|
on Urban and Real Estate Economics |
| By: | Eric Glaeser (Harvard University); Eric Hanushek (Stanford University); John Quigley (University of California, Berkeley) |
| Abstract: | No economist studying the spatial economy of urban areas today would ignore the effects of race on housing markets and labor market opportunities, but this was not always the case. John Kain developed much of urban economics but, more importantly, legitimized and encouraged scholarly consideration of the geography of racial opportunities. His provocative study of the linkage between housing segregation and the labor market opportunities of Blacks arose from his work on employment decentralization and constraints on Black residential choice. His later research program on school outcomes was similarly focused in how the economic opportunities of minority households vary with location. John Kain's scientific work forms a legacy linked by the study of the urban disadvantaged. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1051&r=ure |
| By: | John Quigley (University of California, Berkeley); Steven Raphael (Univesity of California, Berkeley) |
| Abstract: | During the three-year period ending in July 2003, the rise in housing costs in California far exceeded the national inflation rate. Housing prices in five coastal counties increased by more than 60 percent. For the highest quintile of cities, prices increased by an average of more than thirty percent per year. Evidently California housing markets differ along important dimensions from those in the rest of the country. One striking difference is the degree of regulation governing land use and residential construction. California represents the most extreme example of autarky in land use regulations of any U.S. state. Cities are free to set their rules independently, with little oversight. Moreover, state tax policy creates incentives that are likely to decrease production an increase housing costs. Property taxes are constitutionally limited to one percent of acquisition costs while cities are permitted a share of local sales tax receipts. This creates a regulatory incentive to favor retail development over housing construction, to favor development of expensive housing over moderately priced housing, and to discourage the construction of housing.In this paper, we explore the linkages between land-use regulations, growth in the housing stock, and housing prices in California cities. First, we assess whether housing is more expensive in more regulated cities. Next, we assess whether growth in the housing stock over the period of a decade depends on the degree of land-use regulation at the start of the decade. Finally, we estimate the price elasticity of housing supply in regulated and relatively unregulated cities. Our results suggest that current regulations have powerful effects on housing outcomes. |
| Keywords: | house prices, Housing, Housing markets, Laud-use policies, |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1060&r=ure |
| By: | John Quigley (University of California, Berkeley) |
| Abstract: | (no abstract available) |
| Keywords: | Housing, Housing Market, Housing markets, |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1054&r=ure |
| By: | John Quigley (University of California at Berkeley) |
| Abstract: | This paper provides a selective review of two aspects of urban policy in the U.S. -- federal policy providing housing subsidies for lower income households, and federal support for urban redevelopment and physical renewal. The paper reviews four periods in the history of American housing policy, indicating the major equity and efficiency issues in delivering housing services, the factors affecting program costs, and the development of more effective programs. The paper also traces urban development policy from the urban renewal partnership sponsored by the 1949 Housing Act to the present, indicating the linkage between theories of intergovernmental fiscal relations and the evolution of programs. The analysis is mostly an exercise in positive economics, explicating the development of policies, their economic rationale, and economic consequences. However, inevitably, there is some attention paid to the normative aspects of these programs. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1038&r=ure |
| By: | Kenneth Gibb (Department of Urban Studies, University of Glasgow) |
| Abstract: | This paper is concerned with the attempt to model and simulate an urban housing system dominated by non-market social housing, primarily to forecast demand for social housing under different scenarios. The urban system concerned is the city of Glasgow and its suburbs, a post-industrial city in West Central Scotland, a region now emerging from long-term structural economic decline. There is an established literature concerned with the development of metropolitan housing market models in both the USA and the UK. The present model draws from these traditions but is heavily influenced by the work of Meen (1999). The Glasgow model is heavily demand-determined with only a limited supply-side but with a standard market-clearing setup. Data for the model comes from the Scottish House Condition Survey 1996 and from extraneous housing, population and household estimates from local authority planners. The focus of the core part of the paper is primarily on the demand-side. Demand in the model is composed of three elements: new household formation, net migration and the tenure and locational choices of existing households. It is this third element that poses the most difficulties and is modelled separately using a nested multinomial logit formulation. The paper discusses the modelling issues and results from a series of NMNL models that attempt to explain the locational, tenure and mobility decisions of existing households. The preferred results are then adopted as conditional probabilities in the simulation model. The paper sets out the structure of the basic model and reports some initial runs. The paper concludes by examining the academic and policy implications of the model and suggests future avenues for refinement and further work. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1027&r=ure |
| By: | George Masnick (Joint Center for Housing Studies, Harvard University) |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1034&r=ure |
| By: | John Quigley (University of California, Berkeley) |
| Abstract: | Urban economics emphasizes: the spatial arrangements of households, firms, and capital in metropolitan areas; the externalities which arise from the proximity of households and land uses; and the public policy issues which arise from the interplay of these economic forces. |
| Date: | 2006–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1072&r=ure |
| By: | John Landis (Institute of Urban and Regional Development, University of California at Berkeley); Vicki Elmer (Institute of Urban and Regional Development, University of California at Berkeley); Matt Zook (Institute of Urban and Regional Development, University of California at Berkeley) |
| Abstract: | This paper uses employment and output in high-tech industries, venture capital funding, and the number of dot-com firms per 1000 private workers, at the metropolitan level, to identify their contribution to differences in housing market outcomes. Housing prices in New Economy markets are found to be higher, peakier and more volatile than in old economy markets. Homeownership rates are found to be lower in new economy metro areas while crowding is found to be higher. Although the distribution of housing values, cost, and rents was more equal in New Economy markets, the cause would seem to be differences in metro area income levels, with poorer MSA's having greater inequalities. Regression analysis is used to identify the contribution of traditional supply and demand factors such as job growth, income, residential construction, as well as New Economy indicators, to housing market outcomes. Rather than being fundamentally different, New Economy housing markets are found to be faster and more extreme versions of traditional housing markets. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1031&r=ure |
| By: | Min Hwang (National University of Singapore); John Quigley (University of California, Berkeley) |
| Abstract: | This paper investigates the effects of national and regional economic conditions on housing market outcomes: the prices of owner-occupied housing, vacancies, and residential construction activity. Our three-equation model confirms the importance of changes in regional economic conditions, income and employment on local housing markets. The results provide the first detailed evidence on the importance of vacancies in the owner-occupied housing market in affecting housing prices and supplier activities. The results also document the importance of variations in materials, labor and capital costs and regulation in affecting new supply. Simulation exercises, using standard impulse response models, document the lags in market responses to endogenous shocks and the variations arising from differences in local parameters. The results also suggest the importance of local regulation in affecting the pattern of market responses to regional income shocks. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1050&r=ure |
| By: | Kathryn Nelson (U.S. Department of Housing and Urban Development) |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1030&r=ure |
| By: | Jean Cavailhes (IRNA-CESAER); Carl Gaigne (IRNA); Takatoshi Tabuchi (Faculty of Economics, University of Tokyo); Jacques-Francois Thisse (CORE, Universite catholique de Louvain) |
| Abstract: | Our purpose is to investigate how the interplay between trade, commuting and communication costs shapes the economy at both the interregional and intra-urban levels. Specifically, we study how economic integration affects the internal structure of cities and show how decentralizing the production and consumption of goods in secondary employment centers allows firms located in a large city to maintain their predominance. Several new results in both economic geography and urban economics are established, which all agree with empirical evidence. |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2006cf454&r=ure |
| By: | Paul Torrens (University College London) |
| Abstract: | There are indications that the current generation of models used to simulate the geography of housing choice has reached the limits of its usefulness under existing specifications. The relative stasis in residential choice modeling--and urban simulation in general--contrasts with simulation efforts in other disciplines, where techniques, theories, and ideas drawn from computation and complexity studies are revitalizing the ways in which we conceptualize, understand, and model real-world phenomena. Many of these concepts and methodologies are applicable to housing choice simulation. Indeed, in many cases, ideas from computation and complexity studies--often clustered under the collective term of geocomputation, as they apply to geography--are ideally suited to the simulation of residential location dynamics. However, there exist several obstructions to their successful use for these puropses, particularly as regards the capacity of these methodologies to handle top-down dynamics in urban systems. This paper presents a framework for developing a hybrid model for urban geographic simulation generally and discusses some of the imposing barriers against innovation in this field. The framework infuses approaches derived from geocomputation and complexity with standard techniques that have been tried and tested in operational land-use and transport simulation. As a proof-of-concept exercise, a micro-model of residential location has been developed with a view to hybridization. The model mixes cellular automata and multi-agent approaches and is formulated so as to interface with meso-models at a higher scale. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1036&r=ure |
| By: | Jens Ludwig (Georgetown University); Greg Duncan (Northwestern University); Joshua Pinkston (Nothwestern University) |
