intraurban residential mobility the role of transactions costs market imperfections and household disequilibrium abstract this paper presents a model of household residential search and mobility that focuses on microeconomic elements of household behavior and incorporates housing market features the model is cast explicitly in terms of a rigorous model of housing demand allowing the benefits from moving to be measured as the compensating income variation of the potential change in consumption the empirical results indicate that large changes in economic variables such as income and prices produce only small potential gains from moving and that a major factor in the moving decision is the magnitude of search and moving costs

regular articlepreemptive innovation we consider the problem faced by firms investing in r d when the first implementation of an innovation imparts an extreme first mover advantage effectively spoiling the market for later entrants we establish the existence of an equilibrium in threshold rules and show that the equilibrium quality level for the implemented innovation stochastically decreases as the number of firms increases furthermore in the presence of alternative r d methods competition can induce the firms to select the least efficient r d method journal of economic literature classification numbers c72 d83 l15 o31

optimal commuting and migration decisions under commuting cost uncertainty the aim of this paper is to assess the implications of economic uncertainty on individual mobility behaviour at the local and regional levels focusing especially on uncertainty with respect to the evolution of commuting costs a model is developed that describes the interrelated decisions of residential choice and the appropriate type of mobility connecting workplace and residence results indicate that higher uncertainty about commuting costs increases the number of residentially immobile individuals in that the decision regarding a relocation of residence is accordingly deferred to a later point in time this also means that individuals initially commuting between residence and workplace remain in this mobility mode despite an apparently favourable net present value of moving to the workplace region

pioneering price level targeting the swedish experience 1931 1937 in september 1931 sweden became the first country to make the stabilization of the domestic price level the official goal of its monetary policy actually the only country that so far has adopted such an explicit price level target starting from the issues and concepts familiar from research and policy experience of inflation targeting as contrasted to price level targeting this paper examines the evolution of the swedish price level targeting in the 1930s we bring out a number of similarities and differences between price stabilization in the 1930s and in the 1990s

networking off madison avenue known for the key role that networking plays in the operation of agencies where interviews suggest that informal networking among close neighbors is critical to many agencies success networking involves the exchange of ideas and while there is no market place for these ideas exchanges may be more deliberate rather than just marshall s 1890 mysteries of the air type of information spillovers this paper examines the effect on productivity of having more near advertising agency neighborhoods and hence better opportunities for meetings and exchange within manhattan we will show that there is extremely rapid spatial decay in the benefits of having more near neighbors even in the close quarters of southern manhattan a finding that is new to the empirical literature and indicates our understanding of scale externalities is still very limited the finding indicates that having a high density of commercial establishments is important in enhancing local productivity an issue in lucas and rossi hansberg 2002 where within business district spatial decay of spillovers plays a key role we will argue also that in manhattan advertising agencies trade off the higher rent costs of being in bigger clusters nearer centers of action against the lower rent costs of operating on the fringes away from high concentrations of other agencies introducing the idea of trade offs immediately suggests heterogeneity is involved we will show that higher quality agencies are the ones willing to pay more rent to locate in greater size clusters specifically because they benefit more from networking while all 1 the research in this paper was conducted while the authors were census bureau research associates at the boston research data center research results and conclusions expressed are those of the authors and do not necessarily indicate concurrence by the census bureau the paper has been screened to ensure that no confidential data are revealed we acknowledge helpful comments from andrew foster on aspects of the paper and from participants in seminars at brown university lse and the university of toronto

persistent shocks to urban density evidence from the berlin air raids abstract temporary shocks can have persistent effects on the distribution of economic activity across urban space suggesting considerable stickiness in adjustment to spatial equilibrium i examine the long run effect of world war ii air raids on berlin s contemporary population density profile exploiting random variation in the extent of damage caused at the scale of street blocks while controlling for a flexible secular time trend in the citywide density gradient 70 years after the end of the war blocks affected by irreparable damage feature significantly lower population density while repairable damage had no lasting effect these findings are consistent with a vintage effect where large fixed costs associated with the construction of new buildings retard adjustment of the housing supply to growing demand for low density structures

localization economies vertical organization and trade this paper develops a model of regional production networks based on localization economies i consider an industry with two activities one with location specific external economies the other with constant returns under autarky localization economies imply the formation of an industry center agglomeration drives up wages in the center causing the constant returns activity to disperse to outlying regions trade recreates the regional production network on a global scale i apply the model to data from the mexican apparel industry estimation results on mexico s pre and post trade regional apparel wage structure are consistent with localization economies implications for the north american free trade agreement nafta are discussed this abstract was borrowed from another version of this item

tall buildings and land values height and construction cost elasticities in chicago 1870 2010 cities around the world are experiencing unprecedented vertical growth yet the economics of skyscrapers remain empirically understudied this paper analyzes the determinants of the urban height profile by combining a micro geographic data set on tall buildings with a unique panel of land prices covering 140 years we provide novel estimates of the land price elasticity of height the height elasticity of construction cost and the elasticity of substitution between land and capital for tall build ings in line with improvements in construction technology the land price elasticity of height increased substantially over time rationalizing a trend to ever taller buildings the land price elasticity of height is larger for commercial than for residential buildings suggesting that the typical segregation of land uses within cities is not exclusively shaped by the demand side but also by the supply side

