|
on Urban and Real Estate Economics |
| By: | Satyajit Chatterjee; Burcu Eyigungor |
| Abstract: | The authors construct a quantitative equilibrium model of the housing market in which an unanticipated increase in the supply of housing triggers default mortgages via its effect on house prices. The decline in house prices creates an incentive to increase the consumption of housing space, but leverage makes it costly for homeowners to sell their homes and buy bigger ones (they must absorb large capital losses). Instead, leveraged households find it advantageous to default and rent housing space. Since renters demand less housing space than homeowners, foreclosures are a negative force affecting house prices. The authors explore the possible effects of the government's foreclosure prevention policy in their model. They find that the policy can temporarily reduce foreclosures and shore up house prices. |
| Keywords: | Housing ; Default (Finance) ; Foreclosure |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:09-22&r=ure |
| By: | Kristopher Gerardi; Adam Hale Shapiro; Paul S. Willen |
| Abstract: | We estimate a model of foreclosure using a data set that includes every residential mortgage, purchase-and-sale, and foreclosure transaction in Massachusetts from 1989 to 2008. We address the identification issues related to the estimation of the effects of house prices on residential foreclosures. We then use the model to study the dramatic increase in foreclosures that occurred in Massachusetts between 2005 and 2008 and conclude that the foreclosure crisis was primarily driven by the severe decline in housing prices that began in the latter part of 2005, not by a relaxation of underwriting standards on which much of the prevailing literature has focused. We argue that relaxed underwriting standards did severely aggravate the crisis by creating a class of homeowners who were particularly vulnerable to the decline in prices. But, as we show in our counterfactual analysis, that emergence alone, in the absence of a price collapse, would not have resulted in the substantial foreclosure boom that was experienced. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2009-25&r=ure |
| By: | Ramírez Grajeda, Mauricio; Sheldon, Ian |
| Abstract: | The New Economic Geography framework supports the idea that economic integration plays an important role in explaining urban concentration. By using Fujita et al. (1999) as a theoretical motivation, and information on the 5 most important cities of 84 countries, we find that the size of main cities declines and the size of secondary cities increases as a result of external trade. Similar results are obtained for cities with a population over a million. However, cities with a large fraction of the urban population grow independently of their position in the urban ranking. The implications for urban planners and development economists is that investment in infrastructure must take place in secondary cities when a country is involved in a process of trade liberalization, especially, those located near ports. |
| Keywords: | New Economic Geography; Trade Openness; Agglomeration and Urban Economics. |
| JEL: | F15 F12 R12 |
| Date: | 2009–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18029&r=ure |
| By: | Todd M. Sinai; Nicholas S. Souleles |
| Abstract: | Conventional wisdom holds that one of the riskiest aspects of owning a house is the uncertainty surrounding its sale price, especially if one moves to another housing market. However, households who sell a house typically buy another house, whose purchase price is also uncertain. We show that for such households, home owning often hedges their net exposure to housing market risk, because their sale price covaries positively with house prices in their likely new market. That expected covariance is much higher than previously recognized because there is considerable heterogeneity across city pairs in how much house prices covary and households tend to move between the highly correlated housing markets. Taking these two considerations into account increases the estimated median expected correlation in real house price growth across MSAs from 0.35 to 0.60. Moreover, we show that households’ decisions whether to own or rent are sensitive to this “moving-hedge†value. We find that the likelihood of home owning for a mobile household is more than one percentage point higher when the expected house price covariance rises by 38 percent (one standard deviation). This effect attenuates as a household’s probability of moving diminishes and thus the moving-hedge value declines. |
| JEL: | E21 G11 G12 J61 R21 R23 R31 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15462&r=ure |
| By: | John Krainer; Elizabeth Laderman |
| Abstract: | We compare the ex ante observable risk characteristics and the default rates of securitized mortgage loans and mortgage loans retained by the original lender. We find that privately securitized loans tend to be riskier and to default at a faster rate than loans securitized with the GSEs and lender-retained loans. However, the differences in default rates across investor types are of secondary importance for explaining mortgage defaults compared to more conventional predictors, such as original loan-to-value ratios and the path for house prices. Privately securitized home mortages have conditionally higher expected returns than retained loans, suggesting the presence of risk factors that are unobservable but nonetheless at least partially acknowledged by the market. |