| Abstract: | Housing policies for low-income families may affect the concentration of poverty in America, which could in turn affect the ability of families receiving housing services to become economically self-sufficient. In this paper we examine the effects of a randomized housing- voucher experiment on welfare receipt and labor market outcomes, both of which are measured using state administrative data. We find that providing families in high-poverty public housing areas with housing vouchers that can only be redeemed in low-poverty neighborhoods reduces rates of welfare use by around 6 percentage points. Most of this reduction in welfare receipt appears to be explained by differences in welfare-to-work transitions. We also find that providing families with unrestricted housing vouchers has little effect on economic outcomes beyond the first year. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1032&r=ure |
| By: | Kenneth Rosen (University of California, Berkeley); Ted Dienstfrey (Gerson Bakar and Associates, San Francisco) |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1002&r=ure |
| By: | Richard Green (School of Business, University of Wisconsin-Madison) |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1028&r=ure |
| By: | John Quigley (University of California, Berkeley); Steven Raphael (University of California, Berkeley) |
| Abstract: | This paper reviews trends in housing affordability in the U.S. over the past four decades. There is little evidence that owner-occupied housing has become less affordable. In contrast, there have been modest increases in the fraction of income that the median renter household devotes to housing. We find pronounced increases in the rent burdens for poor households.We explore the low-income rental market, analyzing the importance of changes in the income distribution, and in housing quality in affecting rent burdens. We conclude that zoning and land use restrictions are more important factors driving up rents. We also sketch out some policies that might improve housing affordability. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1047&r=ure |
| By: | Luci Ellis (Reserve Bank of Australia) |
| Abstract: | This paper draws together themes from work at the RBA, other national central banks, the BIS and elsewhere on recent developments in housing and housing finance. The general conclusion is that financial and macroeconomic developments have increased the demand for the stock of housing. Because the stock of housing is inherently slow to adjust, this has increased its relative price. Although this is a global trend, individual country institutions have affected outcomes, sometimes in ways that are not obvious. The resulting expansion in both sides of the household balance sheet is an important development for policy-makers to monitor, but it is probably not of itself a cause of financial instability. |
| Keywords: | housing; housing finance; economic geography; cross-country |
| JEL: | E21 E44 R21 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:rba:rbardp:rdp2006-12&r=ure |
| By: | Erica Greulich (University of California, Berkeley); John Quigley (University of California, Berkeley); Steven Raphael (University of California, Berkeley) |
| Abstract: | This paper assesses whether growth in the immigrant population over the past two decades has adversely affected the housing consumption opportunities of native renter households. We find that the monthly housing expenses of native renters are higher in metropolitan areas with larger immigrant populations. However, these marginal effects are comparable for both native households in direct competition with immigrants and native households that are unlikely to compete with immigrants in the housing market. Moreover, while average native rents increase as the proportion immigrant increases within a given metropolitan area, the same is not true for rent-to-income ratios. We do find that native households in metropolitan areas with large immigrant populations consume fewer rooms and are relatively more likely to reside in crowded conditions. This result holds in an analysis of cross-sectional variation as well as the analysis of changes within metropolitan areas. However, there is little evidence that these effects are larger for those native households who are likely to be in competition for housing with immigrant households. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1049&r=ure |
| By: | Roberto Querica (University of North Carolina at Chapel Hill); Michael Stegman (University of North Carolina at Chapel Hill); Walter Davis (University of North Carolina at Chapel Hill) |
| Abstract: | In this study, we present an analysis of the impacts of high tech economic growth on the incidence of critical housing problems among all households and among moderateincome working families in major metropolitan areas. We rely on data from the 1999 American Housing Survey, supplemented with data from the State of the Cities 2000, Landis and Elmer (2001), and Burby et al. (2000). Overall, we found that the level of high tech activity impacts, positively and significantly, the incidence of critical housing problems for all households and for moderate-income working households, regardless of tenure. Consistent with anecdotal information about the problems of working families, we found stronger impacts on moderate-income working households than on all households. We conclude that housing policy should be broadened to address the problems of working families as well as those of the poor, especially when dealing with problems arising from rapid economic growth. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1035&r=ure |
| By: | Peter Englund (Stockholm School of Economics); John Quigley (University of California at Berkeley); Christian Redfearn (University of California at Berkeley) |
| Abstract: | Estimates of the prices of housing and the value of the stock are derived from observations on housing transactions. These transactions may well be a non-random sample of the underlying population of dwellings. For example, it is widely thought that smaller "starter homes" sell more frequently than more expensive properties and that the frequency of transactions on high-valued properties varies over the business cycle. This paper considers the importance of these selectivity issues in making imputations about housing price trends. We estimate a model of housing price determination and of the nonrandom selection of observed transactions. We analyze the factors affecting the probabilities that transactions on different houses will be observed, and we estimate the effect of these factors upon housing prices. The analysis considers a variety of plausible selection models. For each of the alternatives, the estimated effect of selectivity upon housing price calculations is quite substantial. The analysis is based on a unique body of data containing observations of all house sales in Sweden during the period 1981- 1993. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1009&r=ure |
| By: | John Quigley (University of California at Berkeley); Steven Raphael (University of California at Berkeley) |
| Abstract: | It is generally believed that the increased incidence of homelessness in the U.S. has arisen from broad societal factors--changes in the institutionalization of the mentally ill, increases in drug addiction and alcohol usage, etc. This paper reports on a comprehensive test of the alternate hypothesis that variations in homelessness arise from changed circumstances in the housing market and in the income distribution. We utilize essentially all the systematic information available on homelessness in U.S. urban areas--census counts, shelter bed counts, records of transfer payments, and administrative agency estimates. We use these data to estimate the effects of housing prices, vacancies and rent-to-income ratios upon the incidence of homelessness. Our results suggest that simple economic principles governing the availability and pricing of housing and the growth in demand for the lowest quality housing explain a large portion of the variation in homelessness among U.S. metropolitan housing markets. Furthermore, rather modest improvements in the affordability of rental housing or its availability can substantially reduce the incidence of homelessness in the U.S. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1014&r=ure |
| By: | Peter Englund (Stockholm School of Ecomonics); Min Hwang (University of California at Berkeley); John Quigley (University of California at Berkeley) |
| Abstract: | An unusually rich source of data on housing prices in Stockholm is used to analyze the investment implications of housing choices. This empirical analysis derives market-wide price and return series for housing investment during a 13-year period, and it also provides estimates of the individual-specific, idiosyncratic, variation in housing returns. Because the idiosyncratic component follows an autocorrelated process, the analysis of portfolio choice is dependent upon the holding period. We analyze the composition of household investment portfolios containing housing, common stocks, stocks in real estate holding companies, bonds, and t-bills. For short holding periods, the efficient portfolio contains essentially no housing. For longer periods, low risk portfolios contain 15 to 50 percent housing. These results suggest that there are large potential gains from policies or institutions that would permit households to hedge their lumpy investments in housing. We estimate the potential value of hedges in reducing risk to households, yet yielding the same investment returns. The value is surprisingly large, especially to poorer homeowners. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1018&r=ure |
| By: | John Quigley (University of California at Berkeley); Steven Raphael (University of California at Berkeley); Larry Rosenthal (University of California at Berkeley) |
| Abstract: | We analyze the link between autarchic land use policies adopted by local governments in California and the substantial redistribution of its population during the decade of the 1990s. We relate changes in population growth by racial and ethnic group in California cities to measures of the extent to which locally adopted policy favors expansion of the single-family housing stock. We control for the initial conditions of housing and labor markets by relying upon census measures for 1990, and we account for the potential endogeneity of contemporaneous land use policies by r elying upon exogenous measures of the "exclusivity" and "pro-growth" propensities of the local public sector recorded by a statewide survey in the early 1990s. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1024&r=ure |
| By: | Erica Greulich (University of California at Berkeley); John Quigley (University of California at Berkeley) |
| Abstract: | The most significant U.S. housing subsidy programs are funded by tax expenditures through the Internal Revenue Code (IRC). Beyond the subsidy to homeownership provided to all owner occupants through the personal income tax, the IRC provides additional subsidies to specific groups of homeowners. The Mortgage Revenue Bond (MRB) program permits lower levels of government to issue tax-exempt debt, using the proceeds to supply mortgages at below-market interest rates to deserving households. States are also permitted to issue and distribute Mortgage Credit Certificates (MCCs) which entitle recipient homeowners to claim a tax credit for some portion of the mortgage interest paid rather than the tax deduction claimed by other homeowners.This paper documents the wide variations in reliance upon MCCs and MRBs across the United States and the emergence of Mortgage Credit Certificates as the largest housing program administered by the state of California. The paper provides an economic analysis of the MCC program using micro data on program recipients in California during the period 1996-1998. We estimate the extent and distribution of MCC subsidies across income and demographic groups, measuring the dollar amount of federal subsidies and their effects upon the user cost of residential capital and the demand price of housing. We analyze the geographic incidence of MCC subsidies across neighborhoods of varying socio-demographic composition and deprivation. Finally, we note important differences in the administrative and programmatic costs of MCCs and MRBs, suggesting that there are clear reasons to favor Mortgage Credit Certificates as a means of subsidizing deserving households. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1042&r=ure |
| By: | John Quigley (University of California, Berkeley) |
