nep-ure New Economics Papers
on Urban and Real Estate Economics
Issue of 2017‒06‒18
thirty papers chosen by
Steve Ross
University of Connecticut

  1. Is the Rent Too High? Aggregate Implications of Local Land-Use Regulation By Devin Bunten
  2. Dynamics of Housing Debt in the Recent Boom and Great Recession By Manuel Adelino; Antoinette Schoar; Felipe Severino
  3. Housing Price and Population Growth across China: The Role of Housing Supply By Wang, Hongbo; Rickman, Dan S.
  4. Regional Growth Differences in China for 1995-2013: An Empirical Integrative Analysis of their Sources By Wang, Hongbo; Rickman, Dan S.
  5. The Effects of the Bus Rapid Transit Infrastructure on the Property Values in Colombia By Perdomo Calvo, Jorge Andrés
  6. Is there trickle-down from tech? Poverty, employment and the high-technology multiplier in US cities By Neil Lee; Andrés Rodríguez-Pose
  7. How Inheritance Affects the Real Estate Market in an Aging Economy: Evidence from Transaction and Registry Data By Mizuta, Takeshi; Shimizu, Chihiro; Uesugi, Iichiro
  8. Social ties and the demand for financial services By Eleonora Patacchini; Edoardo Rainone
  9. Reducing Inequality Through Dynamic Complementarity: Evidence from Head Start and Public School Spending By Rucker C. Johnson; C. Kirabo Jackson
  10. Sorting Between and Within Industries: A Testable Model of Assortative Matching By John M. Abowd; Francis Kramarz; Sebastien Perez-Duarte; Ian M. Schmutte
  11. Innovation, Skill, and Economic Segregation By Florida, Richard; Mellander, Charlotta
  12. The local environment shapes refugee integration: Evidence from post-war Germany By Braun, Sebastian; Dwenger, Nadja
  13. TOLLS VERSUS MOBILITY PERMITS: A COMPARATIVE ANALYSIS By André De Palma; Stef Proost; Ravi Seshadri; Moshe Ben-Akiva
  14. "On the regional impact of broadband on productivity: the case of Brazil" By Juan Jung; Enrique López-Bazo
  15. Are users better-off with new transit lines? By Moez Kilani; André De Palma; Stef Proost
  16. Two Tales of Two U.S. States: Regional Fiscal Austerity and Economic Performance By Rickman, Dan S.; Wang, Hongbo
  17. Rental equivalence estimates of national and regional housing expenditures By Bettina H. Aten
  18. Decentralization and fiscal performance in Central and Eastern Europe By Makreshanska, Suzana; Petrevski, Goran
  19. Political economy comes home: on the moral economies of housing By Insa Koch
  20. Who do you know or what do you know? Informal recruitment channels, family background and university enrolments By Emanuela Ghignoni
  21. The Economic Response of Rural Areas to Local Supply Shock: Evidence From Palestine By Belal Fallah
  22. Decentralization and electoral swings. By Ignacio Lago; André Blais
  23. New evidence on interregional mobility of students in tertiary education: the case of Italy By Ilaria De Angelis; Vincenzo Mariani; Roberto Torrini
  24. The Geography of Economic Segregation By Florida, Richard; Mellander, Charlotta
  25. Does Inter-municipal Cooperation promote efficiency gains? Evidence from Italian Municipal By Massimiliano Ferraresi; Giuseppe Migali; Leonzio Rizzo
  26. No free lunch, Buddy: past housing transfers and informal care later in life By Emanuele Ciani; Claudio Deiana
  27. Supplemental Poverty Measure: A Comparison of Geographic Adjustments with Regional Price Parities vs. Median Rents from the American Community Survey: An Update By Trudi J. Renwick; Eric B. Figueroa; Bettina H. Aten
  28. Maimonides Rule Redux By Joshua D. Angrist; Victor Lavy; Jetson Leder-Luis; Adi Shany
  29. "Seeking price and macroeconomic stabilisation in the euro area: The role of house prices and stock prices" By Imran Hussain Shah; Simón Sosvilla-Rivero
  30. Revealing the Economic Consequences of Group Cohesion By Simon Gaechter; Chris Starmer; Fabio Tufano

  1. By: Devin Bunten
    Abstract: Highly productive U.S. cities are characterized by high housing prices, low housing stock growth, and restrictive land-use regulations (e.g., San Francisco). While new residents would benefit from housing stock growth in cities with highly productive firms, existing residents justify strict local land-use regulations on the grounds of congestion and other costs of further development. This paper assesses the welfare implications of these local regulations for income, congestion, and urban sprawl within a general-equilibrium model with endogenous regulation. In the model, households choose from locations that vary exogenously by productivity and endogenously according to local externalities of congestion and sharing. Existing residents address these externalities by voting for regulations that limit local housing density. In equilibrium, these regulations bind and house prices compensate for differences across locations. Relative to the planner's optimum, the decentralized model generates spatial misallocation whereby high-productivity locations are settled at too-low densities. The model admits a straightforward calibration based on observed population density, expenditure shares on consumption and local services, and local incomes. Welfare and output would be 1.4% and 2.1% higher, respectively, under the planner’s allocation. Abolishing zoning regulations entirely would increase GDP by 6%, but lower welfare by 5.9% because of greater congestion.