| Keywords: | Mortgage loans |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2009-22&r=ure |
| By: | Ronel Elul |
| Abstract: | The academic literature, the popular press, and policymakers have all debated the securitization's contribution to the poor performance of mortgages originated in the run-up to the current crisis. Theoretical arguments have been advanced on both sides, but the lack of suitable data has made it difficult to assess them empirically. The author examines this issue by using a loan-level data set from LPS Analytics, covering approximately three-quarters of the mortgage market from 2003-2007 and including both securitized and non-securitized loans. He finds evidence that privately securitized loans do indeed perform worse than similar, non-securitized loans. Moreover, this effect is concentrated in prime mortgage markets; for example, a typical prime ARM loan originated in 2006 becomes delinquent at a 20 percent higher rate if it is privately securitized, ceteris paribus. By contrast, subprime loan performance does not seem to be worse for most classes of securitized loans. |
| Keywords: | Mortgage-backed securities ; Default (Finance) |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:09-21&r=ure |
| By: | Luc Laeven; Harry Huizinga |
| Abstract: | This paper shows that banks use accounting discretion to overstate the value of distressed assets. Banks' balance sheets overvalue real estate-related assets compared to the market value of these assets, especially during the U.S. mortgage crisis. Share prices of banks with large exposure to mortgage-backed securities also react favorably to recent changes in accounting rules that relax fair-value accounting, and these banks provision less for bad loans. Furthermore, distressed banks use discretion in the classification of mortgage-backed securities to inflate their books. Our results indicate that banks' balance sheets offer a distorted view of the financial health of the banks. |
| Keywords: | Accounting , Asset management , Asset prices , Bank accounting , Bank regulations , Banks , Financial crisis , Housing prices , Investment , Liquidity management , Real estate prices , |
| Date: | 2009–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/207&r=ure |
| By: | Laurent Gobillon (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Normale Supérieure de Paris - ENS Paris); François-Charles Wolff (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272) |
| Abstract: | In this paper, we study the mobility and housing choices of the elderly when retiring using household data collected in France. From a theoretical viewpoint, retirees are likely to decrease their housing quantity because of an income loss when retiring, but they may also increase it to benefit from more housing comfort for leisure. Using the 1992 Trois Générations survey, we first show that housing mobility at retirement is substantial in France, with a variety of self-reported motives. Then, using the 1994-2001 French Europanel survey, we find evidence of both upsizing and downsizing for mobile recent retirees. In many cases, housing adjustments lead to a correction of the initial disequilibrium between the number of rooms and the number of occupants. However, a significant proportion of mobile recent retirees improve the quality of their dwelling. |
| Date: | 2009–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00424096_v1&r=ure |
| By: | John Krainer; Stephen F. LeRoy; Munpyung O |
| Abstract: | We study optimal exercise by mortgage borrowers of the option to default. Also, we use an equilibrium valuation model incorporating default to show how mortgage yields and lender recovery rates on defaulted mortgages depend on initial loan-to-value ratios when borrowers default optimally. The analysis treats both the frictionless case and the case in which borrowers and/or lenders incur deadweight costs upon default. The model is calibrated using data on California mortgages. We find that the model's principal testable implication for default and mortgage pricing—that default rates and yield spreads will be higher for high loan-to-value mortgages—is borne out empirically. |
| Keywords: | Mortgage loans ; Mortgage loans - California ; Default (Finance) |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2009-20&r=ure |
| By: | Susan Dynarski; Jonathan Gruber; Danielle Li |
