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Monday, January 21, 2013

Location, location, location

 

Mobility and Mortgages: Evidence from the PSID

Edward Coulson & Paul Grieco
Regional Science and Urban Economics, January 2013, Pages 1-7

Abstract:
We use the 1999-2009 Panel Survey of Income Dynamics to estimate household move probabilities as a function of, among other things, current housing equity. The "lock-in effect" supposes that mobility decreases with equity, particularly as equity becomes negative. We find that while owners do move less than renters, the move probability increases as homeowners become underwater. The propensity to move out of state in particular increases dramatically for "sand state" homeowners who have negative equity. There is no lock in effect from negative equity.

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No Country for Old Men

Daniel Nettle, Rebecca Coyne & Agathe Colléony
Human Nature, December 2012, Pages 375-385

Abstract:
Within affluent societies, people who grow up in deprived areas begin reproduction much earlier than their affluent peers, and they display a number of other behaviors adapted to an environment in which life will be short. The psychological mechanisms regulating life-history strategies may be sensitive to the age profile of the people encountered during everyday activities. We hypothesized that this age profile might differ between environments of different socioeconomic composition. We tested this hypothesis with a simple observational study comparing the estimated age distribution of people using the streets in an affluent and a socioeconomically deprived neighborhood which were closely matched in other ways. We were also able to use the UK census to compare the age profile of observed street users with the actual age profile of the community. We found that people over 60 years of age were strikingly less often observed on the street in the deprived than in the affluent neighborhood, whereas young adults were observed more often. These differences were not reflections of the different age profiles of people who lived there, but rather of differences in which residents use the streets. The way people use the streets varies with age in different ways in the affluent and the deprived neighborhoods. We argue that chronic exposure to a world where there are many visible young adults and few visible old ones may activate psychological mechanisms that produce fast life-history strategies.

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Residential Mobility and Local Civic Engagement in Japan and the United States: Divergent Paths to School

Leonard Schoppa
Comparative Political Studies, forthcoming

Abstract:
What drives differences across countries in levels of civic engagement? Both the United States and Japan have been described as having high levels of civic engagement, but a variety of measures show that the type of involvement that is most common varies. Americans join and contribute to national political groups, but membership in PTAs and volunteer firefighting units is low and declining. Japanese participate at a much lower level in national advocacy organizations, but they join local neighborhood associations at very high rates, participate extensively in PTAs, and volunteer to clean up neighborhood parks. This article seeks to unravel why Japanese have such high rates of local civic engagement by examining how parents and volunteers have mobilized to maintain high rates of walking to and from school during a period in which walk-to-school rates have plummeted in the United States. The higher rate of Japanese local engagement in this area, I argue, is motivated by housing markets that limit residential mobility to much lower levels than in the United States. High cost of residential "exit" in Japan drives citizens to exercise "voice" to maintain the safety and walkability of their neighborhoods.

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Are Homeowners Better Citizens? Homeownership and Community Participation in the United States

Brian McCabe
Social Forces, forthcoming

Abstract:
Proponents of homeownership policies often argue that homeowners participate more actively in community life and civic affairs than renters. Although research suggests higher rates of participation among homeowners, the underlying mechanisms driving this relationship are unclear. On one hand, the locally dependent financial investments homeowners make in their communities could lead them to participate as a means of protecting their principal investment. On the other hand, homeownership could stimulate participation by increasing residential stability, enabling households to overcome the institutional barriers and to develop the social networks that drive community participation. The failure to differentiate between these pathways muddies our understanding of how homeownership matters for community life. Drawing on the November supplement of the Current Population Survey, this article investigates whether homeowners are more likely to vote in local elections, participate in neighborhood groups and join civic associations. A falsification strategy compares these outcomes to a set of placebo measures to address concerns that the findings are driven by selection. The research identifies an independent role for residential stability and locally dependent financial investments in explaining why homeowners participate in their communities.