financial intermediation capital composition and income stagnation the case of europe abstract we look into the role of financial intermediation in inducing the european financial crisis of 2008 by exploring the effects of overall lending and the allocation of credit to specific categories of borrowers namely households vs firms we find that for the eu26 during the period 1995 2008 excessive household leverage through mortgage lending exerted a crowding out effect on availability of credit to support innovation and productive investment the crowding out effect ultimately translated into a gdp growth that was decoupled from real household income in this article we explain that shifting credit towards mortgages and away from corporate projects is consistent with rational behaviour based on historical trends aimed at minimizing short term risk for each individual bank nevertheless as a whole the sum of individual risk reducing attitudes generated a long term systemic risk

accounting for central neighborhood change 1980 2010 abstract after 1980 2000 population decline and economic stagnation downtown neighborhoods in most large us cities experienced 2000 2010 population growth and gentrification stark racial differences in valuations of downtown amenities and suburban labor market opportunities among those with less than college that only emerged after 2000 are the primary drivers of these downtown neighborhood dynamics as college educated whites moved in increases in valuations of downtown amenities encouraged other whites to remain in downtowns a reversal from prior decades continued departures of less than college educated minorities were driven both by relative improvements in suburban employment opportunities for this group and their continued declines in valuations of downtown amenities our evidence highlights the importance of racial differences in valuations of potentially endogenous local amenities for understanding recent downtown gentrification

maximum score estimates of the determinants of residential mobility implications for the value of residential attachment and neighborhood amenities abstract this paper uses a semiparametric empirical technique maximum score to estimate the determinants of the decision of low income renters to move out of their dwelling the maximum score estimates prove to be far more precise than probit estimates the estimates are used to show that low income residents highly value remaining in their dwelling in addition these estimates are used to illustrate an alternative method to measure willingness to pay for neighborhood amenities which we argue to be superior to hedonic based wtp measures

residential mobility with job location uncertainty abstract this paper investigates the relationship between job changes and residential mobility a job change may be prompted by reasons unrelated to factors associated with housing consumption however a job change may lead to an adjustment to housing consumption i e residential relocation previous studies find that job relocations are positively associated with residential mobility this paper departs from previous studies by looking at the effects of an uncertain future job location on residential mobility and mobility expectation it is conjectured that with the existence of costs of residential mobility a household head s likelihood for changing jobs in the future dampens the household s propensity to move but encourages the formation of mobility expectation these conjectures are examined empirically using data from the panel study of income dynamics and they are confirmed

productivity gains from geographic concentration of human capital evidence from the cities abstract based on recent theoretical developments the argument is made that the average level of human capital is a local public good cities with higher average levels of human capital should therefore have higher wages and higher land rents after conditioning on the characteristics of individual workers and dwellings this prediction is supported by data for standard metropolitan statistical areas smsas in the united states where the smsa average levels of formal education and work experience are used as proxies for the average level of human capital the alternative explanations of omitted smsa variables and self selection are evaluated an estimate of the effect of an additional year of average education on total factor productivity is computed

price level targeting and stabilisation policy a survey this paper surveys recent articles on the costs and benefits of price level targeting focusing its use as a tool for stabilisation policy it discusses how price level targeting can affect the short run trade off between output and inflation variability by influencing inflation expectations it reviews how assigning an explicit price level target to a central bank that is unable to commit to its future policies can improve economic performance it surveys other potential benefits and costs among the costs it underlines the importance of perfectly rational expectations for the optimality of price level targeting and an exacerbation of the time inconsistency problem

gibrat s law for all cities two empirical regularities concerning the size distribution of cities have repeatedly been established zipf s law holds the upper tail is pareto and city growth is proportionate census 2000 data are used covering the entire size distribution not just the upper tail the nontruncated distribution is shown to be lognormal rather than pareto this provides a simple justification for the coexistence of proportionate growth and the resulting lognormal distribution an equilibrium theory of local externalities that can explain the empirical size distribution of cities is proposed the driving force is a random productivity process of local economies and the perfect mobility of workers

residential mobility and job changes under uncertainty abstract this paper empirically investigates households residential mobility and job change decisions under uncertainty we allow households degree of risk aversion to be a confounding factor in the joint decision of residential mobility and job changes using panel data to estimate a random effects multinomial probit model of households joint decision of residential and job mobility our empirical results show that risk aversion discourages a household from making any changes moreover when compared to single changes in either job or residential locations risk aversion is more discouraging for joint changes to more central residential locations and less discouraging for joint changes to more distant residential locations these effects are statistically significant albeit small in magnitude our empirical results demonstrate the uncertainty does play a role in households job and residential mobility decisions

price level targeting vs inflation targeting a free lunch price level targeting without base drift and inflation targeting with base drift are compared under commitment and discretion with persistence in unemployment price level targeting is often said to imply more short run inflation variability and thereby more employment variability than inflation targeting counter to this conventional wisdom under discretion a price level target results in lower inflation variability than an inflation target if unemployment is at least moderately persistent a price level target also eliminates the inflation bias under discretion and as is well known reduces long term price variability society may be better off assigning a price level target to the central bank even if its preferences correspond to inflation targeting a price level target thus appears to have more advantages than commonly acknowledged