| Abstract: | The effect of vouchers on sorting between private and public schools depends upon the price elasticity of demand for private schooling. Estimating this elasticity is empirically challenging because prices and quantities are jointly determined in the market for private schooling. We exploit a unique and previously undocumented source of variation in private school tuition to estimate this key parameter. A majority of Catholic elementary schools offer discounts to families that enroll more than one child in the school in a given year. Catholic school tuition costs therefore depend upon the interaction of the number and spacing of a family’s children with the pricing policies of the local school. This within-neighborhood variation in tuition prices allows us to control for unobserved determinants of demand with a set fine geographic group fixed effects while still identifying the price parameter. We analyze this variation by using data on over 3700 school tuition schedules collected from Catholic schools around the nation, matched to restricted Census data that identifies precise location that can be matched to the nearest Catholic school. We find that a standard deviation decrease in tuition prices increases the probability that a family will send its children to private school by one half percentage point, which translates into an elasticity of Catholic school attendance with respect to tuition costs of -0.19. Our subgroup results suggest that a voucher program would disproportionately induce into private schools those who, along observable dimensions, are unlike those who currently attend private school. |
| JEL: | I20 I28 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15461&r=ure |
| By: | Ramírez Grajeda, Mauricio; de León Arias, Adrián |
| Abstract: | In 2008, Paul Krugman from Princeton University was awarded the Nobel Prize in Economic Sciences by the Central Bank of Sweden, for his “analysis of trade patterns and location of economic activity”. In this paper we survey the literature, known as the New Economic Geography (NEG), launched by Krugman (1991). In particular, we focus on four topics: (i) NEG roots, (ii) NEG rationale; (ii) the spatial impact of international trade on global economic imbalances; and (iv) the impact of international trade on urban structure. |
| Keywords: | New Economic Geography; Trade Openness; Agglomeration and Urban Economics. |
| JEL: | F15 F12 R12 |
| Date: | 2009–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18076&r=ure |
| By: | Duffy, David |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp319&r=ure |
| By: | Zhenxiang Zhao; Robert Kaestner |
| Abstract: | In this paper, we examine the effect of changes in population density—urban sprawl—between 1970 and 2000 on BMI and obesity of residents in metropolitan areas in the US. We address the possible endogeneity of population density by using a two-step instrumental variables approach. We exploit the plausibly exogenous variation in population density caused by the expansion of the U.S. Interstate Highway System, which largely followed the original 1947 plan for the Interstate Highway System. We find a negative association between population density and obesity and estimates are robust across a wide range of specifications. Estimates indicate that if the average metropolitan area had not experienced the decline in the proportion of population living in dense areas over the last 30 years, the rate of obesity would have been reduced by approximately 13%. |
| JEL: | I12 J11 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15436&r=ure |
| By: | Wada, Roy; Herbert, Zahirovic-Herbert |
| Abstract: | Our results show that high-income families place significantly higher value on academic achievement than low-income families. High-income families are also more likely to penalize house price for non-desirable non-academic school quality. This paper uses quantile regression to examine the distribution of demand for school quality. For academic achievement, the average effects as estimated by OLS are biased toward zero due to “aggregation” of families’ willingness to pay. We take advantage of a court-ordered redistricting as a quasi-random assignment of school quality. Subdivision and school fixed-effects are used to control for unobserved characteristics. |
| Keywords: | school quality; demand; house price; quantile regression; hedonic equation |
| JEL: | I2 R2 D1 D4 R5 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:18078&r=ure |
| By: | Sumit Agarwal; Gene Amromin; Itzhak Ben-David; Souphala Chomsisengphet; Douglas D. Evanoff |
| Abstract: | We explore the effects of mandatory third-party review of mortgage contracts on the terms, availability, and performance of mortgage credit. Our study is based on a legislative experiment in which the State of Illinois required “high-risk” mortgage applicants acquiring or refinancing properties in 10 specific zip codes to submit loan offers from state-licensed lenders to review by HUD-certified financial counselors. We document that the legislation led to declines in both the supply of and demand for credit in the treated areas. Controlling for the salient characteristics of the remaining borrowers and lenders, we find that the ex post default rates among counseled low-FICO-score borrowers were about 4.5 percentage points lower than those among similar borrowers in the control group. We attribute this result to actions of lenders responding to the presence of external review and, to a lesser extent, to counseled borrowers renegotiating their loan terms. We also find that the legislation pushed some borrowers to choose less risky loan products in order to avoid counseling. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-09-07&r=ure |
| By: | Oliver Falck (Ifo Institute for Economic Research); Michael Fritsch (University of Jena); Stephan Heblich (Max Planck Institute of Economics, Entrepreneurship, Growth, and Public Policy) |