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Task Specialization in U.S. Cities from 1880-2000

Guy Michaels, Ferdinand Rauch & Stephen Redding
NBER Working Paper, January 2013

Abstract:
We develop a new methodology for quantifying the tasks undertaken within occupations using 3,000 verbs from around 12,000 occupational descriptions in the Dictionary of Occupational Titles (DOTs). Using micro-data from the United States from 1880-2000, we find an increase in the employment share of interactive occupations within sectors over time that is larger in metro areas than non-metro areas. We provide evidence that this increase in the interactiveness of employment is related to the dissemination of improvements in transport and communication technologies. Our findings highlight a change in the nature of agglomeration over time towards an increased emphasis on human interaction.

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Interstate Migration Has Fallen Less Than You Think: Consequences of Hot Deck Imputation in the Current Population Survey

Greg Kaplan & Sam Schulhofer-Wohl
Demography, August 2012, Pages 1061-1074

Abstract:
We show that much of the recent reported decrease in interstate migration is a statistical artifact. Before 2006, the Census Bureau's imputation procedure for dealing with missing data in the Current Population Survey inflated the estimated interstate migration rate. An undocumented change in the procedure corrected the problem starting in 2006, thus reducing the estimated migration rate. The change in imputation procedures explains 90% of the reported decrease in interstate migration between 2005 and 2006, and 42% of the decrease between 2000 (the recent high-water mark) and 2010. After we remove the effect of the change in procedures, we find that the annual interstate migration rate follows a smooth downward trend from 1996 to 2010. Contrary to popular belief, the 2007-2009 recession is not associated with any additional decrease in interstate migration relative to trend.

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Everybody needs good neighbours? Evidence from students' outcomes in England

Stephen Gibbons, Olmo Silva & Felix Weinhardt
Economic Journal, forthcoming

Abstract:
We use administrative data to estimate the effect of neighbourhood composition on teenagers' educational and behavioural outcomes in England. We exploit a unique research design based on changes over time in neighbourhood composition experienced by residentially immobile students, where these changes arise purely through residential migration amongst other students in our dataset. The complete coverage of our data allows investigating heterogeneity and non-linearities in the effect of neighbourhood composition at an unprecedented level. Our results show that changes in neighbourhood composition have no effects on test scores but some effects on behavioural outcomes, which are heterogeneous for boys and girls.

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Human capital externalities and employment differences across metropolitan areas of the USA

John Winters
Journal of Economic Geography, forthcoming

Abstract:
It has been well documented that employment outcomes often differ considerably across areas. This article examines the extent to which the local human capital level, measured as the share of prime age adults with a college degree, has positive external effects on labor force participation (LFP) and employment for U.S. metropolitan area residents. The empirical results suggest that the local human capital level has positive externalities on the probability of LFP and employment for both women and men. We also find that less educated workers generally receive the largest external benefits.

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Impacts of Property Taxation on Residential Real Estate Development

Richard England, Min Qiang Zhao & Ju-Chin Huang
Journal of Housing Economics, forthcoming

Abstract:
Decisions about residential lot size and square footage are influenced by a variety of determinants ranging from zoning regulations to neighborhood characteristics. Our theoretical analysis suggests that the property tax rate could also affect residential lot sizes and the sizes of newly constructed houses. Using descriptions for over 36 thousand houses built in New Hampshire between 1985 and 2006, we find empirical evidence that higher property taxes are indeed associated with both smaller lots and smaller houses. On average, higher property tax rates are associated with more additional living space per newly developed acre. These effects are modest in magnitude, however.

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The Distribution Of Household Net Worth Within And Across Rural Areas: Are There Links To The Natural Resource Base?

Alexander Marré & John Pender
American Journal of Agricultural Economics, Pages 457-462

"Using household panel survey data we found that household net worth declined between 2001 and 2009 for the 25th, 50th, and 75th percentiles of the net worth distribution in most areas of the United States, including in metropolitan and nonmetropolitan areas. This decline is likely due to the effects of the recession. The only regions that appeared to run counter to that trend were the nonmetropolitan counties in the Corn Belt and the Delta States that were not adjacent to metropolitan areas. Of these areas, the only statistically significant increase in mean real household net worth was in the Corn Belt. The gains in household net worth in the Corn Belt appeared to come mainly from increases in the value of farm and business assets, and showed the strongest linkage between resource values and household net worth for nonmetropolitan nonadjacent residents included in the PSID. We provided supporting evidence that this change came primarily from increases in the value of farmland in the Corn Belt during the decade, driven by increases in the value of corn and other agricultural commodities. What is striking is that this is the only region in which we were able to find increases in net household worth in rural areas."