war migration and the origins of the thai sex industry this paper analyzes the determinants behind the spatial distribution of the sex industry in thailand we relate the development of the sex industry to an early temporary demand shock i e u s military presence during the vietnam war comparing the surroundings of thai military bases used by the u s army to districts close to unused thai bases we find that there are currently 5 times more commercial sex workers in districts near former u s bases the development of the sex industry is also explained by a high price elasticity of supply due to female migration from regions affected by an agricultural crisis finally we study a consequence induced by the large numbers of sex workers in few red light districts the hiv outbreak in the early 1990s

building the city from slums to a modern metropolis we model the building of a city estimate parameters of the model and calculate welfare losses from institutional frictions encountered in changing land use we distinguish formal and slum construction technologies in contrast to slums formal structures can be built tall are durable and non malleable as the city grows areas are initially developed informally then formally and then redeveloped periodically slums are modelled as a technology choice however institutional frictions in land markets may hinder their conversion to formal usage that requires secure property rights using unique data on nairobi for 2003 and 2015 we develop a novel set of facts that support assumptions of the model estimate all parameters of the model and calculate welfare losses of conversion frictions we track the dynamic evolution of the city and compare it with model predictions in the core city formal sector about a third of buildings were torn down over 12 years and replaced by buildings on average three times higher for slums in older areas near the centre even after buying out slumlords overcoming institutional frictions would yield gains amounting to about 18 000 per slum household 30 times typical annual slum rent payments

commutes quits and moves abstract this paper analyzes the effects of commuting distance on quit and move propensities in metropolitan areas with conventional wage and housing price gradients most workers ordinarily move in order to lengthen commutes and quit in order to shorten them however quits and moves by workers whose residential choices are constrained by segregation should be relatively insensitive to commutes descriptive statistics and simultaneous probit estimates of move and quit propensities for white and black employees of a single firm confirm these predictions they demonstrate that long commutes encourage white quits and discourage white moves commute increases of one standard deviation would increase white quit propensities and reduce white move propensities by approximately 10 in contrast commutes by black employees have no significant effects on their quit and move propensities

the economics of density evidence from the berlin wall this paper develops a quantitative model of internal city structure that features agglomeration and dispersion forces and an arbitrary number of heterogeneous city blocks the model remains tractable and amenable to empirical analysis because of stochastic shocks to commuting decisions which yield a gravity equation for commuting flows to structurally estimate agglomeration and dispersion forces we use data on thousands of city blocks in berlin for 1936 1986 and 2006 and exogenous variation from the city s division and reunification we estimate substantial and highly localized production and residential externalities we show that the model with the estimated agglomeration parameters can account both qualitatively and quantitatively for the observed changes in city structure we show how our quantitative framework can be used to undertake counterfactuals for changes in the organization of economic activity within cities in response for example to changes in the transport network

identification results for duration models with multiple spells the purpose of this paper is to investigate the identifiability of duration models with multiple spells we prove that the results of elbers and ridder 1982 and heckman and singer 1984 can be generalized to multi spell models with lagged duration dependence we also prove that without lagged duration dependence the identification result does not depend on moment conditions or tail conditions on the mixing distribution this result is in contrast to ridder s 1990 result for single spell models

urban growth and transportation we estimate the effects of interstate highways on the growth of u s cities between 1983 and 2003 we find that a 10 increase in a city s initial stock of highways causes about a 1 5 increase in its employment over this 20 year period to estimate a structural model of urban growth and transportation we rely on an instrumental variables estimation that uses a 1947 plan of the interstate highway system an 1898 map of railroads and maps of the early explorations of the u s as instruments for 1983 highways we investigate the role of interstate highways in the growth of u s cities our investigation is in three parts in the first we develop a simple structural model describing the joint evolution of highways and employment in cities in the second we develop an instrumental variables strategy that allows us to identify key parameters of our structural model we are also able to provide out of sample evidence for the validity of our estimates and for the central assumptions of our model in the third we use our estimates to assess counterfactual transportation policies we find that a 10 increase in a city s stock of interstate highways causes about a 1 5 increase in its employment over 20 years and that an additional kilometre of highway allocated to a city at random is associated with a larger increase in employment or population than is a road assigned to a city by the prevailing political process our results also suggest that too many new highways were built between 1983 and 2003 these findings are important for three reasons first transportation generally and infrastruc ture in particular are large segments of the economy the median u s household devotes about 18 of its income to road transportation while all levels of government together spend another 200 billion dollars annually overall the value of capital stock associated with road transporta tion in the u s tops 5 trillion dollars united states bureau of transportation statistics 2007 2010 given the magnitude of transportation expenditures it is important that the impact of these expenditures on economic growth be carefully evaluated and not assessed on the basis of the claims of advocacy groups our analysis provides a basis for assessing whether these resources are well allocated our results also provide useful guidance to policy makers charged with planning cities since changes in a city s transportation infrastructure cause changes to the city s employment new transportation infrastructure causes complementary changes in the demand for public utilities and schools our results provide a basis for estimating the magnitude of such changes finally this research is important to furthering our understanding of how cities operate and grow transportation costs are among the most fundamental quantities in theoretical models

export sectors and rural development the export base hypothesis is that a region s growth is led by export demand given perfectly elastic factor supplies it is a rationale for sector based rural development policies and it is formalized by input output models but it is contested by modern trade migration and growth theories and there is little research about its empirical relevance we investigate the hypothesis for contemporary u s rural development by estimating the influence of export sector employment on subsequent rural development outcomes the results reject the hypothesis that emphasizing traditional export employment results in rural growth reject the assumption of perfectly elastic factor supply and support alternative explanations copyright 2009 oxford university press