| Abstract: | An emerging literature on the geography of bohemians argues that a region’s lifestyle and cultural amenities explain, at least partly, the unequal distribution of highly qualified people across space, which in turn, explains geographic disparities in economic growth. However, to date, there has been little or no empirical attempt to identify a causal relation. To identify the causal impact of bohemians on economic growth, we apply an instrumental variable approach using as an exogenous instrument the geographic distribution of bohemians prior to the Industrial Revolution in Germany. This distribution was primary the result of competition for prestige between courts and not of economic prosperity. Accordingly, the instrument is independent of today’s regional economic development. Focusing on the concentration of highly skilled people today that is explained by the proximity to exogenous concentrations of bohemians, the observed local average treatment effect supports the hypothesis of a positive impact of bohemians on regional economic development. |
| Keywords: | Regional Growth, Human Capital, Bohemians, Instrumental Variables |
| JEL: | R11 J24 C31 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:2009/10/doc2009-12&r=ure |
| By: | Nicole Schneeweis; Martina Zweimüller |
| Abstract: | In the Austrian (as well as the German) education system students have to choose between different school tracks at the age of 10. We argue that early tracking creates inefficiencies because the earlier the track choice has to be made, the more it is influenced by factors other than innate ability. Recent evidence suggests that the relative age of a student within a grade is related to his or her achievement, and that this effect is decreasing over grades. Thus, age-related achievement differences probably translate into age-related differences in track choice if track choice has to be made early. In this paper we estimate the effect of observed age on the track choice after grade 4 using register data for a major Austrian city for the period 1984-2006. Since observed age at track choice is endogenous, we exploit the exogenous variation in birth month to identify the causal effect of age. We find a strong and significant positive effect of age on track choice in grades 5-8. Since after grade 8, students again have to make a track choice, we use additional data from PISA 2003 and 2006 to show that the effect is long-lasting in urban areas. Therefore, the education system fails to provide a mechanism that leads to an efficient allocation of students to tracks. |
| Keywords: | Early tracking, school choice, age effect, instrumental variables, birth month |
| JEL: | I21 I28 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:jku:nrnwps:2009_20&r=ure |
| By: | William R. Kerr |
| Abstract: | We investigate the speed at which clusters of invention for a technology migrate spatially following breakthrough inventions. We identify breakthrough inventions as the top one percent of US inventions for a technology during 1975-1984 in terms of subsequent citations. Patenting growth is significantly higher in cities and technologies where breakthrough inventions occur after 1984 relative to peer locations that do not experience breakthrough inventions. This growth differential in turn depends on the mobility of the technology's labor force, which we model through the extent that technologies depend upon immigrant scientists and engineers. Spatial adjustments are faster for technologies that depend heavily on immigrant inventors. The results qualitatively confirm the mechanism of industry migration proposed in models like Duranton (2007). |
| JEL: | F2 J4 J6 O3 O4 R1 R3 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15443&r=ure |
| By: | Keith R. Phillips; Christina Daly |
| Abstract: | The broadest and most commonly used measure of the cost of living across U.S. cities is the American Chamber of Commerce Research Association (ACCRA) index. This index is used by business and government organizations and the media to to rank living standards and real wages across U.S. cities. In this study we reduce the aggregation bias in the index by calculating national average prices for the 59 item prices using population weights instead of the equal weight formula used by ACCRA. This correction results in a decline in the index values for all cities and changes in the rankings and bi-variate comparisons between city pairs. In some high-cost cities the index values decrease by over 25 percent, and in 74 percent of the cities the rank changes by greater than one spot. |
| Keywords: | Cost and standard of living ; Wages ; Prices |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddwp:0902&r=ure |
| By: | Ankur Sarin; Rekha Jain |
| Abstract: | Using a survey of 1774 users and non-users in 84 slums in three metropolitan cities (Delhi, Ahmedabad and Kolkata), we try to understand the impact of mobiles on their social and economic lives. Urban slum dwellers spend significant amounts on communications, both for a first time acquisition of handset and SIM (nearly 40% of the average household earnings per month), as well as on going expenditure. However, a majority of respondents believe that the use of mobiles has led to an improvement in their economic situation and that these benefits are greater than ownership and usage costs. Mobile also appears to change how slum residents interact with each other. Despite reducing face-to-face interactions, mobile usage is associated with stronger social relationships. In comparing users and non-users, we find differences between users and non-users in terms of income, education and other social characteristics. We also find evidence of hierarchies within households, with women far more likely than men to be only infrequent mobile users or not to have access at all. While cost of a handset is the primary barrier to owning a mobile, non-owners report difficulty in using a mobile, clarity of charges for call-plans and information dissemination as other barriers to ownership. |