| Abstract: | The most significant and most expensive housing policy in the United States is the treatment of owner-occupied housing for tax purposes. This treatment of housing under the tax code is analogous to that in many other countries (for example, Sweden), but certainly not in all developed countries (for example, Canada). Federal subsidies to US renter households are much smaller. Policy has evolved from programmes in which the government built, owned, and managed dwellings to programmes emphasizing housing demand through vouchers and rent certificates awarded to eligible households. |
| Date: | 2006–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1073&r=ure |
| By: | Andrea R. Lamorgese (Banca d'Italia); Gianmarco I.P. Ottaviano |
| Abstract: | Using national level input-output matrices, we propose a strategy to identify pecuniary externalities operating through the markets for intermediate goods at the local level. Then, controlling for common shocks in a spatial econometric framework, (i) we estimate the e®ect of pecuniary externalities on productivity growth; (ii) we disentangle such e®ect from the one of other local interactions (i.e. knowledge or other face-to-face spillovers) and that of local characteristics; (iii) we evaluate the scope of operating of all kind of externalities using di®erent distance measures. Our estimates suggest that pecuniary externalities and other kinds of local interactions coexist, that their e®ect on productivity growth is decreasing with distance and that it depends on inter-city diversity and the pattern of local specialisation |
| Keywords: | customer and supplier driven externalities, spatial autoregressive models, dynamic factors model |
| JEL: | R12 R15 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:667&r=ure |
| By: | John Quigley (University of California at Berkeley); Steven Raphael (University of California at Berkeley); Eugene Smolensky (University of California at Berkeley) |
| Abstract: | It is generally believed that the increased incidence of homelessness in the U.S. has arisen from broad societal factors--changes in the institutionalization of the mentally ill, increases in drug addiction and alcohol usage, etc. This paper presents a comprehensive test of the alternate hypothesis that variations in homelessness arise from changed circumstances in the housing market and in the income distribution. We assemble essentially all the systematic information available on homelessness in U.S. urban areas--census counts, shelter bed counts, records of transfer payments, and administrative agency estimates. We estimate similar statistical models using four different samples of data on the incidence of homelessness, defined according to very different criteria. Our results suggest that simple economic principles governing the availability and pricing of housing and the growth in demand for the lowest quality housing explain a large portion of the variation in homelessness among U.S. metropolitan housing markets. Furthermore, rather modest improvements in the affordability of rental housing or its availability can substantially reduce the incidence of homelessness in the U.S. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1006&r=ure |
| By: | Philip Oreopoulos (University of California at Berkeley) |
| Abstract: | Many social scientists presume that the quality of the neigborhood to which children are exposed affects a variety of long-run social outcomes. I examine the effect on the long-run labor market outcomes of adults who were assigned, when young, to substantially different public housing projects in Toronto. Administrative data are matched to public housing addresses to track children from the program for over 15 years. The main finding is that neighborhood quality plays little role in determining a youth's adult earnings, education attainment, or welfare participation, but does affect exposure to crime. While living in contrasting housing projects cannot explain large variances in labor market outcomes, family differences, as measured by sibling outcome correlations, account for up to 30 percent of the total variance in the data. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1041&r=ure |
| By: | Markus K. Brunnermeier; Christian Julliard |
| Abstract: | A reduction in inflation can fuel run-ups in housing prices if people suffer from money illusion. For example, investors who decide whether to rent or buy a house by simply comparing monthly rent and mortgage payments do not take into account that inflation lowers future real mortgage costs. We decompose the price-rent ratio in a rational component -- meant to capture the proxy effect and risk premia -- and an implied mispricing. We find that inflation and nominal interest rates explain a large share of the time-series variation of the mispricing, and that the tilt effect is unlikely to rationalize this finding. |
| JEL: | G12 R2 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12810&r=ure |
| By: | David Erickson (University of California, Berkeley) |
| Abstract: | Some scholars argue that the state jealously guards its power and budgets, slowly adding to them over time. Recent U.S. public policy history offers a challenge to this interpretation. Since the 1970s, the go vernment has been shedding capacity. Government increasingly has relied on a new incentive structure to build institutional capacity outside of government. Low-income housing policies were the vanguard of this change. The federal housing bureaucracy grew from the 1930s to the 1960s but was bypassed in the 1970s in favor of a network of new players--state and local government, private and nonprofit corporations, and consultants. This new network has been effective in delivering housing producing more than 1 million subsidized homes in the 1980s and 1990s. This article outlines the political debates of over the evolution of this network - from a recommitment to low-income housing production in the 1960s, to attacks on government housing programs in the 1980s, and finally to a new consensus in the late 1980s over the decentralized housing development network infused with federal dollars. |
| Keywords: | Housing, Low income housing, |
| Date: | 2006–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1065&r=ure |
| By: | Gunther Maier; Gerald Franz; Pia Schrock |
| Abstract: | This paper discusses the question whether the city of Vienna, Austria, is experiencing urban sprawl. We will critically evaluate the concept of urban sprawl and analyze its relationship to regular forms of urban development. Particular emphasis will be given to quantitative measures of urban change that might be able to identify key factors of urban sprawl. These measures are then applied to empirical data for the city of Vienna, Austria |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa06p105&r=ure |
| By: | Min Hwang (National University of Singapore); John Quigley (University of California, Berkeley) |
| Abstract: | This paper develops a model of price formation in the housing market which accounts for non-random selection of those dwellings sold on the market from the stock of existing houses. The model also accounts for changes in the quality of dwellings themselves and tests for mean reversion in individual house prices. The model is applied to a unique body of data representing all dwellings sold in Sweden's largest metropolitan area during the period 1982-1999. The analysis compares house price indices that account for selectivity, quality change and mean reversion with the conventional repeat sales models used to describe the course of metropolitan housing prices. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1046&r=ure |
| By: | Erin Mansur (University of California at Berkeley); John Quigley (University of California at Berkeley); Steven Raphael (University of California at Berkeley); Eugene Smolensky (University of California at Berkeley) |
| Abstract: | In this paper, we use a general equilibrium simulation model of the housing market to assess the potential to reduce the incidence of homelessness of various housing-market policy interventions. A version of the model developed by Anas and Arnott is extended and adapted to study homelessness and is calibrated to the four largest metropolitan areas in California. Using data from the Census of Population and Housing for 1980 and 1990 and the American Housing Survey for various years, we explore several alternative simulations. First, we calibrate the model for each metropolitan area to observed housing market and income conditions in 1980 and assess how well the model predicts observed changes in rents during the decade of the 1980s. Next, using models calibrated to 1990 conditions, we assess the effects on homelessness of changes in the income distribution similar to those that occurred during the 1980s. Finally, we explore the welfare consequences and the effects on homelessness of three housing market policy interventions: extending housing vouchers to all low-income households, subsidizing all landlords, and subsidizing those landlords who supply low-income housing. Our results suggest that a very large fraction of homelessness can be eliminated through increased reliance upon well-known housing subsidy policies. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1017&r=ure |
| By: | John Quigley (University of California, Berkeley) |
| Abstract: | Owner occupied housing facilitates household wealth accumulation and the stability of consumption in developed countries. It also contributes to other social goals. But owneroccupied housing is also a risky investment. This paper synthesizes existing knowledge about the riskiness of housing investment in European economies during the past quarter century. It also presents estimates of the potential gains to European consumers from investments in derivatives which may reduce risk at the individual level. We find that futures markets in house price indexes may increase portfolio returns for European investors by several percentage points at the same level of risk. We also consider practical steps to develop markets for these investments. |
| Date: | 2006–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1075&r=ure |
| By: | Carl Mason (University of California, Berkeley); John Quigley (University of California, Berkeley) |
| Abstract: | This paper analyzes the implications of rent control as applied to dwellings located in mobile home parks. This form of regulation differs from apartment rent control in that: it is applied selectively to a small portion of the housing stock, and; it regulates the site rents paid to the park owner, not the selling prices of mobile homes. We present a detailed case study of the effects of this institution in three mobile home parks in different cities and regions in California, documenting the capitalization of regulatory rules into the selling prices of housing, and raising questions about the legality as well as the efficacy of the institution. |
| Date: | 2006–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1066&r=ure |
| By: | Scott Susin (none) |
| Abstract: | Since the early 1980s, low-income housing subsidies have increasingly shifted towards vouchers which allow recipients to rent in the private market. By 1993, vouchers subsidized as many households as lived in traditional housing projects, although most low-income households did not receive any subsidies. This study investigates whether this policy has raised rents for unsubsidized poor households, as many analysts predicted when the program was conceived. The main finding is that low-income households in metropolitan areas with more vouchers have experienced faster rent increases than those where vouchers are less abundant. In the 90 biggest metropolitan areas, vouchers have raised rents by 16 percent on average, a large effect consistent with a low supply elasticity in the low quality rental housing market. Considered as a transfer program, this result implies that vouchers have caused a $8.2 billion increase in the total rent paid by low-income non-recipients, while only providing a subsidy of $5.8 billion to recipients, resulting in a net loss of $2.4 billion to low-income households. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1005&r=ure |
| By: | Katherine O'Regan (University of California, Berkeley); John Quigley (University of California, Berkeley) |