    Keywords: General Equilibrium ; House Prices ; Housing Supply ; Regulation ; Urban, Rural, & Regional Economics
    JEL: R52 H73 E61
    Date: 2017–06
  2. By: Manuel Adelino; Antoinette Schoar; Felipe Severino
    Abstract: This paper documents a number of key facts about the evolution of mortgage debt, homeownership, debt burden and subsequent delinquency during the recent housing boom and Great Recession. We show that the mortgage expansion was shared across the entire income distribution, i.e. the flow and stock of debt rose across all income groups (except for the top 5%). The mortgage expansion was especially pronounced in areas with increased house prices, and the speed at which houses turned over (churn) in these areas went up significantly. However, the average loan-to-value ratios (LTV) at origination did not increase over the boom period. While homeownership rates increased for the middle and upper income households, there was no increase in homeownership for the lowest income groups. Finally, default rates post-crisis went up predominantly in areas with large house price drops, especially for high income and high-FICO borrowers. These results are consistent with a view that the run up in mortgage debt over the pre-crisis period was driven by rising home values and expectations of increasing prices.
    JEL: G01 G1 G18 G20 G21
    Date: 2017–06
  3. By: Wang, Hongbo; Rickman, Dan S.
    Abstract: In this paper, we employ a spatial equilibrium growth model to examine the role of housing supply for differences in housing price and population growth across the provinces, autonomous regions and municipalities of mainland China for 1999-2013. A distinguishing feature of the model used from other spatial equilibrium models is a time-varying and regionally-varying elasticity of housing supply. Regions in the East are found to have had the most inelastic housing supply, while northern regions had the most elastic housing supply. The differences in exogenous housing supply growth are shown to have significantly affected relative regional population growth over the period, suggesting that housing policies can be used to promote growth.
    Keywords: Housing supply; China; Spatial equilibrium
    JEL: R11 R12 R31
    Date: 2017–03–17
  4. By: Wang, Hongbo; Rickman, Dan S.
    Abstract: An integrative analysis of several regional economic outcome variables in China for the period of 1995-2013 reveal the major sources of regional growth differences in China. Patterns of growth in population, per capita income, gross regional product, housing prices and changes in unemployment rates are identified using principal components analysis. Regression analysis of principal component scores is applied to identify geographic patterns in the sources of the growth. The analysis suggests that shifts in labor supply largely were responsible for the regional growth differences over the period, though shifts in labor demand were nearly equally as important. The results have implications for evaluating the success of regional development policies such as the Western Development Strategy.