valuing rail access using transport innovations this paper uses a powerful empirical method to evaluate the benefits of rail access to consumers we study the effects on house prices of a transport innovation that altered the distance to the nearest station for some households but left others unaffected the transport innovation we study is the construction of new stations in london in the late 1990s using this innovation we implement a quasi experimental approach that allows us to avoid the biases inherent in cross sectional valuation work our evidence on distance station effects on local prices identified through distance changes induced by the transport innovation suggests that households value rail access and that these valuations are large compared to the valuations of other local amenities

urban population and amenities the neoclassical model of location we develop a neoclassical general equilibrium model to explain cross metro variation in population and density we provide new methods to estimate traded and non traded productivities and elasticities of housing and land supply using density and land area data from wage and housing cost indices the model explains half of u s density and population variation and finds that quality of life determines location choices more than trade productivity productivity and factor substitution in housing matter most but are weak in nicer areas relaxing land use regulations would increase population in the west raising both quality of life and productivity experienced by residents

monetary policy for inattentive economies we offer a contribution to the analysis of optimal monetary policy we begin with a critical assessment of the existing literature arguing that most work is based on implausible models of inflation output dynamics we then suggest that this problem may be solved with some recent behavioral models which assume that price setters are slow to incorporate macroeconomic information into the prices they set a specific such model is developed and used to derive optimal policy in response to shocks to productivity and aggregate demand optimal policy is price level targeting base drift in the price level which is implicit in the inflation targeting regimes currently used in many central banks is not desirable in this model when shocks to desired markups are added optimal policy is flexible targeting of the price level that is the central bank should allow the price level to deviate from its target for a while in response to these supply shocks but it should eventually return the price level to its target path optimal policy can also be described as an elastic price standard the central bank allows the price level to deviate from its target when output is expected to deviate from its natural rate

project selection commitment and competition we examine project selection decisions of firms constrained in the number of projects they can handle at once a new project opportunity arises every period taking on a project requires a commitment of uncertain duration preventing the firm from selecting another project in subsequent periods until the commitment ends in our dynamic game when two firms are free of commitment they move sequentially in random order symmetric pure strategy markov perfect equilibria always exist in equilibrium the first mover strategically rejects some projects that are then selected by the second mover even when the value of the project is the same for both firms a monopolist rejects more projects and adopts ones of higher average quality compared to the duopolist duopolists select too few projects compared to their jointly optimal behavior we extend the model to allow for externalities asymmetry and n 2n 2 firms

agglomeration and land rents evidence from the prefectures abstract we use japanese prefectural wage and land rent data to estimate the magnitude of agglomeration effects in manufacturing and financial services we also examine the geographical range of agglomeration effects by estimating the extent to which they diminish with distance using a specification that encompasses the polar cases of purely local agglomeration economies on the one hand and national increasing returns on the other we find that the extent of agglomeration economies in both industries is significant but that their effect decays much faster with distance in financial services than in manufacturing that is the geographical reach of spillovers in financial services appears to be much lower than in manufacturing

local economic development agglomeration economies and the big push 100 years of evidence from the tennessee valley authority we study the long run eects of one of the most ambitious place based economic development policies in u s history the tennessee valley authority using a rich panel dataset of counties we conduct an evaluation of the dynamic eects of the tva on local economies in the seventy years following the program s inception we nd that the tva led to short run gains in agricultural employment that were eventually reversed while impacts on manufacturing employment continued to intensify well after the program s subsidies had lapsed a pattern consistent with the presence of strong agglomeration economies in the manufacturing sector economists have long cautioned that the local gains created by place based policies may be oset by losses elsewhere yielding ambiguous eects on the u s as a whole building on the framework in glaeser and gottlieb 2008 we develop a novel approach to assessing the aggregate consequences of shifting the spatial distribution of manufacturing employment our ndings suggest the aggregate productivity gains associated with relocating manufacturing activity to the tva region were probably minimal

a structural dynamic analysis of job turnover and the costs associated with moving to another job this paper provides an empirical analysis of the labor market behavior of employed individuals using a structural on the job search model the costs associated with moving to another job are allowed to be nonzero and may depend on the wage level it is shown that under certain conditions the optimal strategy has the reservation wage property the model is estimated using data on job durations and subjective responses concerning the search strategy the results reveal some strong sources of inflexibility of the labor market copyright 1992 by royal economic society

congestion agglomeration and the structure of cities abstract congestion costs in urban areas are significant and clearly represent a negative externality nonetheless economists also recognize the production advantages of urban density in the form of positive agglomeration externalities the long run equilibrium outcomes in economies with multiple correlated but offsetting externalities have yet to be fully explored in the literature therefore i develop a spatial equilibrium model of urban structure that includes both congestion costs and agglomeration externalities i then estimate the structural parameters of the model using a computational algorithm to match the spatial distribution of employment population land use land rents and commute times in the data policy simulations based on the estimates suggest that congestion pricing may have ambiguous consequences for economic welfare

economic linkages between urban and rural regions what s in it for the rural urban rural interdependences are modelled based on wages cost of living and interregional migration and commuting rural to urban commuting generates a scenario where the relative level of urban