| Date: | 2009–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2009-02-05&r=ure |
| By: | Alessia Matano; Paolo Naticchioni (Dipartimento di Economia, Sapienza University of Rome Italy) |
| Abstract: | Spatial sorting plays an important role in accounting for disparities in average wages among locations. This paper shows that sorting also matters when addressing the relation between spatial externalities and wage distribution, i.e. across workers located at dierent percentiles of the wage distribution. Using Italian employer-employee panel data we can control for individual and firm heterogeneity as well as for unobserved individual heterogeneity by means of quantile fixed eects estimates. After controlling for the sorting of workers the spatial externality impacts dampen along the whole wage distribution and generally remain positive only in the upper tail. As for firm sorting, it becomes uniform along the wage distribution once individual fixed effects are considered. We also point out that the impact of worker sorting is not homogeneous across sectors: along the density dimension it occurs mainly in skill-intensive sectors, while along the specialization dimension it is concentrated in the unskill-intensive sectors. |
| Keywords: | Spatial Externalities, Spatial Sorting, Wage Distribution, Quantile Fixed Effects |
| JEL: | J31 J61 R23 R30 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:des:wpaper:14&r=ure |
| By: | Greg Kaplan |
| Abstract: | This paper examines the relationship between the dynamics of parent-youth living arrangements and labor market outcomes for youths who do not go to college in the United States. The data come from a newly constructed panel data set based on retrospective monthly coresidence questions in the NLSY97. This is the first data set containing information on the labor market circumstances of youths at the time of movements in and out of the parental home. Based on estimates from duration models that allow for unobserved heterogeneity, I find that moving from employment to non-employment increases the hazard of moving back home in a given month by 64% for males and 71% for females. These results suggest that labor market factors play an important role in determining the dynamics of parent-youth living arrangements and that coresidence may be an important way in which insurance against labor market shocks takes place within the family. |
| Keywords: | Labor economics ; Housing |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:675&r=ure |
| By: | Jos van Ommeren (VU University Amsterdam); Derk Wentink (VU University Amsterdam); Jasper Dekkers (VU University Amsterdam) |
| Abstract: | This paper is the first to empirically examine the residents' willingness to pay for on-street parking permits as well as the cost of cruising using an identification methodology based on house prices for Amsterdam. The average cost of cruising is €1.30 per day. The average residents' willingness to pay for a parking permit is €8 per day. Further, we show that the introduction of paid parking in a neighborhood decreases house prices in this neighbourhood. |
| Keywords: | on-street parking; cruising; parking policy; parking permits |
| JEL: | R48 |
| Date: | 2009–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20090083&r=ure |
| By: | TAKEDA Yosuke; UCHIDA Ichiro |
| Abstract: | This paper is in the spirit of Marshall (1920), who raised the question of how economic distance affects a firm's productivity, focusing upon the role of idea sharing in relation to technological knowledge or information between firms. In order to quantify the degree of knowledge spillover or information sharing, we take the production function approach. Assuming core-periphery structure around automobile assemblies surrounded with auto-parts suppliers, we estimate plant-level production functions of the Japanese auto-parts suppliers, where productivity function depends upon the degree of information sharing measured by both geographic plant location and membership of technological cooperation associations. We take econometric issues of cross-sectional dependence of productivity and a simultaneity problem between inputs, applying methods to the standard OLS and GMM estimators. Positive technological externalities are seen in general and for independent plants, the fact which is robust to specifications of the production functions. Agglomeration effects are however rarely observed for relation-specific or cooperative plants. Some of them cost substantial negative externalities. Once a simultaneity problem is econometrically considered, instead of increasing returns, decreasing returns to scale emerge in cases of total materials. Agglomeration, if any, could be brought about not by increasing returns to scale, but by productivity spillover among suppliers proximate to automobile assemblies. |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:09051&r=ure |