    Keywords: Regional growth; China; Western Development Strategy
    JEL: R11 R12 R31
    Date: 2017–03–11
  5. By: Perdomo Calvo, Jorge Andrés
    Abstract: Several articles have theoretically and empirically verified favorable changes in the value (per square meter) of properties near urban mass transit infrastructure. The main purpose of this study was to demonstrate this effect under an unbiased specification using Geographical Information Systems (GIS) and advanced econometric techniques (Pooled Cross Sections, Spatial Econometrics, Box-Cox Transformation and Structural Change). Particularly, if the construction of the bus rapid transit (BRT) infrastructure impacted the price market (per square meter or asking price) of the residential and commercial properties in Bogota and Barranquilla (Colombia) with access to the BRT. Results indicated the true private monetary or higher valuation of such properties, caused by public investment over several years (1999-2011). This effect is conceived as a positive economic externality of the BRT projects
    Keywords: Property value; BRT infrastructure; Colombia; advanced econometric techniques; unbiased specification
    JEL: C52 L92 R14 R23 R42
    Date: 2015–10–07
  6. By: Neil Lee; Andrés Rodríguez-Pose
    Abstract: High-technology industries are seen as important in helping urban economies thrive, but at the same time they are often considered as potential drivers of poverty and social exclusion. However, little research has assessed how high-tech affects urban poverty and the wages of workers at the bottom of the pyramid. This paper addresses this gap in the literature and investigates the relationship between employment in high-tech industries, poverty and the labour market for non-degree educated workers using a panel of 295 Metropolitan Statistical Areas (MSAs) in the United States between 2005 and 2011. The results of the analysis show no real impact of the presence of high-technology industries on poverty. Yet there is strong evidence that tech-employment increases wages for non-degree educated workers and, to a lesser extent, employment for those without degrees. These results suggest that while tech employment has some role in improving welfare for non-degree educated workers, tech-employment alone is not be enough to reduce poverty.
    Keywords: High-technology industries; employment; wages; poverty; cities
    JEL: R11 R12 R58
    Date: 2016
  7. By: Mizuta, Takeshi; Shimizu, Chihiro; Uesugi, Iichiro
    Abstract: The impact of population aging on real estate prices has been closely scrutinized by Mankiw and Weil (1989) and others. This paper sheds new light on the literature on asset meltdown by examining the mechanism how the death of property owners and subsequent inheritances affect the realty market. By combining the unpredictable nature of death and inheritance and the unique characteristics of the Japanese tax system, which provides an incentive to heirs to sell inherited properties shortly after inheriting them, we use the incidence of inheritance to instrument for the supply of real estate and examine the causal relationship between supply and realty prices to find the following. First, a higher incidence of inheritance results in a larger number of properties for sale. Second, a larger number of properties for sale as a result of inheritances decreases transaction prices in the real estate market. And third, there exists a substantial difference in the demand elasticity of real estate property depending on whether land use regulations were relaxed or tightened.
    Keywords: Real estate market, Realty prices, Inheritance tax, Instruments
    JEL: R31 R38 H24
    Date: 2016–09
  8. By: Eleonora Patacchini (Cornell University); Edoardo Rainone (Bank of Italy)
    Abstract: This paper studies the importance of social interactions for the adoption of financial services among young adults. Specifically, we investigate whether, how, and why financial decisions among interacting agents are correlated. We exploit a unique dataset of friendship networks in the United States and a novel estimation strategy that accounts for possibly endogenous network formation. We find that not all social contacts are equally important: only long-lasting relationships influence financial decisions. Moreover, this peer influence exists only in cohesive social structures. This evidence is consistent with an important role of trust in financial decisions. When agents consider whether or not to adopt a financial instrument, they face a risk and may place greater value on information coming from agents they trust. These results can help explain the importance of face-to-face social contacts for financial decisions.
    Keywords: financial market participation, financial literacy, social interactions, trust, network formation, endogeneity, Bayesian estimation
    JEL: C11 C31 D1 D14 D81 D85 G11 M31
    Date: 2017–06
  9. By: Rucker C. Johnson; C. Kirabo Jackson
    Abstract: We explore whether early childhood human-capital investments are complementary to those made later in life. Using the Panel Study of Income Dynamics, we compare the adult outcomes of cohorts who were differentially exposed to policy-induced changes in pre-school (Head Start) spending and school-finance-reform-induced changes in public K12 school spending during childhood, depending on place and year of birth. Difference-in-difference instrumental variables and sibling- difference estimates indicate that, for poor children, increases in Head Start spending and increases in public K12 spending each individually increased educational attainment and earnings, and reduced the likelihood of both poverty and incarceration in adulthood. The benefits of Head Start spending were larger when followed by access to better-funded public K12 schools, and the increases in K12 spending were more efficacious for poor children who were exposed to higher levels of Head Start spending during their preschool years. The findings suggest that early investments in the skills of disadvantaged children that are followed by sustained educational investments over time can effectively break the cycle of poverty.