| Abstract: | Theories about the importance of space in urban labor markets have emphasized the role of employment access, on the one hand, and neighborhood composition, on the other hand, in affecting employment outcomes. This paper presents an empirical analysis which considers both of these factors, together with individual human capital characteristics and household attributes in affecting youth employment.The analysis is based upon an unusually rich sample of micro data on youth in four New Jersey metropolitan areas. The empirical analysis is based on a sample of some 28,000 at home youth, matched to detailed census tract demographic information and specially constructed measures of employment access. The research includes a comparison of the importance of neighborhood and access in affecting youth employment when individual and household attributes are also measured. The results demonstrate the overall importance of these spatial factors (particularly neighborhood composition) in affecting youth employment in urban areas. |
| Keywords: | Employment, Spatially isolated minorities, |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1058&r=ure |
| By: | Jon H. Fiva and Marte Rønning (Statistics Norway) |
| Abstract: | Recent theoretical contributions indicate favorable incentive effects of property taxation on public service providers. The object of this paper is to confront these theories with data from Norwegian school districts. The institutional setting in Norway is well suited for analyzing the effects of property taxation because one can compare school districts with and without property taxation. To take into account potential endogeneity of the choice of implementing property taxation, we rely on instrumental variable techniques. The empirical results indicate that, conditional on resource use, property taxation improves school quality measured as students’ result on the national examination. |
| Keywords: | Property taxation; Disciplining device; Public sector quality |
| JEL: | C21 H71 I22 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:484&r=ure |
| By: | John Quigley (University of California, Berkeley); Aaron Swoboda (University of Pittsburgh) |
| Abstract: | We consider the general equilibrium implications of environmental regulations which result in a reduction of otherwise profitable residential development. Critical habitat designation under the Endangered Species Act is an important example. If the regulations affect a significant amount of land, they may have important effects on the rest of the regional economy - increasing rents and densities on lands not subject to the regulation, causing the conversion of lands from alternative uses, increasing the net developed area in the region, and decreasing consumer welfare. We develop a flexible general equilibrium simulation of the economic effects of critical habitat designation, explicitly considering the distributional effects upon owners of different types of land and upon housing consumers. The results of our simulation show that the most significant economic effects of critical habitat occur outside of the designated area. The prices and rents of non-critical habitat lands increase significantly. Incomes are redistributed across landlords, and the well being of housing consumers is further affected through these linkages. |
| Date: | 2006–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1070&r=ure |
| By: | John Quigley (University of California, Berkeley) |
| Abstract: | This paper reviews the evolution of the major credit and insurance programs undertaken by the US government in support of urban housing. As the review makes clear, the FHA, VA, FNMA, and FHLMC have played major roles in the development of liberal and efficient primary and secondary mortgage markets in the US. The development of capacity in mortgage lending and securitization in the private sector does suggest, however, that federally subsidizing mortgage market activities can be restrained with little effect upon homeownership, the principal rationale for federal activity. In particular, the orderly reduction in the mortgage investment activities of the GSEs and the imposition of guarantee fees upon MBS insured by the GSEs are first steps in restraining federal activity. More generally, a concentration of FHA and GSE activity on first-time homebuyers would reduce federal risk exposure while preserving the economic rationale for government activity. |
| Date: | 2006–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1074&r=ure |
| By: | Min Hwang (University of California, Berkeley); John Quigley (University of California, Berkeley) |
| Abstract: | There is increasing evidence that aggregate housing prices are predictable. Despite this, a random walk in time and independence in space are two maintained hypotheses in most empirical models of housing price measurement. This paper examines the price discovery process in individual dwellings over time and space by relaxing both assumptions, using a unique body of data from the Singapore private condominium market. We develop a model that tests directly the hypotheses that the prices of individual dwellings follow a random walk over time and that the price of an individual dwelling is independent of the price of a neighboring dwelling. The model is general enough to include other widely used models for housing price determination as special cases. The empirical results clearly support mean reversion in housing prices and also diffusion of innovations over space. We find that serial and spatial correlation "matter" in the computation of price indices and the estimation of investor returns. This predictability may suggest that excess returns are possible. We use the monthly price series derived from condominium sales to investigate this issue. When aggregate returns are computed from models that assume a random walk and spatial independence, we find that they are strongly autocorrelated. When returns are calculated from more general models that permit mean reversion, the estimated autocorrelation in investment returns is reduced. Finally, when they are calculated from models permitting mean reversion and spatial autocorrelation, predictability in investment returns is completely absent. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1039&r=ure |
| By: | Shah, Anwar; Shen, Chunli |
| Abstract: | In China, most of the service delivery responsibilities are assigned to the subnational governments. Yet for reasons of efficiency in tax collection and administration, the central government collects revenues far in excess of its expenditure needs. In 2003 the central government collected 70 percent of consolidated revenues but accounted for only 30 percent of consolidated expenditures. The initial fiscal surplus of the central government enables it to use its spending power to provide financing to subnational jurisdictions for the achievement of national objectives and to influence local priorities. This paper examines the incentives associated with the design of such transfers and their implications for the efficiency and equity of public service provision and accountable local governance in China. The paper argues that the existing design of such transfers is not consistent with efficiency and equity considerations. It further undermines local autonomy without enhancing local accountability while creating incentives for imprudent fiscal management. Its main limitations include a complex and opaque system, a piecemeal approach to gap filling, lack of consistency of design with objectives, focus on input controls without regard for output accountability, incentives to support an antiquated management paradigm, a one-size-fits-all approach to local financing, and lack of transparency and regulatory framework for the intergovernmental transfer system. The paper makes specific suggestions on a reform of this system to overcome these limitations and on better use of fiscal transfers to create responsive, responsible, equitable, and accountable local governance in China. |
| Keywords: | Intergovernmental Fiscal Relations and Local Finance Management,Regional Governance,Public & Municipal Finance,Urban Economics,Public Sector Management and Reform |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4100&r=ure |
| By: | Manfred M. Fischer; Daniel A. Griffith |
| Abstract: | The need to account for spatial autocorrelation is well known in spatial analysis. Many spatial statistics and spatial econometric texts detail the way spatial autocorrelation can be identified and modelled in the case of object and field data. The literature on spatial autocorrelation is much less developed in the case of spatial interaction data. The focus of interest in this paper is on the problem of spatial autocorrelation in a spatial interaction context. The paper aims to illustrate that eigenfunction-based spatial filtering offers a powerful methodology that can efficiently account for spatial autocorrelation effects within a Poisson spatial interaction model context that serves the purpose to identify and measure spatial separation effects to interregional knowledge spillovers as captured by patent citations among high-technology-firms in Europe. |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa06p10&r=ure |
| By: | Sarah Dunn (University of California, Berkeley); John Quigley (University of California, Berkeley); Larry Rosenthal (University of California, Berkeley) |
| Abstract: | Recent California legislation extends the application of prevailing wage regulations to subsidized low-income residential construction projects. This paper estimates the cost and supply effects of this legislation. Econometric evidence based on recently completed tax-credit projects in California demonstrates that construction costs increase substantially under prevailing wage requirements. Estimates of additional construction costs in our most extensive models range from 9 to 32 percent. The analysis controls for variations in cost by geographical location and for differences in project characteristics, financing, and developer attributes. We estimate the effect of uniform imposition of these regulations on the number of new dwellings for low-income households produced under the tax credit program. Under reasonable conditions, our mid-range estimate of this prospective decrease exceeds 2,600 units per year. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1048&r=ure |
| By: | Eric Clapham (Stockholm School of Economics); Peter Englund (Stockholm School of Economics); John Quigley (University of California, Berkeley); Christian Redfearn (University of Southern California) |
| Abstract: | This paper examines index revision in measuring the prices for owner-occupied housing. We consider the context of equity insurance and the settlement of futures contracts. In addition to other desirable characteristics for aggregate price indexes, their usefulness in these contexts requires stability as they are revised. Methods that are subject to substantial or complex revision raise questions about the viability of derivatives markets. Of course, all indexes are subject to revision as the result of new information. Nevertheless, we find that the most-widely used house price indexes are not equally exposed to volatility in revision. Hedonic indexes appear to be substantially more stable than repeat-sales indexes and are less prone to substantial revision in the light of new information. Moreover, we find that the repeat-sales indexes are subject to systematic downward revision. We analyze alternative settlement procedures and contracts to mitigate the impact of revision associated with repeat sale indexes. |
| Keywords: | Hedonic, House price index, Owner occupied housing, |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1059&r=ure |
| By: | Alejandro F. Garcia |
| Abstract: | The analysis of the factors that determine the price of the second-hand house, by means of the use of the hedonic methodology, constitutes the central objective of this work. This study has been applied to the market of the house corresponding to the municipality of Malaga (Spain), of where a sample of 1996 transactions, made during 2003, has been selected.This information has been facilitated by a real estate agency. The obtained results have allowed to identify those characteristics of the houses that more affect their price and quantify this influence, valuing it in monetary terms. It has been stated that the contribution of some structural attributes (the floor area, the number of toilets, the presence of private garage or the luminosity of the house) and others of location (proximity to the sea or downtown, and location in a certain zone) affects the price of the house decisively. |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa06p101&r=ure |