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Wealth Effects Revisited: 1975-2012

Karl Case, John Quigley & Robert Shiller
NBER Working Paper, January 2013

Abstract:
We re-examine the links between changes in housing wealth, financial wealth, and consumer spending. We extend a panel of U.S. states observed quarterly during the seventeen-year period, 1982 through 1999, to the thirty-seven year period, 1975 through 2012Q2. Using techniques reported previously, 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 regression models in levels, first differences and in error-correction form, relating per capita consumption to per capita income and wealth. We find a statistically significant and rather large effect of housing wealth upon household consumption. This effect is consistently larger than the effect of stock market wealth upon consumption. In our earlier version of this paper we found that households increase their spending when house prices rise, but we found no significant decrease in consumption when house prices fall. The results presented here with the extended data now show that declines in house prices stimulate large and significant decreases in household spending. The elasticities implied by this work are large. An increase in real housing wealth comparable to the rise between 2001 and 2005 would, over the four years, push up household spending by a total of about 4.3%. A decrease in real housing wealth comparable to the crash which took place between 2005 and 2009 would lead to a drop of about 3.5%.

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Housing Wealth Effect: Evidence from Threshold Estimation

Sherif Khalifa, Ousmane Seck & Elwin Tobing
Journal of Housing Economics, forthcoming

Abstract:
This paper attempts to estimate the housing wealth effect of households in different income levels. To endogenously split the sample by income levels, we use the threshold estimation technique, developed in Hansen et al. (1999), for non-dynamic panels with individual-specific fixed effects. The data are drawn from the Panel Study of Income Dynamics (PSID), during the waves of 2001, 2003, and 2005. We find two significant threshold income levels of $74,046, and $501,000. Housing wealth has a significant effect on consumption with a coefficient of 0.010602, if income is below $74,046. It is also significant and equals 0.028224 if income is between $74,046 and $501,000. For incomes above $501,000, the coefficient is not statistically significant.

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Investors: The Missing Piece in the Foreclosure Racial Gap Debate

John Gilderbloom et al.
Journal of Urban Affairs, December 2012, Pages 559-582

Abstract:
Foreclosures have become one of the most important problems facing cities and the U.S. economy. However, not all communities are affected equally. Our goal is to better understand factors that affect variation in neighborhood foreclosures in a typical, mid-sized U.S. city - Louisville, Kentucky. While previous findings indicate that a key explanatory variable leading to rising neighborhood foreclosures is the proportion of racial minorities, our analysis finds that in a fully specified model, race does not predict differences between black and white homeowners. On the other hand, an analysis of investors predicts high foreclosure rates in African-American neighborhoods. The effect of percent nonwhite is caused by several key intervening variables, including the presence of investor foreclosures, the absence of neighborhood walkability, and the prevalence of high-cost loans. In the past, walkability and investor behavior have largely been ignored by social scientists studying neighborhood variation in foreclosures and the role of race in rising foreclosures. In this article, we examine how speculation by investors in majority African-American neighborhoods along with degree of walkability and the concentration of high-priced loans have contributed to recent increases in foreclosures and variation across neighborhoods. Together, the findings demonstrate that these three factors help to better explain the contemporary causes of greater foreclosures in African-American neighborhoods.