    JEL: I20 I24 I28 J20 J68
    Date: 2017–06
  10. By: John M. Abowd; Francis Kramarz; Sebastien Perez-Duarte; Ian M. Schmutte
    Abstract: We test Shimer's (2005) theory of the sorting of workers between and within industrial sectors based on directed search with coordination frictions, deliberately maintaining its static general equilibrium framework. We fit the model to sector-specific wage, vacancy and output data, including 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 confirm that strong assortative matching can be present even when worker and employer components of wage heterogeneity are weakly correlated.
    Keywords: Wage Differentials, Human Capital, Skills, Job Matching, Simulation Methods
    JEL: J31 J24 E24
    Date: 2017–01
  11. By: Florida, Richard (University of Toronto); Mellander, Charlotta (Jönköping University & Centre of Excellence for Science and Innovation Studies (CESIS))
    Abstract: Our research examines the role of innovation and skill on the level economic segregation across U.S. metro areas. On the one hand, economic and urban theory suggest that more innovative and skilled metros are likely to have higher levels of economic segregation. But on the other hand, theory also suggests that more segregated metros are likely to become less innovative over time. We examine the connection between innovation and economic segregation this via OLS regressions informed by a Principal Component Analysis to distill key variables related to innovation, knowledge and skills, while controlling for other key variables notably population size. Our findings are mixed. While we find evidence of an association between the level of innovation and skill and the level of economic segregation in 2010, we find little evidence of an association between the level of innovation and skill across metros and the growth of economic segregation between 2000 and 2010.
    Keywords: Economic segregation; inequality; innovation; high-tech; skill; talent; human capital
    JEL: J24 O30 R23
    Date: 2017–06–07
  12. By: Braun, Sebastian; Dwenger, Nadja
    Abstract: This paper studies how the local environment in receiving counties affected the economic, social, and political integration of the eight million expellees who arrived in West Germany after World War II. We first document that integration outcomes differed dramatically across West German counties. We then show that more industrialized counties and counties with low expellee inflows were much more successful in integrating expellees than agrarian counties and counties with high in inflows. Religious differences between native West Germans and expellees had no effect on labor market outcomes, but reduced inter-marriage rates and increased the local support for anti-expellee parties.
    Keywords: Expellees,Forced migration,Immigration,Integration,Post-War Germany
    JEL: J15 J61 N34 C36
    Date: 2017
  13. By: André De Palma (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Stef Proost (Department of Economics, KU Leuven); Ravi Seshadri (Singapore-MIT Alliance for Research and Technology (SMART) Centre); Moshe Ben-Akiva (MIT - Massachusetts Institute of Technology)
    Abstract: To address traffic congestion, two categories of instruments are used: price regulation (for instance, road pricing or congestion tolling) and quantity regulation (credit-based mobility schemes). Although the comparison of price and quantity regulation has received significant attention in the economics community, the literature is relatively sparse in the context of transportation systems. This paper develops a methodology to compare the toll and mobility permit instruments using a simple transportation network consisting of parallel highway routes and a public transport alternative. The permits can be traded across roads. The demand for each route is determined by a mixed logit route choice model and the supply consists of static congestion. The comparison is based on the optimum social welfare which is computed for each instrument by solving a non-convex optimization problem involving the mixed logit equilibrium constraints. Equity considerations are also examined. Numerical experiments conducted across a wide range of demand/supply inputs indicate that the toll and mobility permit instruments perform very closely in efficiency terms. The permit system is on average more efficient, but only by a small margin.
    Keywords: Social Welfare, Mixed Logit,Tolls, Mobility Permits, Equity, Stochastic Demand
    Date: 2016–11–16
  14. By: Juan Jung (AQR-IREA, Universitat de Barcelona, Av. Diagonal 690, 08034 Barcelona, Spain.); Enrique López-Bazo (AQR-IREA, Universitat de Barcelona, Av. Diagonal 690, 08034 Barcelona, Spain.)