| By: | Graham Robert Crampton |
| Abstract: | This paper reports on a project funded by the Volvo Research Foundations. It is international in nature and focuses on the impact of urban public transport, and light rail in particular, on restraining the growth of (or even reducing) local car ownership rates. The recent Censuses of the UK (2001) and France (1999) make these two countries particularly suitable, but the project examined other countries and urban transport systems too. We were especially interested in the `high quality' alternatives to light rail, including other urban rail, or enhanced forms of bus. Especially in Britain, the investment costs in new light rail systems have led to Government disquiet and reluctance to approve funding. The empirical work consists of econometric estimates using small area data, mainly from Censuses, reinforced by GIS mapping of urban transport access on the local small area. 300 metre and 600 metre zones of good access can then be used in the econometrics, alongside socioeconomic indicators of the economically active population. Results from a wide range of cities suggest that good access does indeed reduce car ownership below what would be expected given the local socioeconomic profile. These findings have important implications for environmental and transport policy |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa06p123&r=ure |
| By: | Stephen Malpezzi (Center for Urban Land Economics Research, University of Wisconsin) |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1033&r=ure |
| By: | Harry Holzer (Public Policy Institute, Georgetown University); John Quigley (University of California at Berkeley); Steven Raphael (Goldman School of Public Policy, University of California at Berkeley) |
| Abstract: | A recent expansion of the San Francisco Bay Area's heavy rail system represents an exogenous change in the accessibility of inner-city minority communities to a concentrated suburban employment center. We evaluate this natural experiment by conducting a two-wave longitudinal survey of firms, with the first wave of interviews immediately prior to the opening of service and the second wave approximately a year later. We compare within-firm changes in the propensity to hire minority workers for firms located near the station to those located further away, and we also estimate the effect of employer distance to the new stations on changes in propensity to hire minorities. Our results indicate a sizable increase in the hiring of minority workers, particularly Latinos, near the new stations. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1020&r=ure |
| By: | John Quigley (University of California, Berkeley); Steven Raphael (University of California, Berkeley); Eugene Smolensky (University of California, Berkeley) |
| Abstract: | Rapidly rising homelessness in the 1980s shocked Americans and led to a flurry of studies, a deluge of news stories, and to Public Law 100-77, the Stewart B. McKinney Homeless Assistance Act of July 1987. The McKinney Act marked the entrance of the federal government into homelessness policy, which, until then, had been a purely local issue. A dozen years later, housing the homeless remains a recurrent political issue in many cities in California. Improving the quality of life of those without a regular and decent place to spend the night rests primarily with a multitude of nonprofit organizations. Meagerly funded by all levels of government, they must not only house the homeless but must also attend to their many personal problems. While a multifaceted approach is probably required to eliminate the homelessness problem, in California homelessness might be substantially reduced with modest policy changes attacking the problem in the most obvious way: by adding to the stock of adequate housing accessible to the poor. We explore options that aim to do exactly that in this monograph. |
| Keywords: | Homeless, Homelessness, |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1055&r=ure |
| By: | Börje Johansson (Jönköping International Business School); John Quigley (University of California, Berkeley) |
| Abstract: | We consider the parallel developments in the economics of agglomeration and the economics of networks. We explore the complentarities between the productivity benefits of agglomeration and those of network linkages, arguing that networks of actors dispersed over space may substitute for agglomerations of actors at a single point. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1053&r=ure |
| By: | John Quigley (University of California, Berkeley); Aaron Swoboda (University of Pittsburgh) |
| Abstract: | We consider the general equilibrium implications of land use restrictions which result in a reduction of otherwise profitable residential development. If the regulations affect a significant amount of land, they may have important effects on the rest of the regional economy - increasing rents and densities on lands not subject to the regulation, causing the conversion of lands from alternative uses, increasing the net developed area in the region, and decreasing consumer welfare. We develop a flexible general equilibrium simulation of the economic effects of land use restrictions, explicitly considering the distributional effects upon owners of different types of land and upon housing consumers. The results of our simulation show that the most significant economic effects of land use regulations occur outside of the designated area. The prices and rents of non-restricted lands increase significantly, and the well being of housing consumers is further affected through these linkages. |
| Keywords: | General Equilibrium, |
| Date: | 2006–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1071&r=ure |
| By: | Giulio Fella (Economics Queen Mary, University of London); Giovanni Gallipoli |
| Abstract: | This paper provides a framework within which to study the equilibrium impact of alternative policies. We develop an overlapping generation, life-cycle model with endogenous education and crime choices. Education and crime depend on different dimensions of heterogeneity, which takes the form of differences in innate ability and wealth at birth as well as employment shocks. The model is calibrated to match education enrolments, aggregate (property) crime rate and some features of the wealth distribution. In our numerical experiments we find that policies targeting crime reduction through increases in high school graduation rates are more cost-effective than simple incapacitation policies. The cost-effectiveness of high school subsidies increases significantly if they are targeted at the wealth poor. Financial incentives to high school graduation have radically different implications in general and partial equilibrium |
| Keywords: | Crime, Education, Life Cycle |
| JEL: | E26 H52 I28 K42 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:136&r=ure |
| By: | John Quigley (University of California, Berkeley); Larry Rosenthal (University of California, Berkeley) |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1052&r=ure |
| By: | Roland Andersson (Royal Institute of Technology, Stockholm); John Quigley (University of California at Berkeley); Mats Wilhelmsson (Royal Institute of Technology, Stockholm) |
| Abstract: | During the past fifteen years, Swedish higher education policy has emphasized the spatial decentralization of post-secondary education. We analyze this policy as a natural experiment, and we investigate the economic effects of this decentralization on productivity and output. We rely upon a twelve-year panel of output, employment and investment for Sweden's 285 municipalities, together with data on the location of university researchers and students, to estimate the effects of exogenous changes in educational policy upon regional development. We find important and significant effects of this policy upon output and productivity, suggesting that the economic effects of the decentralization on regional development are economically important. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1022&r=ure |
| By: | Robert F. Martin (International Finance Federal Reserve Board) |
| Abstract: | This paper explores the baby boom's impact on U.S. house prices and interest rates in the post-war 20th century and beyond. Using a simple Lucas asset pricing model, I quantitatively account for the increase in real house prices, the path of real interest rates, and the timing of low-frequency fluctuations in real house prices. The model predicts that the primary force underlying the evolution of real house prices is the systematic and predictable changes in the working age population driven by the baby boom. The model is calibrated to U.S. data and tested on international data. One surprising success of the model is its ability to predict the boom and bust in Japanese real estate markets around 1974 and 1990. |
| Keywords: | asset pricing, yield curve, moderation |
| JEL: | E21 E31 G12 R21 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:84&r=ure |
| By: | Michael Kremer (Department of Economics, Harvard University); Edward Miguel (Department of Economics, University of California, Berkeley); Rebecca Thorton (Department of Economics, Harvard University) |
| Abstract: | We report results from a randomized evaluation of a merit scholarship program for adolescent girls in Kenya. Girls who scored well on academic exams had their school fees paid and received a cash grant for school supplies. Girls eligible for the scholarship showed significant gains in academic exam scores (average gain 0.12-0.19 standard deviations) and these gains persisted following the competition. There is also evidence of positive program externalities on learning: boys, who were ineligible for the awards, also showed sizeable average test gains, as did girls with low pretest scores, who were unlikely to win. Both student and teacher school attendance increased in the program schools. We discuss implications both for understanding the nature of educational production functions and for the policy debate surrounding merit scholarships. |
| Keywords: | Education, merit scholarships, externalities, |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ciders:1060&r=ure |
| By: | Richard Meese (Haas School of Business, UC Berkeley); Nancy Wallace (Haas School of Business, UC Berkeley) |
| Abstract: | Using transaction level data for dwellings in Paris, France over the period 1986-92, we find evidence consistent with the hypothesis that economic fundamentals constrain movements in Parisian dwelling prices over longer term horizons. The conclusion is based on the results of two different procedures for estimating an error correction model of housing prices based on supply and demand fundamentals. The error correction models suggest that the speed of adjustment in the Paris dwelling market is about 30% per month. The paper also introduces a new econometric methodology that permits simultaneous estimation of the parameters of a dynamic hedonic price model, the price index, and the parameters of a structural model for housing prices. The new methodology is compared with the more traditional two-step procedure of first estimating a price index, and then using the estimated index in subsequent structural modeling. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1004&r=ure |
| By: | Stephen L. Ross (University of Connecticut); Yves Zenou (Research Institute of Industrial Economics, Stockholm) |
| Abstract: | Recent theoretical work has examined the spatial distribution of unemployment using the efficiency wage model as the mechanism by which unemployment arises in the urban economy. This paper extends the standard efficiency wage model in order to allow for behavioral substitution between leisure time at home and effort at work. In equilibrium, residing at a location with a long commute affects the time available for leisure at home and therefore affects the trade-off between effort at work and risk of unemployment. This model implies an empirical relationship between expected commutes and labor market outcomes, which is tested using the Public Use Microdata sample of the 2000 U.S. Decennial Census. The empirical results suggest that efficiency wages operate primarily for blue collar workers, i.e. workers who tend to be in occupations that face higher levels of supervision. For this subset of workers, longer commutes imply higher levels of unemployment and higher wages, which are both consistent with shirking and leisure being substitutable. |
