain complexity as the Institute develops and incorporates more researchers. However, this case study also uncovers and verifies several social network analysis (SNA) limitations on research pattern analysis.
    Keywords: Co-authorship, bibliometrics, social network analysis, Regional Research Institute
    JEL: R00 O18 A12 B31
    Date: 2016–07
  33. By: Foreman-Peck, James (Cardiff Business School); Zhou, Peng (Cardiff Business School)
    Abstract: Households may migrate between jurisdictions to secure preferred mixes of collectively sup-plied services and taxation. But devolution of taxes to sub-national jurisdictions could reduce expected tax revenue if some move to lower tax regimes, constraining devolved government policy. This paper develops an indirect approach to establish lower bound tax revenue impacts of possible tax changes by devolved governments. We estimate and aggregate migration responses to existing tax differentials between smaller, component administrative areas of the devolved jurisdictions. Because such existing taxes may have different bases from proposed devolved taxes, appropriate corrections are made in a model of the devolved economy. This model also establishes how the tax base and therefore the tax yield of the devolved economy, as well as the output per capita, would be changed by implementing different tax rates, given the migration responses estimated. The model is used to assess the fiscal possibilities for Wales created by the UK Government of Wales Act 2014.
    Keywords: Migration; Fiscal Decentralisation; Tax Revenue
    JEL: R23 J61 H11 H22 H71 H72 H77
    Date: 2016–07
  34. By: Goldschlag, Nathan (U.S. Census Bureau); Bianchini, Stefano (Université de Strasbourg); Lane, Julia (New York University); SanMartin Sola, Joseba; Weinberg, Bruce A. (Ohio State University)
    Abstract: Public support of research typically relies on the notion that universities are engines of economic development, and that university research is a primary driver of high wage localized economic activity. Yet the evidence supporting that notion is based on aggregate descriptive data, rather than detailed links at the level of individual transactions. Here we use new micro-data from three countries - France, Spain and the United States - to examine one mechanism whereby such economic activity is generated, namely purchases from regional businesses. We show that grant funds are more likely to be expended at businesses physically closer to universities than at those farther away. In addition, if a vendor has been a supplier to a grant once, that vendor is subsequently more likely to be a vendor on the same or related grants. Firms behave in a way that is consistent with the notion that propinquity is good for business; if a firm supplies a research grant at a university in a given year it is more likely to open an establishment near that university in subsequent years than other firms.
    Keywords: science policy, innovation, regional economic development, UMETRICS
    JEL: O30 R10
    Date: 2016–07
  35. By: Massimiliano Ferraresi (Università di Ferrara); Umberto Galmarini (Università dell'Insubria e IEB); Leonzio Rizzo (Università di Ferrara e IEB); Alberto Zanardi (Ufficio Parlamentare di Bilancio)
    Abstract: The abolition of the municipal property tax on owner-occupied dwellings accomplished in Italy in 2008 offers a quasi-natural experiment that allows for the identification of the presence of political budget cycles - the incentives for municipalities close to elections to manipulate policy outcome decisions. Our empirical analysis shows that the reform impacted on municipalities that in 2008 were in their pre-electoral year, by expanding the size of their budget in the form of an increase of current expenditure and fees and charges, but this did not occurred in municipalities that experienced their pre-electoral year before 2008.
    Keywords: political budget cycle, transfers, federal budget, property tax, fiscal reform, local elections
    JEL: C23 H71 H72
  36. By: Andrea Kunnert (WIFO)
    Abstract: The expenditure-to-income ratio is a widely used measure of housing affordability as it is easy to calculate and to interpret. Yet it suffers from several flaws that may diminish its usefulness. This paper addresses the main points of critique and improves the accuracy of the ratio measure by providing additional information about the distribution (values at the 10th, 25th, 50th, 75th and 90th percentile) for the cost burden and calculating cumulative distributions for a range of expenditure-to-income shares instead of one single benchmark. Furthermore, an upper limit for income and housing quality is set in order to avoid misclassifying households that have strong preferences towards housing consumption. The results indicate that these modifications are necessary to avoid overestimating affordability problems. The tailored ratio approach developed in this paper holds up well when contrasting its results to that of the residual income approach in Austria by tenure.
    Keywords: housing affordability, ratio approach, quality adjustment, residual income approach, Austria
    Date: 2016–07–28

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