    Abstract: This paper analyses the incidence of broadband on regional productivity in Brazil, intending to find out if the economic impact is uniform across all territories of the country. The possibility of performing a regional approach, instead of the usual country-level analysis, means an opportunity to disentangle the economic impact of broadband at territories which share a common institutional and regulatory framework as are the regions inside a country. Results suggest that the impact of broadband on productivity is positive although not uniform across regions. On the one hand, it seems to depend on connection quality and network effects. Faster download speed and critical-mass accounting for network externalities in the region enhance the economic impact of broadband. On the other hand, higher productivity gains are estimated for the less developed regions. The fact that the less productive regions in Brazil seem to be benefiting more from broadband may suggest that it can constitute a factor favoring regional convergence in the country.
    Keywords: Broadband, Information and Communication Technologies, Regional Productivity. JEL classification: O33, O47, R11.
    Date: 2017–05
  15. By: Moez Kilani (EQUIPPE - Economie Quantitative, Intégration, Politiques Publiques et Econométrie - Université de Lille, Sciences et Technologies - Université de Lille, Sciences Humaines et Sociales - PRES Université Lille Nord de France - Université de Lille, Droit et Santé); André De Palma (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Stef Proost (Center for Economic Studies - CES - KU Leuven - CES - KU Leuven)
    Abstract: This paper studies the entry of new competitors in public transport like long distance busses that compete with rail. A stylized model is used that analyzes the addition of a new more direct line in an existing network. We show that the introduction of the new line is only beneficial if there are relatively many users that want to use the new direct line. Our result raises serious concerns with respect to the decentralized management of transit systems.
    Keywords: externalities 1,public transport,Transport investment
    Date: 2016–03–14
  16. By: Rickman, Dan S.; Wang, Hongbo
    Abstract: The recent fiscal austerity experiments undertaken in the states of Kansas and Wisconsin have generated considerable policy interest. Using a variety of identification approaches within a difference-in-differences framework and examining a wide range of economic indicators, this paper assesses whether the experiments have spurred growth in the states as promised by the governors and legislatures which enacted them into law. The overall conclusion from the paper is that the fiscal experiments did not spur growth, and if anything, harmed state economic performance. Among the identification approaches used, the Synthetic Control Method (Abadie and Gardeazabal 2003; Abadie et al., 2010) is demonstrated to provide the most compelling evidence.
    Keywords: Fiscal austerity; State taxes; Synthetic Control Method
    JEL: H71 R12 R23
    Date: 2017–03–19
  17. By: Bettina H. Aten (Bureau of Economic Analysis)
    Date: 2017–06
  18. By: Makreshanska, Suzana; Petrevski, Goran
    Abstract: The paper provides empirical evidence on the association between decentralization and fiscal performance of the general government on a panel of 11 former transition countries during 1996-2012, controlling for the effects of various demographic, institutional, and macroeconomic variables. Also, for robustness check we make a comparison with a panel of 18 industrialized European economies. The main findings from the empirical investigation suggest that decentralizing government activities in Central and Eastern Europe leads to an increase in the efficiency in the provision of public goods. Also, we show that not only the extent of fiscal decentralization, but the composition of local revenue, too, matters for fiscal discipline. In these regards, providing local governments with higher autonomy in financing their activities by relying more on their “own” tax revenues instead of intergovernmental grants seems to be conducive with fiscal discipline. In contrast to the sample consisting of the former transition economies, we cannot find evidence on the association between decentralization and fiscal discipline in the developed European countries.
    Keywords: Fiscal decentralization, Budget deficits, Central and Eastern Europe, Panel data models
    JEL: H50 H76 H77
    Date: 2016–03–25
  19. By: Insa Koch
    JEL: N0
    Date: 2017
  20. By: Emanuela Ghignoni
    Abstract: This paper deals with the role that an extensive use of informal networks to match workers to jobs can play in the university enrolments decisions of low socioeconomic status students in Italy. By applying estimation techniques with instrumental variables to ISTAT microdata, I found that upper-secondary students coming from lower social classes are less likely to participate in higher education when they live in provinces where the percentage of newly tertiary graduates who found a job thanks to the help of relatives, family connections or friends is higher. My results are consistent with the hypothesis that the wide diffusion of ‘favouritism’ in local labour markets engenders a sense of ‘economic despair’ among those who are poorly connected, thereby damaging individual human capital accumulation, inequality of access to higher education and local socio-economic development.