| Keywords: | Efficiency wage, leisure, urban unemployment |
| JEL: | J41 R14 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2006-21&r=ure |
| By: | Roland Andersson (Royal Institute of Technology, Sweden); John Quigley (University of California, Berkeley); Mats Wilhelmsson (Royal Institute of Technology, Sweden) |
| Abstract: | During the past fifteen years, Swedish government policy has decentralized post-secondary education throughout the country. We investigate the economic effects of this decentralization policy on the level of productivity and innovation and their spatial distribution in the Swedish economy. We analyze productivity, measured as output per worker at the level of the locality, for 284 Swedish communities during a 14 year period, and innovation, measured by commercial patents awarded in 100 Swedish labor market areas during an 8 year period. These economic outcomes, together with data documenting the decentralization of university-based researchers, permit us to estimate the effects of exogenous changes in educational policy upon increases in productivity and the locus of innovative activity. We find important and significant effects of this policy upon economic output and the locus of knowledge production, suggesting that the decentralization has affected regional development through local innovation and increased creativity. Moreover, our evidence suggests that aggregate productivity was increased by the deliberate policy of decentralization. |
| Date: | 2006–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1068&r=ure |
| By: | Yusuf, Shahid; Nabeshima, Kaoru; Wei Ha |
| Abstract: | The benefits of good health to individuals and to society are strongly positive and improving the health of the poor is a key Millennium Development Goal. A typical health strategy advocated by some is increased public spending on health targeted to favor the poor and backed by foreign assistance, as well as by an international effort to perfect drugs and vaccines to ameliorate infectious diseases bedeviling the developing nations. But if the objective is better health outcomes at the least cost and a reduction in urban health inequity, the authors ' research suggests that the four most potent policy interventions are: water and sanitation systems; urban land use and transport planning; effective primary care and health programs aimed at influencing diets and lifestyles; and education. The payoff from these four in terms of health outcomes dwarf the returns from new drugs and curative hospital-based medicine, although these certainly have their place in a modern urban health system. And the authors find that the resource requirements for successful health care policies are likely to depend on an acceleration of economic growth rates which increase household purchasing power and enlarge the pool of resources available to national and subnational governments to invest in health-related infrastructure and services. Thus, an acceleration of growth rates may be necessary to sustain a viable urban health strategy which is equitable and to ensure steady gains in health outcomes. |
| Keywords: | Health Monitoring & Evaluation,Population Policies,Housing & Human Habitats,Health Economics & Finance,Health Systems Development & Reform |
| Date: | 2007–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4107&r=ure |
| By: | Roland Andersson (Royal Institute of Technology); John Quigley (University of California, Berkeley); Mats Wilhelmsson (Royal Institute of Technology, Sweden) |
| Abstract: | This paper analyzes the spatial distribution of "creativity" -- the production of new knowledge. We analyze commercial patents granted in Sweden during 1994-2001 using a panel of one hundred labor market areas which encompass the entire country. We relate patent activity to measures of localization and urbanization, to the industrial composition and size distribution of firms, and to the regional distribution of human capital. Our analysis confirms the importance of human capital and research facilities in stimulating regional patent output. Importantly, our results document the importance of agglomeration and spatial factors in influencing creativity: Patent activity is increased in larger and more dense labor markets and in regions in which a larger fraction of the labor force is employed in medium-sized firms. Our results also indicate that creativity is greater in labor markets with more diverse employment bases and in those which contain a larger share of national employment in certain industries, confirming the importance of urbanization and localization economies in stimulating creativity. Our quantitative results suggest that the urbanization of Sweden during the 1990s had an important effect upon the aggregate level of patent activity in the country, leading to increases of up to five percent in aggregate patents. |
| Keywords: | Agglomeration, |
| Date: | 2006–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1069&r=ure |
| By: | Ivan Jaccard |
| Abstract: | The main contribution of this work is to provide a dynamic general equilibrium model of asset allocation, allowing to reconcile economic theory with several puzzling contradictions recently pointed out in the literature: (i) the asset allocation puzzle, (ii) the observed time-variation in aggregate portfolio holdings, and (iii) the occurrence of twin peaks in equity and house prices. In this approach, compared to the existing literature, the main difference stems from the fact that, in addition to consumption and dividends, both prices and portfolio decisions are allowed to be endogenously determined within a general equilibrium framework. Secondly, real estate is introduced into the analysis, labor supply is allowed to be endogenously determined and macroeconomic shocks are the main source of riskiness. |
| Keywords: | strategic asset allocation, real estate, house prices, business cycle, general equilibrium |
| JEL: | E20 G11 G12 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:574&r=ure |
| By: | John Quigley (University of California, Berkeley) |
| Abstract: | This paper tests the "lock−in" effect of mortgage contract terms and establishes the link between changes in market interest rates and homeowner mobility. The analysis is based on the Panel Study of Income Dynamics during 1990−1993, when mortgage interest rates declined by almost 30 percent. |
| Keywords: | Households, Mortgage, |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1056&r=ure |
| By: | Uschi Backes-Gellner (Institute for Strategy and Business Economics, University of Zurich); Stephan Veen (Institute for Strategy and Business Economics, University of Zurich) |
| Abstract: | Central exams have been discussed as an incentive to improve educational outcomes. In our paper we study the impact of central exams on labor market outcomes. We explain the quality choice of schools under central and non-central exams and model the resulting students’ schooling decisions and employers’ wage decisions. We use the German Abitur and the variation among the German federal states with respect to central exams as a quasi experimental design. We expect the ratio of Abitur holders to increase in states without central exams and their wage premiums to decrease at the same time. In states with central exams these effects should not occur. We test our implications with official statistics on education and with the GSOEP. The first two implications are born out in the data. Finally, explanations and policy recommendations are discussed. |
| Keywords: | Educational Economics, School choice, Incentives for Schools, Central Exams, Economic impact, Labor Market Outcome |
| JEL: | M51 J31 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:iso:wpaper:0061&r=ure |
| By: | Min Hwang (National University of Singapore); John Quigley (University of California, Berkeley); Jae Son (Kok-Kuk University) |
| Abstract: | It is generally conceded that dividend pricing models are poor predictors of asset prices. This finding is sometimes attributed to excess volatility or to a dividend process manipulated by firm managers. In this paper, we present rather powerful panel tests of the dividend pricing relation using a unique data set in which dividends are set by market forces independent of managers' preferences. We rely on observations on the market for condominium dwellings in Korea - perhaps the only market in which information on dividends and prices is publicly and continuously available to consumers and investors. We extend the "dividend-price ratio model" to panels of housing returns and rents differentiated by type and location. We find broad support for the dividend pricing model during periods both before and after the Asian Financial Crisis of 1997-1998, suggesting that the market for housing assets in Korea has been remarkably efficient. |
| Keywords: | Housing prices, |
| Date: | 2006–07–13 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1067&r=ure |
| By: | Richard M. Bird; Enid Slack (International Tax Program, Rotman School of Management, University of Toronto) |
| Abstract: | We argue in this paper that better rural local governments are needed to improve the lives of billions and that a good property tax is the key to improving rural local governments. Moreover, we suggest that only by giving local governments both the incentive and the ability to levy a property tax can effective rural local government and a meaningful rural property tax be achieved in most countries. Such a tax would often likely be a simple area-based levy, and the central government may not be too happy either with the way communities run the tax or how they spend the proceeds, but the critical role of the central government is to support and facilitate local action on this front, not to supplant it. |
| Keywords: | property tax, rural local government |
| JEL: | H11 H71 R51 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:ttp:itpwps:0608&r=ure |
| By: | Joseph Cullen; Price V. Fishback |
| Abstract: | We examine whether local economies that were the centers of federal spending on military mobilization experienced more rapid growth in consumer economic activity than other areas. We have combined information from a wide variety of sources into a data set that allows us to estimate a reduced-form relationship between retail sales per capita growth (1939-1948, 1939-1954, 1939-1958) and federal war spending per capita from 1940 through 1945. The results show that the World War II spending had virtually no effect on the growth rates in consumption that we examined. This contrasts with Fishback, Horrace, and Kantor's (2005) findings of about half a dollar increase in retail sales associated with a dollar of New Deal public works and relief spending. Several factors contributed to this relative lack of impact. World War II spending often required a conversion of plants designed for civilian good production into military factories and back again over the 9 year period. Substantially higher federal tax rates that were paid by the majority of households imposed much stronger fiscal drags on the benefits of the spending. Finally, less of the military spending was earmarked for wages and use of locally produced inputs, which reduced the direct stimulus to the local economy. |
| JEL: | H50 N32 N42 N92 R11 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12801&r=ure |
| By: | Andrea Bonaccorsi; Lucia Piscitello; Cristina Rossi |