tarnishing the golden and empire states land use restrictions and the u s economic slowdown abstract this paper studies the impact of state level land use restrictions on u s economic activity focusing on how these restrictions have depressed macroeconomic activity since 2000 we use a variety of state level data sources together with a general equilibrium spatial model of the united states to systematically construct a panel dataset of state level land use restrictions between 1950 and 2014 we show that these restrictions have generally tightened over time particularly in california and new york we use the model to analyze how these restrictions affect economic activity and the allocation of workers and capital across states counterfactual experiments show that deregulating existing urban land from 2014 regulation levels back to 1980 levels would have increased us gdp and productivity roughly to their current trend levels california new york and the mid atlantic region expand the most in these counterfactuals drawing population out of the south and the rustbelt general equilibrium effects particularly the reallocation of capital across states account for much of these gains

changes in commuting distances of dutch households this paper is concerned with the analysis of commuting distances the development of commuting distances has become a subject of political concern because of the large flows of traffic involved which are concentrated in a few hours each day and cause considerable congestion problems as well as environmental damage the economic theory of search will be proposed as a theoretical background which motivates the modelling of commuting distance distributions for the empirical analysis a sub sample is used of respondents of the housing demand survey of 1985 approached again in 1988 commuting distances are discussed in relation to household characteristics such as the number of persons the presence of a spouse or partner and her his employment status the apparent rapid increase in commuting distances is due in large part to changes in the employment situation people who change job will often commute over a longer distance after the change occurs changes in housing situation are more or less neutral in th

nash equilibrium search for the best alternative in a recent paper weitzman econometrica 47 1979 641 654 described a policy of optimal search for the best alternative the present paper is concerned with the development and characterization of a policy of nash equilibrium search for the best alternative specifically it is shown that under certain monotonicity assumptions and under the assumption that firms have incomplete information regarding the results of rivals search behavior a nash equilibrium search policy exists and has the same form as weitzman s optimal search policy

tenure choice and expected mobility a synthesis abstract this study employs a joint logit probability model to estimate the effects of a vector of independent variables on the household s current tenure choice and expected mobility which are hypothesized to be simultaneously determined in the empirical analysis it was found that the coefficient on the endogenous variables tenure choice and expected mobility is the most highly significant of all the coefficients estimated in addition in previous analyses the age of the household head has always exhibited a highly significant positive effect on the probability of ownership however in this analysis it is demonstrated that this age variable was acting as a proxy for the expected mobility and wealth of the household

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

price and output stability under price level targeting it is commonly believed that a monetary policy that targets the price level reduces the long term variability of the price level but only at the cost of increased variability of both inflation and output we develop a model in which the one step ahead variance of output and the price level are lower under price level targeting than under inflation targeting this increased stability under price level targeting works through an interest rate channel that to our knowledge has not previously been emphasized in the literature surprisingly if the sensitivity of demand to the real rate of interest is high enough then the variance of inflation can also be lower under price level targeting than under inflation targeting

spatial wage disparities sorting matters spatial wage disparities can result from spatial differences in the skill composition of the workforce in non human endowments and in local interactions to distinguish between these explanations we estimate a model of wage determination across local labour markets using a very large panel of french workers we control for worker characteristics worker fixed effects industry fixed effects and the characteristics of the local labour market our findings suggest that individual skills account for a large fraction of existing spatial wage disparities with strong evidence of spatial sorting by skills interaction effects are mostly driven by the local density of employment not controlling for worker heterogeneity leads to very biased estimates of interaction effects endowments only appear to play a small role

option exercise games an application to the equilibrium investment strategies of firms under the standard real options approach to investment under uncertainty agents formulate optimal exercise strategies in isolation and ignore competitive interactions however in many real world asset markets exercise strategies cannot be determined separately but must be formed as part of a strategic equilibrium this article provides a tractable approach for deriving equilibrium investment strategies in a continuous time cournot nash framework the impact of competition on exercise strategies is dramatic for example while standard real options models emphasize that a valuable option to wait leads firms to invest only at large positive net present values the impact of competition drastically erodes the value of the option to wait and leads to investment at very near the zero net present value threshold copyright 2002 oxford university press

investment uncertainty and pre emption this paper examines irreversible investment in a project with uncertain returns when there is an advantage to being the first to invest and externalities to investing when others also do so we show that the possibility of pre emption can have significant qualitative and quantitative effects on the relationship between uncertainty and investment in a single agent real options model the trigger threshold for investment increases without bound as uncertainty grows in contrast the investment trigger of a leader faced with pre emption is bounded above as uncertainty increases in fact we show that under certain parameter values greater uncertainty can lead the leader to invest earlier these findings reinforce the importance of extending real options analysis to include strategic interactions between players applications to industry situations are also discussed

economic growth and regional disparities in slovenia banerjee b and jesenko m economic growth and regional disparities in slovenia regional studies regional disparities in gross domestic product gdp per capita and labour utilization have widened in slovenia since 1999 however regional gaps in per capita household disposable income have declined because of higher social transfers to the poorest regions inter regional commuting and other factors econometric analysis shows that there is heterogeneity in steady states across regions and regional growth in per capita gdp and labour productivity are converging to these region specific steady states time series approach to convergence confirms stochastic trend convergence in both indicators for several regions labour productivity growth has been driven by capital deepening and growing importance of total factor productivity tfp improvement