    Keywords: informal channels, favouritism, enrolments, tertiary education, local labour markets
    JEL: I24 J24 R10
    Date: 2017–06
  21. By: Belal Fallah (Palestine Polytechnic University)
    Abstract: This paper examines the economic effect of return commuting from the Israeli labor market on non-commuters in rural areas of the Occupied West Bank. The results show that returned commuting, when forced, has negative repercussions. Specifically, wages decrease for workers with same skill type (low skilled). The results also provide evidence that favors the crowd out effect hypothesis. The estimated probability of unemployment increases for non-commuters with disproportionate effect for job seekers relative to those reportedly employed. Consistent with this result, increases in return commuting prolong unemployment duration for the low skilled.
    Date: 2017–06–15
  22. By: Ignacio Lago; André Blais
    Abstract: We explore how the uniformity of electoral swings in the district vote within countries is affected by the level of economic and political decentralization. We rely on district-level data from OECD countries in two consecutive elections before and after the Great Recession to show that as regional governments exert more influence over the central government districts deviate less from the overall pattern of change in the support of the national incumbent party. The causal mechanism accounting for the effect of decentralization on dynamic nationalization is examined with individual panel data from national elections in Canada and Spain.
    Keywords: Decentralization, dynamic nationalization, electoral swing, Great Recession.
    JEL: R1 R12
    Date: 2017–06
  23. By: Ilaria De Angelis (Bank of Italy); Vincenzo Mariani (Bank of Italy); Roberto Torrini (Bank of Italy)
    Abstract: A relatively low geographical mobility of students in the Centre and North of the country and a large incidence of movers from southern regions to universities located in the Centre and North are well-established features of the Italian academic system. Exploiting a novel administrative dataset on academic enrolments, this paper shows that the interregional mobility of Italian students has increased in recent years. We highlight that the increase in mobility, which has occurred in a period of declining entry rates, is not attributable to a change in the composition of the enrolling students. We investigate some of the main drivers of student mobility by relating regional flows to the attractiveness of universities and show that mobility is positively associated with the quality of research and teaching and with the job prospects offered by the hosting university. Student flows are instead negatively correlated with the distance between the university and the region of origin and with drop-out rates. The empirical evidence also suggests that in recent years the distance from the university of destination has become less relevant in explaining mobility, whereas the role played by university quality has increased.
    Keywords: university, student mobility, quality of research, labour market JEL Classification: I20, I23
    Date: 2017–06
  24. By: Florida, Richard (University of Toronto & New York University); Mellander, Charlotta (Jönköping International Business School (JIBS) & Centre of Excellence for Science and Innovation Studies (CESIS))
    Abstract: This study examines the geography of economic segregation in America. Most studies of economic segregation focus on income, but our research develops a new measure of overall economic segregation spanning income, educational, and occupational segregation which we use to examine the economic, social and demographic factors which are associated with economic segregation across US metros. Adding in the two other dimensions of educational and occupational segregation– seems to provide additional, stronger findings with regard to the factors that are associated with economic segregation broadly. Our findings suggest that several key factors are associated with economic segregation. Across the board, economic segregation is associated with larger, denser, more affluent, and more knowledge based metros. Economic segregation is related to race and to income inequality.
    Keywords: Economic Segregation; Income Inequality; Education; Occupation; Race
    JEL: I30 J10 R23
    Date: 2017–06–09
  25. By: Massimiliano Ferraresi (European Commission - DG JRC Directorate I Competences - Modelling, Indicators and Impact Evaluation Unit); Giuseppe Migali (Lancaster University Management School); Leonzio Rizzo (Università di Ferrara)
    Abstract: Inter-municipal cooperation is a widespread phenomenon among municipalities as a way to provide local public services, exploit economies of scale and internalise externalities. While the determinants driving the decision to cooperate have been deeply analyzed in the literature, little is known about possible efficiency gains. We test their existence in terms of local public expenditures reductions by investigating the Italian experience of Municipal Unions. We exploit unique administrative data on 335 municipalities located in the Emilia Romagna region, for the period 2001-2011. Using a difference-in-differences approach combined with matching models, we find that being in a Municipal Union reduces the total per capita current expenditures by around 5%. The effect is robust, persistent and increasing up to nine years after entrance. Furthermore, joining a Municipal Union does not reduce the level of local public services. Hence, the Municipal Union is an effective tool that allows municipalities to gain efficiency.