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Changes in Implicit Flood Risk Premiums: Empirical Evidence from the Housing Market

Okmyung Bin & Craig Landry
Journal of Environmental Economics and Management, forthcoming

Abstract:
Hedonic valuation models have shown that sales prices can capitalize property risk factors, such as flood zone; properties facing lower risk sell at a premium, all else being equal. Previous research has indicated that price differentials reflecting risk of flooding become much larger in the wake of a storm. We re-examine these findings for Pitt County, NC using multiple storm events within a difference-in-differences framework, and we compare flood zone price differentials for a more recent sample of property sales. Prior to Hurricane Fran in 1996, we detect no market risk premium for presence in a flood zone, but we find significant price differentials after major flooding events, amounting to a 5.7% decrease after Hurricane Fran and 8.8% decrease after Hurricane Floyd. Results from a separate model that examines more recent data covering a period without significant storm-related flood impacts indicate a significant risk premium ranging between 6.0% and 20.2% for homes sold in the flood zone, but this effect is diminishing over time, essentially disappearing about 5 or 6 years after Hurricane Floyd. The lack of a persistent effect suggests that buyers' and sellers' risk perceptions may change with the prevalence of hazard events and that homebuyers are unaware of flood risks and insurance requirements when bidding on properties.

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The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection

Pierre-Philippe Combes et al.
Econometrica, November 2012, Pages 2543-2594

Abstract:
Firms are more productive, on average, in larger cities. Two main explanations have been offered: firm selection (larger cities toughen competition, allowing only the most productive to survive) and agglomeration economies (larger cities promote interactions that increase productivity), possibly reinforced by localized natural advantage. To distinguish between them, we nest a generalized version of a tractable firm selection model and a standard model of agglomeration. Stronger selection in larger cities left-truncates the productivity distribution, whereas stronger agglomeration right-shifts and dilates the distribution. Using this prediction, French establishment-level data, and a new quantile approach, we show that firm selection cannot explain spatial productivity differences. This result holds across sectors, city size thresholds, establishment samples, and area definitions.

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Who Offers Tax-Based Business Development Incentives?

Alison Felix & James Hines
Journal of Urban Economics, forthcoming

Abstract:
Many American communities seek to attract or retain businesses with tax abatements, tax credits, or tax increment financing of infrastructure projects (TIFs). The evidence for 1999 indicates that communities are most likely to offer one or more of these business development incentives if their residents have low incomes, if they are located close to state borders, and if their states have troubled political cultures. Ten percent greater median household income is associated with a 3.2 percent lower probability of offering incentives; ten percent greater distance from a state border is associated with a 1.0 percent lower probability of offering incentives; and a 10 percent higher rate at which government officials are convicted of federal corruption crimes is associated with a 1.2 percent greater probability of offering business incentives. TIFs are the preferred incentive of communities whose residents have household incomes between $25,000 and $75,000; whereas TIFs are much less commonly offered by communities whose residents have household incomes below $25,000. The need to finance TIFs out of incremental tax revenues may make it infeasible for many of the poorest of communities to use TIFs for local business development.

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Urbanization, Agglomeration Economies, and Access to Mortgage Credit

Stuart Gabriel & Stuart Rosenthal
Regional Science and Urban Economics, January 2013, Pages 42-50

Abstract:
We examine the effect of urban agglomeration on access to mortgage credit using HMDA data from 1994 to 2008. Previous studies suggest that agglomeration should increase access to specialized workers and information, both of which should enhance liquidity in mortgage lending. Findings indicate that agglomeration economies increase mortgage origination rates and loan amounts in the 1990s, and especially so in higher risk locations. However, agglomeration effects dissipated over the study period. While we do not identify the microfoundations of these patterns, the decline in the influence of agglomeration coincides with the dramatic expansion of secondary mortgage markets and development of information technology, both of which should have reduced regional disparities in access to credit.

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Forest proximity and residential land values

Vijaya Sharma
Journal of Forest Economics, January 2013, Pages 78-86

Abstract:
This study estimates a hedonic price equation for residential lands in some mountain counties of Colorado. Results suggest that per-acre price of land in a town is positively influenced by the town's proximity to ski resort and is negatively influenced by its proximity to forest. However, there is a positive fixed effect of having a protected forest such as a national park or wildlife refuge nearby, and the negative effect of proximity of forest is much lower with protected forests. Results suggest that increasingly bigger parcels of land command progressively lower per-acre prices.

By KEVIN LEWIS | 09:00:00 AM