| Abstract: | In the framework of analyses on the relationship between geography and technological innovation, the role of universities has received considerable attention. Both theoretical and empirical literature has shown that university research positively influences the capacity for innovation of the surrounding firms (Jaffe, 1989; Feldman, 1994; Acs et al, 2002). Universities play a central role in innovation processes both as the main responsible for basic research and also as forgers of human capital’s skills. Empirical work has highlighted that such effects radiate from major university centres crossing borders and administrative boundaries (Anselin et al., 1997). This paper focuses on the relationship between universities and the innovative capacity at the territorial level. Specifically, our empirical analysis investigates whether university research spillovers are highly localised or they rather flow across borders. Empirical literature has widely investigated intensity and directions of such spillovers, mainly within the theoretical framework of Griliches-Jaffe. However, we extend the empirical evidence exploring whether intensity and directions of spillovers depend on universities’ specificities (e.g. size, fields of specialization, fund rising capacity) and on the local absorptive capacity. The analysis is developed at the Italian NUTS3 level, using an explicit spatial econometric approach applied to a knowledge production function. References Acs, Z., Anselin, L., and Varga, A. (2002): “Patents and innovation counts as measures of regional production of new knowledgeâ€, Research Policy 31, pp. 1069-1085. Anselin, L., Varga, A., and Acs, Z. (1997): “Local geographic spillovers between University research and high technology innovationsâ€, Journal of Urban Economics 42, pp. 422-448. Feldman, M. (1994): The Geography of innovation, Kluwer Academic Publishers. Dordrecht. Jaffe, A. (1989): “Real effects of academic researchâ€, The American Economic Review, vol 79, n. 5, pp. 957-970. |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa06p116&r=ure |
| By: | Caporin Massimiliano (Department of Economics, University of Padova, Italy); Paruolo Paolo (Department of Economics, University of Insubria, Italy) |
| Abstract: | This paper proposes a new approach for the specification of multivariate GARCH models for data sets with a potentially large cross-section dimension. The approach exploits the spatial dependence structure associated with asset characteristics, like industrial sectors and capitalization size. We use the acronym SEARCH for this model, short for Spatial Effects in ARCH. This parametrization extends current feasible specifications for large scale GARCH models, while keeping the numbers of parameters linear with respect to the number of assets. An application to daily returns on 20 stocks from the NYSE for the period January 1994 to June 2001 shows the benefits of the present specification. |
| JEL: | C32 C51 C52 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:ins:quaeco:qf0501&r=ure |
| By: | Katherine O'Regan (New York University); John Quigley (University of California at Berkeley) |
| Abstract: | Mortgage terminations arise because borrowers exercise options. Empirically the extent to which the call is in the money is strongly associated with exercise of the prepayment option, and the probability that the put option is in the money is strongly associated with exercise of the default option. Nevertheless, evidence also shows that borrowers do not behave as "ruthlessly" as the theory predicts. This paper investigates the apparently irrational behavior of those borrowers who do not terminate their mortgages even when the option is deeply into the money. We develop an option-based empirical model to analyze this phenomenon -- the behavior of irrational "woodheads." Of course we do not observe "woodheads" explicitly in any body of data. Instead, we analyze the correlates of unobserved heterogeneity within a large sample of mortgage holders. We extend SMLE techniques proposed by Stinebrickner (1999) to estimate the competing risks of mortgage prepayment and default, recognizing unobserved heterogeneity, which is due in part to the behavior of "woodheads." The extended model is clearly superior to alternatives on statistical grounds. We then analyze the economic implications of this more powerful model. We analyze the predictions of the model for the valuation and pricing of mortgage pools and mortgage-backed securities. Based upon an extensive Monte Carlo simulation, we find that the SMLE model yields prices for seasoned mortgage pools that vary by as much as about forty basis points from more primitive estimates. The results indicate the empirical importance of heterogeneity and the implications of non-optimizing behavior for the valuation and pricing of mortgages and mortgage-backed securities. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1016&r=ure |
| By: | Joris Knoben |
| Abstract: | It is accepted in the literature that exchanges within networks have an ongoing social structure that both enables and constrains the behavior of its members (Pfeffer and Nowak 1976; Uzzi 1996). However, most research in inter-organizational settings has focused on the enabling effects of networks and network structures only, even though some noteworthy exceptions exist (e.g. Romo and Schwartz 1995; Singh and Mitchell 1996). A possible constraining effect of network participation is spatial lock-in, also known as spatial inertia, of a firm. Following Resource Dependence Theory (Pfeffer and Salancik 1978), it can be argued that a firm that makes extensive use of knowledge resources possessed or controlled by external actors for its innovative processes can become dependent on these actors. By themselves, the relationships in which these dependencies exist are non-spatial. However, since geographical proximity is assumed to facilitate the successful exchange of (especially tacit) knowledge through inter-organizational relationships (IORs) (Bretschger 1999), dependency on other firms located in the same region can also lead to dependency on a certain geographical location, and thus to spatial lock-in (Stam 2003). The IORs that are enabling for the firm in terms of its innovative processes act, at the same time, as constraining factors for the spatial behavior of the firm. Similar reasonings can be found in the literature on Territorial Innovation Models (Moulaert and Sekia 2003), which indicates that economic embeddedness in a region can be beneficial for the performance of firms. However, this embeddedness can also lead to dependence on localized inputs and production factors. Due to these dependencies, a firm can become very unlikely to relocate, even if doing so is beneficial from a cost perspective. As Romo and Schwartz state: “Firms are usually too dependent on the material, political and social resources available in the local production culture to risk departure, even when production costs might be substantially reduced (Romo and Schwartz 1995:874).†There currently is, however, only weak empirical evidence for the proposed relationship between the level of (local) embeddedness and a firm’s propensity to relocate. Moreover, several authors even propose that geographical distance in IORs is becoming irrelevant since it effects can be replicated by ICT (Morgan 2004), or high levels of organizational or technological proximity (Kirat and Lung 1999). If this is indeed the case, then participation in localized innovative IORs will have no effect on the spatial behavior of firms, since a firm can operate exactly the same on a different geographical location. The main goal of this research is to provide empirical insights into the effects of a firm’s level of participation in innovative (localized) inter-organizational relationships (IORs) on its propensity to relocate. Based on the above, the following research question has been formulated is “To what extent is the level of embeddedness of a firm in (localized) innovative inter-organizational relationships of influence on its propensity to relocate?†Answering this research question adds to the insights about the constraining effects of networks by focusing on the spatially constraining effect of inter-organizational relationships. This research question will be answered based on a data from a survey among Dutch automation service firms in 2006. In line with earlier research (c.f. Van Dijk and Pellenbarg 2000; Brouwer et al. 2004) an ordinal logit model will be used to relate the relocation propensity of a firm to that firm’s participation in localized innovative IORs, the strength of these IORs, and the level of geographical, organizational and technological proximity. It also provides insight into the question whether or not high levels of technological and organizational proximity can negate the need for geographical proximity in inter-organizational collaboration (Boschma 2005). References: Boschma, R. A. (2005). "Proximity and innovation: A critical assessment." Regional Studies 39(1): 61-74 Bretschger, L. (1999). "Knowledge diffusion and the development of regions." Annals of Regional Science 33(3): 251-268 Brouwer, A. E., I. Mariotti and J. N. van Ommeren (2004). "The firm relocation decision: An empirical investigation." Annals of Regional Science 38(2): 335-347 Van Dijk, J. and P. H. Pellenbarg (2000). "Firm relocation decisions in The Netherlands: An ordered logit approach." Papers in Regional Science 79(1): 191-219 Kirat, T. and Y. Lung (1999). "Innovation and proximity - Territories as loci of collective learning processes." European Urban and Regional Studies 6(1): 27-38 Morgan, K. (2004). "The exaggerated death of geography: Learning, proximity and territorial innovation systems." Journal of Economic Geography 89(1): 3-21 Moulaert, F. and F. Sekia (2003). "Territorial innovation models: A critical review." Regional Studies 37(3): 289-302 Pfeffer, J. and P. Nowak (1976). "Joint-ventures and interorganizational interdependence." Administrative Science Quarterly 21(3): 398-418 Pfeffer, J. and G. R. Salancik (1978). The external control of organizations: A resource dependency perspective. New York, Harper and Row Romo, F. P. and M. Schwartz (1995). "The structural embeddedness of business decisions: The migration of manufacturing plants in New York state, 1960 to 1985." American Sociological Review 60(1): 874-907 Singh, K. and W. Mitchell (1996). "Precarious collaboration: Business survival after partners shut down or form new partnerships." Strategic management journal 17(2): 99-116 Stam, F. C. (2003). Why butterflies don't leave: Locational evolution of evolving enterprises. Utrecht, Utrecht University Uzzi, B. (1996). "The sources and consequences of embeddedness for the economic performance of organizations: The network effect." American Sociological Review 61(4): 674-698 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwrsa:ersa06p1&r=ure |
| By: | Karl Case (Wellesley College); John Quigley (University of California at Berkeley); Robert Shiller (Yale University and NBER) |
| Abstract: | We examine the link between increases in housing wealth, financial wealth, and consumer spending. We rely upon a panel of 14 countries observed annually for various periods during the past 25 years and a panel of U.S. states observed quarterly during the 1980s and 1990s. We impute the aggregate value of owner-occupied housing, the value of financial assets, and measures of aggregate consumption for each of the geographic units over time. We estimate regressions relating consumption to income and wealth measures, finding a statistically significant and rather large effect of housing wealth upon household consumption. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1021&r=ure |
| By: | Steven Raphael (Goldman School of Public Policy, University of California at Berkeley); Michael Stoll (School of Public Policy and Social Research, University of California at Berkeley) |
| Abstract: | In this paper, we assess whether boosting minority car-ownership rates would narrow inter-racial employment rate differentials. We pursue two empirical strategies. First, we explore whether the effect of auto ownership on the probability of being employed is greater for more segregated groups of workers. Exploiting the fact that African-Americans are considerably more segregated from whites than are Latinos, we estimate car-employment effects for blacks, Latinos, and whites and test whether these effects are largest for more segregated groups. Second, we use data at the level of the metropolitan area to test whether the car-employment effect for blacks relative to that for whites increases with the degree of black relative isolation from employment opportunities. We find the strongest car effects for blacks, followed by Latinos, and then whites. Moreover, this ordering is statistically significant. We also find that the relative car-employment effect for blacks is largest in metropolitan areas where the relative isolation of blacks from employment opportunities is the most severe. Our empirical estimates indicate that raising minority car-ownership rates to the white car ownership rate would eliminate 45 percent of the black-white employment rate differential and 17 percent of the comparable Latinbo-white differential. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1013&r=ure |