urbanization and the viability of local agricultural economies urbanization presents both opportunities and challenges for farmers and farm supporting sectors on the urban fringe this paper examines the effects of urbanization on the viability of input suppliers and output processors and on the cost and profitability of farming an analytical model is developed to provide insights into such effects this model motivates a multiple equation empirical model that we estimate using county level panel data for california idaho oregon and washington results provide evidence that urbanization has a significant impact on agricultural infrastructure farm production costs and net farm income and suggest that agriculture related opportunities of urbanization outweigh the challenges

the attenuation of human capital spillovers abstract this paper uses 2000 census data to estimate the relationship of agglomeration and proximity to human capital to wages the paper takes a geographic approach and focuses on the attenuation of agglomeration and human capital effects differencing and instrumental variable methods are employed to address endogeneity in the wage agglomeration relationship and also to deal with measurement error in our agglomeration and human capital variables three key results are obtained first the spatial concentration of employment within five miles is positively related to wage second the benefits of spatial concentration are driven by proximity to college educated workers an instance of human capital spillovers third these effects attenuate sharply with distance

income maximization and the selection and sorting of international migrants abstract two prominent features of international labor movements are that the more educated are more likely to emigrate positive selection and more educated migrants are more likely to settle in destination countries with high rewards to skill positive sorting using data on emigrant stocks by schooling level and source country in oecd destinations we find that a simple model of income maximization can account for both phenomena results on selection show that migrants for a source destination pair are more educated relative to non migrants the larger is the absolute skill related difference in earnings between the destination country and the source results on sorting indicate that the relative stock of more educated migrants in a destination is increasing in the absolute earnings difference between high and low skilled workers we use our framework to compare alternative specifications of international migration estimate the magnitude of migration costs by source destination pair and assess the contribution of wage differences to how migrants sort themselves across destination countries

an optimizing is lm specification for monetary policy and business cycle analysis we ask whether relations of the is lm type can sensibly be used for the aggregate demand portion of a dynamic optimizing general equilibrium model intended for analysis of issues regarding monetary policy and cyclical fluctuations the main result is that only one change the addition of a term regarding expected future income is needed to make the is function match a fully optimizing model whereas no changes are needed for the lm function this modification leads to a dynamic forward looking model of aggregate demand that is tractable and usable with a wide variety of aggregate supply specifications theoretical applications concerning price level determinacy and gradual price adjustment are included

migration and job change a multinomial logit approach abstract a multinomial logit model of residence and job change is developed and estimated both housing demand and job search characteristics are found to be significant determinants of the decision to migrate it is also found that both equilibrium and disequilibrium forces induce migration and job change finally the data do not appear to be ordered with respect to job and residence change contingencies with the exception of changing neither job nor residence relative to all other contingencies

labour supply and commuting abstract we examine the effect of commuting distance on workers labour supply patterns distinguishing between weekly labour supply number of workdays per week and daily labour supply we account for endogeneity of distance by using employer induced changes in distance in germany distance has a slight positive effect on daily and weekly labour supply but no effect on the number of workdays the effect of distance on labour supply patterns is stronger for female workers but it is still small

optimal service speeds in a competitive environment this is a study of the economic behavior of vendors of service in competition a simple model with two competing exponential servers and poisson arrivals is considered each server is free to choose his own service rate at a cost per time unit that is strictly convex and increasing there is a fixed reward to a server for each customer that he serves the model is designed to study one specific aspect of competition namely competition in speed of service as a means for capturing a larger market share in order to maximize long run expected profit per time unit a two person strategic game is formulated and its solutions are characterized depending on the revenue per customer served and on the cost of maintaining service rates the following three situations may arise i a unique symmetric strategic nash equilibrium in which expected waiting time is infinite ii a unique symmetric strategic equilibrium in which expected waiting time is finite and iii several nonsymmetric strategic equilibria with infinite expected waiting time an explicit expression for the market share of each server as a function of the service rates of the two servers is also given

the determinants and welfare implications of us workers diverging location choices by skill 1980 2000 abstract from 1980 to 2000 the rise in the us college high school graduate wage gap coincided with increased geographic sorting as college graduates concentrated in high wage high rent cities this paper estimates a structural spatial equilibrium model to determine causes and welfare consequences of this increased skill sorting while local labor demand changes fundamentally caused the increased skill sorting it was further fueled by endogenous increases in amenities within higher skill cities changes in cities wages rents and endogenous amenities increased inequality between high school and college graduates by more than suggested by the increase in the college wage gap alone jel d31 i26 j24 j31 j61 r23

price level versus inflation targeting with financial market imperfections this paper compares price level path targeting pt with inflation targeting it in a sticky price dynamic general equilibrium model augmented with imperfections in both the debt and equity markets

wages nonwage job characteristics and the search behavior of employees this paper analyzes the search decision of employees empirically a maximum likelihood model consisting of a wage equation and a search equation in which the difference between the present and the nonobserved alternative market wage is included is estimated to investigate the importance of nonwage job characteristics and future wage prospects relative to the present wage the estimation results indicate that both present and future wages and nonwage job characteristics have a significant impact on the search decisions of employees copyright 1991 by mit press