    Keywords: Municipal Union cooperation, public expenditure, difference-in-differences, matching
    JEL: H71 H72 C23
  26. By: Emanuele Ciani (Bank of Italy); Claudio Deiana (European Commission, Joint Research Centre)
    Abstract: Previous empirical literature on the relationship between intergenerational transfers of assets and services has mostly focused on contemporary exchanges. In contrast, we provide novel evidence that parents who helped their adult children in the past are rewarded by a greater likelihood of receiving informal care later in life. To this end we use Italian data to look at retrospective information about how parents help their children to purchase houses when they get married. Our estimates show a positive association with the current provision of informal care, which is robust to controlling for a large set of individual and family characteristics. We provide evidence that this can be explained by various self-interest motives, relating to theories based either on bilateral exchange or on the presence of a third generation of grandchildren, such as those including a demonstration effect or the concept of a family constitution.
    Keywords: informal care, housing, intergenerational transfers, geographical proximity.
    JEL: D10 J13 J14
    Date: 2017–06
  27. By: Trudi J. Renwick; Eric B. Figueroa; Bettina H. Aten (Bureau of Economic Analysis)
    Date: 2017–06
  28. By: Joshua D. Angrist; Victor Lavy; Jetson Leder-Luis; Adi Shany
    Abstract: We use the discontinuous function of enrollment known as Maimonides Rule as an instrument for class size in large Israeli samples from 2002-2011. As in the 1991 data analyzed by Angrist and Lavy (1999), Maimonides Rule still has a strong first stage. In contrast with the earlier Israeli estimates, however, Maimonides-based instrumental variables estimates using more recent data show no effect of class size on achievement. The new data also reveal substantial enrollment sorting near Maimonides cutoffs, with too many schools having enrollment values that just barely produce an extra class. A modified rule that uses data on students’ birthdays to compute statutory enrollment in the absence of enrollment manipulation also generates a precisely estimated zero. In older data, the original Maimonides Rule is unrelated to socioeconomic characteristics, while in more recent data, the original rule is unrelated to socioeconomic characteristics conditional on a few controls. Enrollment manipulation therefore appears to be innocuous: neither the original negative effects nor the recent data zeros seem likely to be manipulation artifacts.
    JEL: C22 C26 C36 I21 I26 J24
    Date: 2017–06
  29. By: Imran Hussain Shah (Faculty of Humanities & Social Sciences, University of Bath); Simón Sosvilla-Rivero (Complutense Institute for International Studies, Universidad Complutense de Madrid; 28223 Madrid, Spain.)
    Abstract: We propose an Economic Stability Index (ESI) incorporating house prices and stock prices as components of the measure of the inflation rate in order to allow the European Central Bank (ECB) to achieve both price and macroeconomic stability. We use an optimisation approach to estimate target weights for different sectoral prices in the broader price index, which depend on sectoral parameters other than those used to compute the Harmonised Index of Consumer Prices applied by the ECB to gauge price stability in the euro area (EA). Our results suggest that if the ECB had targeted the ESI, it would have implemented a different monetary policy which would had increased stability in the EA’s economic activity and would have helped to create adequate preconditions for sustainable economic growth and job creation.
    Keywords: Stock prices; House prices; Inflation targeting; Macroeconomic stabilization; Euro area. JEL classification:C32, D53, E31, E52, E58, G12, 052, R31.
    Date: 2017–05
  30. By: Simon Gaechter (School of Economics, University of Nottingham); Chris Starmer (School of Economics, University of Nottingham); Fabio Tufano (School of Economics, University of Nottingham)
    Abstract: We introduce the concept of “group cohesion†to capture the economic consequences of ubiquitous social relationships in group production. We measure group cohesion, adapting the “oneness scale†from psychology. A comprehensive program of new experiments reveals the considerable economic impact of cohesion: higher cohesion groups are significantly more likely to achieve Pareto-superior outcomes in classic weak-link coordination games. We show that effects of cohesion are economically large, robust, and portable. We identify social preferences as a primary mechanism explaining the effects of cohesion. Our results provide proof of concept for group cohesion as a productive new tool of economic research.
    Date: 2017–09

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