| By: | Jonsson, Lina (VTI); Lindberg, Gunnar (VTI) |
| Abstract: | Vehicle mass is a crucial factor for the distribution of injuries between occupants in involved vehicles in a two-vehicle crash. A larger vehicle mass protects the occupants in the vehicle while on the same time inflicts a higher injury risk on the occupants in the collision partner. This mass externality can be internalized to reach a situation where the drivers choose vehicle mass based on the social optimum instead of a private optimum that ignores the negative effects that a large vehicle mass has on the injury risk in presumptive collision partners. <p> Using a database including collision accidents in Sweden involving two passenger cars during five years, the influence of vehicle mass on the injuries and thereby the accident cost in both vehicles is explored. The database contains information on road infrastructure, vehicle characteristics including vehicle mass and characteristics of the occupants in the vehicles including their injuries. To get a measure of the accident cost the Swedish official economic valuation of slight injuries, severe injuries and fatalities are applied. <p> In each accident the two involved vehicles are divided into the lighter vehicle and the heavier vehicle and the effect of weight is examined separately for the two groups. The accident cost that falls on the lighter vehicle increases with the mass of the heavier vehicle and decreases with own mass. Given that a vehicle is the heavier one in the crash, neither the own mass nor the mass of the lighter vehicle significantly affect the accident cost. <p> The expected external accident cost is calculated and it is shown to increase rapidly with vehicle mass. The paper discusses different solutions to internalize this external accident cost and calculates a mass dependent multiplicative tax on the insurance premium in a no-fault insurance system. |
| Keywords: | Accident Externality; Accident Cost; Vehicle Mass; Traffic Safety |
| JEL: | D62 H23 I18 R41 |
| Date: | 2009–10–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2009_012&r=ure |
| By: | Swärdh, Jan-Erik (VTI) |
| Abstract: | This paper focuses on empirical analysis of commuting time changes for workers who relocate residence, relocate job, or combine both residence and job relocation. A large register data set of individuals on the Swedish labor market, including travel times, is studied. Workers are not necessarily seeking to decrease their commuting time when they relocate job and/or residence. In fact, the average commuting time is longer after a relocation than before, thus suggesting that workers trade between a better job, a better residence and commuting time. The paper also presents results from a set of econometric models suggesting that commuting time changes differ substantially with respect to socio-economic characteristics as well as with respect to the part of the distribution of commuting time change that is analyzed. |
| Keywords: | Commuting time; Commuting time changes; Relocations; Register data; Longitudinal; Quantile regression |
| JEL: | C81 R10 R40 |
| Date: | 2009–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2009_011&r=ure |
| By: | Ajay K. Agrawal; Iain M. Cockburn; Carlos Rosell |
| Abstract: | We examine variation in the concentration of inventive activity across 72 of North America's most highly innovative locations. In 12 of these areas, innovation is particularly concentrated in a single, large firm; we refer to such locations as "company towns.'' We find that inventors employed by large firms in these locations tend to draw disproportionately from their firm's own prior inventions (as measured by citations to their own prior patents) relative to what would be expected given the underlying distribution of innovative activity across all inventing firms in a particular technology field. Furthermore, we find such inventors are more likely to build upon the same prior inventions year after year. However, smaller firms in company towns do not exhibit this myopic behavior; they draw upon prior inventions as broadly as their small-firm counterparts in more diverse locations. In addition, we find that inventions by large firms in company towns have less impact than those produced elsewhere, although the difference is modest, and that the impact is disproportionately appropriated by the inventing firms themselves. Finally, the geographic scope of impact realized by company town inventions is narrower, whether produced by large or small firms. |
| JEL: | O18 O33 R11 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15437&r=ure |
| By: | Philip Bond; Yaron Leitner |
| Abstract: | Consider the sale of mortgages by a loan originator to a buyer. As widely noted, such a transaction is subject to a severe adverse selection problem: the originator has a natural information advantage and will attempt to sell only the worst mortgages. However, a second important feature of this transaction has received much less attention: both the seller and the buyer may have existing inventories of mortgages similar to those being sold. The authors analyze how the presence of such inventories affects trade. They use their model to discuss implications for regulatory intervention in illiquid markets. |