cities in bad shape urban geometry in india the spatial layout of cities is an important feature of urban form highlighted by urban planners but overlooked by economists this paper investigates the causal economic implications of city shape in india i measure cities geometric properties over time using satellite imagery and historical maps i develop an instrument for urban shape based on geographic obstacles encountered by expanding cities compact city shape is associated with faster population growth and households display positive willingness to pay for more compact layouts transit accessibility is an important channel land use regulations can contribute to deteriorating city shape

job moving residential moving and commuting a search perspective abstract we address the interrelationships between residential mobility labor market mobility and commuting the paper takes its starting point in recent findings in economic research which emphasise that job and residence relocation decisions imply forward looking decision making we examine job and residential mobility by means of bivariate models and interpret the outcomes in light of the search model

the substitution between moves and quits if a worker s workplace and residence locations do not maximize utility quits and moves are substitutes a quit or a move alone is more likely than both together records of a single company confirm this simultaneous bivariate probit estimates of move and quit behavior demonstrate that uncontrolled shocks to quits and moves are negatively correlated furthermore when the company relocated from the central business district to a suburb of its metropolitan area the occurrence of either a quit or a move virtually precluded the occurrence of the other among employees whose journeys to work were lengthened by the relocation copyright 1991 by royal economic society

commuting in search of jobs and residences abstract this paper introduces a model which includes residential job moving and commuting behavior when labor and housing markets are characterized by market imperfections imperfect information and moving costs we examine the consequences of these market imperfections on commuting behavior an empirical analysis of commuting behavior indicates that workers commute less if they receive more job offers

the role of amenities and quality of life in rural economic growth a structural model of regional economic growth is estimated using data for 2243 rural u s counties five indices designed to capture specific amenity and quality of life characteristics are constructed using fifty four separate indicators results suggest that amenity characteristics can be organized into consistent and meaningful empirical measures that move beyond ad hoc descriptions of amenities in addition to insights into the influence of local characteristics ranging from tax burdens to income distribution on regional economic growth results suggest that predictable relationships between amenities quality of life and local economic performance exist

ease vs noise long run changes in the value of transport dis amenities for a complete cost benefit analysis of durable infrastructures it is important to understand how the value of non market goods such as transit time and environmental quality changes as incomes rise in the long run we use difference in differences and spatial differencing to estimate the land price capitalization effects of metro rail in berlin germany today and a century ago over this period the negative implicit hedonic price of rail noise tripled our results imply income elasticities of the value of noise reduction and transport access of 2 2 and 1 4 substantially exceeding cross sectional contingent valuation estimates

core periphery economic linkage a measure of spread and possible backwash effects for the washington economy many questions regarding economic development should be viewed in a regional core periphery framework a core periphery input output model of the washington state economy was constructed the core region supplied the periphery with higher order services while the periphery furnished the core with natural resource based commodities weak backward linkages from major core industries to the periphery lead to rejection of the growth pole theory tenet that core growth supports periphery growth economic growth in the periphery was felt more strongly in the core because periphery sectors with strong within region effects generally had strong impacts in the core

intra urban wage variation employment location and commuting times abstract theory predicts that within a metropolitan area employers located where there is difficult commuting will have to compensate their workers with appropriately higher wages this should hold whether one is comparing central city work locations with those at the fringe or simply differences between suburban edge cities in the longer run if employers are concerned primarily with labor costs firm mobility should equalize wages or else agglomeration economies must exist to sustain the differences using microdata from the 1990 census for 2 large metropolitan areas in the u s wage equations are estimated for urban workers allowing for different wage levels depending on zone of employment the results show that observationally equivalent workers have wages that vary substantially across employment zones within a metro area and that this variation is strongly and significantly correlated with the average commute time of the workers employed in that zone these results hold across several different econometric specifications wages and average travel times also are found to be highly correlated with the aggregate number of workers in each zone but are not affected by zone employment specialization thus there is inconclusive evidence as to whether wage commuting cost differences result from equilibrium agglomeration effects or from a disequilibrium distribution of employment

endogenous monetary policy and the business cycle the correlations and volatilities of real variables seem to be stable over time but the relation between real and nominal variables is unstable presumably one important factor behind this observation is the nature of money supply in this paper i look at a business cycle model where the central bank sets money supply to minimize the volatility of in ation and output i nd that small changes in the central bank s preferences can generate large changes in the derived money supply rule and in correlations between real and nominal variables although wages are assumed to be sticky changes in the money supply rule do not generate any major changes in the behavior of real variables 2000 elsevier science b v all rights reserved jel classixcation e32 e52

on the job search some empirical evidence from britain abstract this paper considers evidence from the labour force survey concerning job search by employed workers the unconditional probability of observing on the job search is decomposed into the product of two constituent probabilities upon which maximum likelihood estimation is performed the analysis facilitates the identification of who searches and whether search takes place in work or from unemployment temporary or part time employment encourages continued search by men but not women skilled workers search more than the unskilled and demonstrate a preference for employed search inter industry wage relativities encourage search on the job job tenure is a significant determinant of the quality of a job match and the subsequent likelihood that on the job search is undertaken employed job seekers adopt search strategies that are more readily integrated into a working environment