| By: | Dennis Gale (Joseph C. Cornwall Center for Metropolitan Studies, Rutgers-Newark) |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1026&r=ure |
| By: | John Quigley (University of California, Berkeley) |
| Abstract: | When interest rates vary, the value to a homeowner of a mortgage at a fixed-interest rate varies as well. In particular, if mortgages are not fully assumable, then when interest rates increase, the value of a pre-existing mortgage contract increases as well. Thus, homeowners have an incentive to postpone moving in response to other economic incentives. Similarly, when interest rates decrease, households who had previously postponed moving now have this disincentive removed. The only empirical evidence on the magnitude of this effect is based upon the period of unusual volatility and increasing interest rates in the late 1970s.This paper investigates the importance of these mortgage contracts upon mobility during a more typical environment, the early 1990s, when much lower interest rates declined further. Thus, it investigates the implications for mobility of a decline in the "lock in" effect of mortgage contracts. The paper uses the same data source and methodology which had been used previously to analyze the effects of high interest rates in 1979-82 upon homeowner mobility. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1043&r=ure |
| By: | Vinicio Vannucci; Loredana Torsello |
| Abstract: | Environmental economics suggests a number of techniques to assess public goods. Such methods, surrogating traditional market mechanism, allow estimations of willingness to pay for improving environmental quality. In the case study proposed in this paper an hedonic price method is implemented to assess the benefits deriving by an improvement of environmental quality due to a reduction in odor emissions. In fact, odor impacts are usually the main pressure perceived by inhabitants living near sugar production plants (localized in Tuscany, in the current case study). The implementation of the hedonic price method allows to exhibit that this kind of externalities affect the real estate market in the nearby the area |
| Keywords: | hedonic price method, economic assessment of natural resources, odor nuissance |
| JEL: | Q51 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:485&r=ure |
| By: | Julian Betts (UCSD and The Public Policy Institute of California); John Roemer (Departments of Political Science and Economics Yale University) |
| Abstract: | We analyze the reallocations of educational expenditures required to equalize opportunities (taken to be wage income), according to the theory of Roemer (1998). Using the NLSYM data set, we find that implementing an equal-opportunity policy across men of different races, by using educational finance as the instrument, and ensuring that no race received less than the average observed nationally, would require spending nine times as much on black students, per capita, as on white students. Even the lower bound of bootstrapped confidence intervals for the policy estimates suggests large reallocations between races. The equal-opportunity policy across men from different socio-economic backgrounds that ignores race does almost nothing to equalize wages across races. For inter-racial allocations, we find evidence of a tradeoff between equity and total product, with reallocation lowering the wage bill by about 5%. In contrast, for reallocations based on parental education, equalization increases the wage bill by about 2% because the impact of school spending appears to be slightly higher for those with less highly educated parents. |
| Date: | 2005–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsdec:2005-14&r=ure |
| By: | Peter Zorn (Federal Home Loan Mortgage Corporation); Susan Gates (Federal Home Loan Mortgage Corporation); Vanessa Perry (Federal Home Loan Mortgage Corporation; Georgetown University) |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1037&r=ure |
| By: | Yongheng Deng (University of Southern California); John Quigley (University of California at Berkeley) |
| Abstract: | Mortgage terminations arise because borrowers exercise options. Empirically the extent to which the call is in the money is strongly associated with exercise of the prepayment option, and the probability that the put option is in the money is strongly associated with exercise of the default option. Nevertheless, evidence also shows that borrowers do not behave as "ruthlessly" as the theory predicts. This paper investigates the apparently irrational behavior of those borrowers who do not terminate their mortgages even when the option is deeply into the money. We develop an option-based empirical model to analyze this phenomenon -- the behavior of irrational "woodheads." Of course we do not observe "woodheads" explicitly in any body of data. Instead, we analyze the correlates of unobserved heterogeneity within a large sample of mortgage holders. We extend SMLE techniques proposed by Stinebrickner (1999) to estimate the competing risks of mortgage prepayment and default, recognizing unobserved heterogeneity, which is due in part to the behavior of "woodheads." The extended model is clearly superior to alternatives on statistical grounds. We then analyze the economic implications of this more powerful model. We analyze the predictions of the model for the valuation and pricing of mortgage pools and mortgage-backed securities. Based upon an extensive Monte Carlo simulation, we find that the SMLE model yields prices for seasoned mortgage pools that vary by as much as about forty basis points from more primitive estimates. The results indicate the empirical importance of heterogeneity and the implications of non-optimizing behavior for the valuation and pricing of mortgages and mortgage-backed securities. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1015&r=ure |
| By: | Thomas J. Miceli (University of Connecticut); Katherine A. Pancak (University of Connecticut); C. F. Sirmans (University of Connecticut) |
| Abstract: | This study examines the traditional compensation model for real estate brokers under which both the listing and buyer brokers are paid by the seller based on a percentage of the property sales price. We argue that this model has not evolved to reflect contemporary legal agency relationships and technology-driven information availability. It therefore creates substantial transactional inefficiencies for buyers and sellers at both the matching and bargaining stages of a transaction. While there is evidence that market forces are pushing for a change in the status quo, there is also evidence that the brokerage industry is resisting this change by pursuing anti-competitive policies and laws. We explore the economics of the current and alternative compensation structures and suggest policy implications regarding anti-competitive behavior in the brokerage industry. |
| Keywords: | agency, brokerage, multiple listings, percentage commission |
| JEL: | D83 L85 R33 |
| Date: | 2006–11 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2006-23&r=ure |
| By: | Yongheng Deng (University of Southern California); John Quigley (University of California, Berkeley); Robert Van Order (Freddie Mac (Federal Home Loan Mortgage Corporation)) |
| Abstract: | As applied to the behavior of homeowners with mortgages, option theory predicts that mortgage prepayment or default will be exercised if the call or put option in "in the money" by some specific amount. Our analysis: tests the extent to which the option approach can explain default and prepayment behavior; evaluates the practical importance of modeling both options simultaneously; and models the unobserved herterogeneity of borrowers in the home mortgage market. The paper presents a unified model of the competing risks of mortgage termination by prepayment and default, considering the two hazards as dependent competing risks which are estimated jointly. It also accounts for the unobserved heterogeneity among borrowers, and estimates the unobserved heterogeneity simultaneously with the parameters and baseline hazards associated with prepayment and default functions.Our results show that the option model, in its most straightforward version, does a good job of explaining default and prepayment; but it is not enough by itself. The simultaneity of the options is very important empirically in explaining behavior. The results also show that there exists significant heterogeneity among mortgage borrowers. Ignoring this heterogeneity results in serious errors in estimating the prepayment behavior of homeowners. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1007&r=ure |
| By: | Matthew J. Baker (City University of New York, Hunter College); Thomas J. Miceli (University of Connecticut); C. F. Sirmans (University of Connecticut) |
| Abstract: | Redemption laws give mortgagors the right to redeem their property following default for a statutorily set period of time. This paper develops a theory that explains these laws as a means of protecting landowners against the loss of nontransferable values associated with their land. A longer redemption period reduces the risk that this value will be lost but also increases the likelihood of default. The optimal redemption period balances these effects. Empirical analysis of cross-state data from the early twentieth century suggests that these factors, in combination with political considerations, explain the existence and length of redemption laws. |
| Keywords: | Mortgage redemption, default, subjective value |
| JEL: | G21 K11 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2006-25&r=ure |
| By: | Katherine O'Regan (Yale University); John Quigley (University of California at Berkeley) |
| Abstract: | Most inferences about the spatial isolation of welfare recipients are based upon residence patterns observed among the poor. This paper provides the first systematic examination of the spatial and transport conditions facing female-headed families on public assistance, comparing them with conditions facing the poor and the non poor. The analysis clearly documents wide differences in labor force attachment, job and residence patterns, commute modes and times by race, between the welfare and poverty populations. It also reveals substantial differences in the residence and workplace locations and commute patterns of public assistance households and large differences in access to automobiles. Worktrip mode varies enormously by auto access, and the incidence of very long journeys to work is much higher for those on public assistance. In contrast, a surprisingly large fraction of female welfare recipients walk to work. These data provide a national benchmark for current welfare reform experiences. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1008&r=ure |
| By: | John Quigley (University of California at Berkeley) |
| Abstract: | This paper suggests that activities in the real estate markets in Southeast and East Asian economies were an important contributing force to the financial crises of 1997 in the Asian economies. The analysis relies upon unpublished data reported contemporaneously by financial institutions and market watchers to document the extent of the imbalances in the real property market that were evident to informed observers at the time of the financial collapse. The analysis argues that a series of reforms in the regulation of the property market and the treatment of real property loans by financial institutions are necessary to prevent the recurrence of the kind of speculative bubble that contributed to the financial crises in Asia. Given the recentness of the crisis, the nature of the data and the absence of definitive statistical sources, the results are tentative, but they are certainly consistent with a financial collapse whose proximate cause was unchecked activity in the property market. |
| Date: | 2006–06–27 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1011&r=ure |