| Keywords: | Mortgage loans |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:09-24&r=ure |
| By: | Harminder Battu (University of Aberdeen); Yves Zenou (Stockholm University, Research Institute of Industrial Economics (IFN) and CREAM) |
| Abstract: | Where a community or group is socially excluded from a dominant group, some individuals of that group may identify with the dominant culture and others may reject that culture. The aim of this paper is to investigate this issue by empirically analyzing the potential trade-off for ethnic minorities between sticking to their own roots and labour market success. We find that the social environment of individuals and attachments to culture of origin has a strong association with identity choice. Our results also suggest that those non-whites who have preferences that accord with being "oppositional" do experience an employment penalty. |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:200924&r=ure |
| By: | Lydia Mechtenberg; Roland Strausz |
| Abstract: | We develop a model to analyze the determinants and effects of an endogenous imperfect transferability of human capital on natives and immigrants. The model reveals that high migration flows and high skill-transferability are mutually interdependent. Moreover, we show that high mobility within a Federation is necessary to attract highly skilled immigrants into the Federation. We study in how far and in what way the European public policy behind the Bologna and the Lisbon Process can contribute to higher mobility in Europe. |
| Keywords: | human capital, migration, transferability, public policy |
| JEL: | D61 H77 I28 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2009-048&r=ure |
| By: | Mario J. Crucini; Hakan Yilmazkuday |
| Abstract: | We develop a model of cities each inhabited by two agents, one specializing in manufacturing, the other in retail distribution. The distribution sector represents the physical transformation of all internationally traded goods from the factory gate to the final consumer. Using a panel of micro-prices at the city level, we decompose the cross-sectional variance of long-run LOP deviations into the fraction due to distribution costs, trade costs and a residual. For the median good, trade costs account for 50 percent of the variance, distribution costs account for 10 percent with 40 percent of the variance unexplained. Since the sample of items in the data are heavily skewed toward traded goods, we also decompose the variance based on the median good on an expenditure-weighted basis. Now the tables turn, with distribution costs accounting for 43 percent, trade costs 36 percent and 21 percent of the variance unexplained. |
| Keywords: | Foreign exchange ; Pricing |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddgw:38&r=ure |
| By: | Sumit Agarwal; Faye H. Wang |
| Abstract: | Incentive provision is a central question in modern economic theory. During the run up to the financial crisis, many banks attempted to encourage loan underwriting by giving out incentive packages to loan officers. Using a unique data set on small business loan officer compensation from a major commercial bank, we test the model’s predictions that incentive compensation increases loan origination, but may induce the loan officers to book more risky loans. We find that the incentive package amounts to a 47% increase in loan approval rate, and a 24% increase in default rate. Overall, we find that the bank loses money by switching to incentive pay. We further test the effects of incentive pay on other loan characteristics using a multivariate difference-in-difference analysis. |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-09-08&r=ure |
| By: | Michle BELOT (OXFORD UNIVERSITY, Nuffield Centre for Experimental Social Sciences (CESS), Nuffield College); Vincent VANDENBERGHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)) |
| Abstract: | This paper evaluates the effects of grade retention on attainment by exploiting a reform introduced in 2001 in the French-Speaking Community of Belgium whereby the possibility of grade retention in grade 7 was reintroduced. It uses the Synthetic Control Method to identify the best possible pre-treatment control. Data come from three waves of the PISA study (corresponding to periods before and after the reform) that contains test scores of representative samples of 15 year-olds. These are used essentially to answer two questions. First, has the 2001 grade repetition reform at least succeeded at filtering out weaker pupils, pupils who would presumably be disadvantaged by being promoted directly to higher grades. This is a minimum condition for grade retention to be justifiable. Second, do these ÒtreatedÓ students achieve better/worse when they repeat (and attend a lower grade) than when they are Òsocially promotedÓ. (and attend the age 15 reference grade 10)? We find significant evidence of positive screening but we fail to demonstrate that those filtered out perform differently under the Ògrade repetitionÓ.regime than under the Òsocial promotionÓregime. |
| Keywords: | Grade retention, educational attainment, synthetic control method |
| JEL: | I20 I28 H52 |
| Date: | 2009–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:ctl:louvir:2009022&r=ure |