land use worker heterogeneity and welfare benefits of public goods we show that investments in public goods change the optimal land use in their vicinity leading to additional welfare benefits this occurs through two sorting mechanisms first availability of public goods leads to higher population densities second population groups sort according to their preferences for public goods we develop a structural spatial general equilibrium model that accounts for these effects the model is estimated using data on transport infrastructure commuting behaviour land use and land rents for some 3000 zip codes in the netherlands and for three levels of education welfare benefits of investments in public transport infrastructure are shown to differ sharply by workers educational attainment welfare gains from changes in land use account for up to 30 of the total benefits of a transport investment

preemption and rent equalization in the adoption of new technology we study the adoption of a new technology to illustrate the effects of preemption in games of timing we show that the threat of preemption equalizes rents in a duopoly but that this result does not extend to the general oligopoly game if the gain to preemption is sufficiently small then the optimal symmetric outcome which involves late adoption is an equilibrium this contrasts with reinganum s result that in precommitment equilibria there must be diffusion we develop a new and richer formalism for modeling games of timing which permits a continuoustime representation of the limit of discrete time mixed strategy equilibria

sex differences in urban commuting patterns this paper takes a new look both theoretical and empirical at the general question of what determines the pattern of urban workers commuting journeys and at the specific question of how women workers commuting journeys differ from those of men commuting journey length for urban workers has proved difficult to model because it stands at the intersection of urban and labor economic theories concerning the spatial location patterns of jobs and housing urban economists view workers as having fixed job locations at the center of the city and being compensated for longer commuting journeys by lower housing prices in the suburbs labor economists in contrast tend

residential and job mobility interregional variation and their interplay in us metropolitan areas while studies on residential and job mobility are typically conducted on a micro scale an examination of region wide mobility dynamics can also be meaningful as it can reflect the importance of s

the capital budgeting process incentives and information we study the capital allocation process within firms observed budgeting processes are explained as a response to decentralized information and incentive problems it is shown that these imperfections can result in underinvestment when capital productivity is high and overinvestment when it is low we also investigate how the budgeting process may be expected to vary with firm or division characteristics such as investment opportunities and the technology for information transfer there is general agreement that investment decisions are the most important decisions made by corporations the choice of projects and the level of investment is critical not just for stakeholders of the firm but also for the economic well being of society as a whole it has been alleged that u s firms invest too little and tend to overemphasize short term results for example porter 1992 citing poterba and summers 1992 asserts that u s firms use hurdle rates to evaluate investment projects that are higher than their estimated costs of capital to understand the investment behavior of firms one must consider both the process by which external capital is made available to firms and the process by which internally and externally raised capital is allocated to investment projects within the firm considerable attention has been paid to how firms raise external capital the fundamental insight in this area is the celebrated result of modigliani and miller mm that capital structure is irrelevant in the absence of capital market frictions accordingly in the three decades since their contribution research on how external capital is raised has focused on market frictions including information and incentive problems relatively little research has focused on the internal allocation process and its relationship to the organization of the firm modern finance theory prescribes allocating capital according to the net present value npv rule just as the mm result itself provides no theory of the arrangements under which

attrition in longitudinal panel data and the empirical analysis of dynamic labour market behaviour in the empirical analysis of unemployment durations and job durations it is generally assumed that the stochastic processes underlying labour market behaviour and the behaviour concerning participation in a panel survey are independent however there are reasons to believe that the probability of dropping out of the panel is related to the rate at which a different job is found if there is such a relation and if it is ignored then the estimator of the rate at which individuals become employed or change jobs will generally be inconsistent in this paper we analyse the relation between the duration spent in a particular labour market state and the duration of panel survey participation by explicitly modelling and estimating the joint distribution of both durations the emphasis will be on models allowing for stochastically related unobserved determinants of both types of duration we estimate models both for unemployment durations and for job durations copyright 1994 john wiley sons ltd

riding the wave of urban growth in the countryside spread backwash or stagnation the advisability of an urban centered growth strategy to reap the benefits of urban agglomeration economies is much debated rural areas benefit when the growth spreads to the hinterlands especially within daily commuting distance yet in distant peripheral locations urban growth may create a backwash as households relocate to the urban center this study examines spread vs backwash as separate from long run distance from urban center trend effects using a novel canadian gis database the unique nation wide approach yields a spread and backwash rural growth topography that varies by distance from the urban center by urban population vs income growth and by size of rural community

transition intensities in the dutch labour market 1980 85 using data from a set of retrospective questions from a dutch national sample on individual labour market experiences in the period 1980 85 a three state hazard model is estimated transitions are analysed between three labour market states employment unemployment and the out of the labour force as well as between jobs job mobility allowance is made for time varying exogenous variables and for duration dependence the estimated transition rates allow us to predict individual probabilities of participation in the labour force of unemployment and employment and to calculate expected lengths of stay in each of these labour market states as a function of personal characteristics and relevant demand conditions

digging for golden carrots an analysis of research tournaments contracting for research is often infeasible because research inputs are unobservable and research outcomes cannot be verified by a court sponsoring a research tournament can resolve these problems a model is presented in which contestants compete to find the innovation of highest value to the tournament sponsor the winner receives a prespecified prize the tournament game has a unique subgame perfect equilibrium free entry is not optimal because equilibrium effort by each researcher decreases in the number of contestants an optimally designed research tournament balances the probability of overshooting the first best quality level against the probability of falling short copyright 1995 by american economic association