generational accounting a meaningful way to evaluate fiscal policy this paper illustrates the technique of generational accounting a new way to evaluate fiscal policy that overcomes the inherent ambiguities of traditional deficit accounting the authors illustrate why there is no correct measure of the deficit and how generational accounting estimating the fiscal burdens current policy places on different generations provides a clearer picture of the intergenerational and macroeconomic effects of fiscal policy than any measure of the deficit their calculations suggest that despite recent changes u s fiscal policy is unsustainable in that it will ultimately require future generations to bear a much higher burden than those currently alive

transfers in a polarized country bridging the gap between efficiency and stability we consider a political economy model of country whose citizens have heterogeneous preferences for a national policy and some regions may contemplate a threat of secession the country is efficient if its break up into smaller countries leads to aggregate utility loss we show that in an efficient country whose citizens preferences exhibit a high degree of polarization a threat of secession cannot be eliminated without interregional transfers we also demonstrate that if majority voting is used to determine the redistribution schemes within the country then a high degree of polarization yields the full compensation scheme as the unique political equilibrium

market heterogeneity and the determinants of paris apartment prices a quantile regression approach in this paper the heterogeneity of the paris apartment market is addressed for this purpose quantile regression is applied with market segmentation based on price deciles and the hedonic pri

understanding heterogeneous preferences in random utility models a latent class approach a finite mixture approach toconditional logit models is developed in whichlatent classes are used to promoteunderstanding of systematic heterogeneity the model is applied to wilderness recreationin which a branded choice experiment involvingchoice of one park from a demand system wasadministered to a sample of recreationists the basis of membership in the classes orsegments in the sample involved attitudinalmeasures of motivations for taking a trip aswell as their stated preferences overwilderness park attributes the econometricanalysis suggested that four classes of peopleexist in the sample using the model toexamine welfare measures of some hypotheticalpolicy changes identified markedly differentwelfare effects than the standard singlesegment model and provided insight into thedifferential impact of alternative policies

defining the government s debt and deficit defining the government s debt and deficit although the budget deficit and the public debt feature prominently in political debate and economic research there is no agreement about how they should be measured they can be defined for different sets of public institutions including the nested sets corresponding to central government general government and the public sector and for any definition of government there are many measures of the debt and deficit including those generated by four kinds of accounts cash financial full accrual and comprehensive which can be derived from four nested sets of assets and liabilities each debt and deficit measure says something about public finances but none tells the whole story each is also vulnerable to manipulation and is likely to be manipulated if it is subject to a binding fiscal rule or target narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of government narrow definitions of debt and deficit encourage operations involving off balance sheets assets and liabilities while broad measures are susceptible to the mismeasurement of on balance sheet assets and liabilities reviewing the literature on these issues the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships

estimating market prices and assessed values for income properties assessors perform property valuations for the purpose of tax assessment buyers and sellers make investment decisions culminating in a market price the valuation by assessors is supposed to be fair and equitable and to amount to a prescribed proportion of market value we investigate the property features considered by assessors in arriving at the assessed value and by buyers and sellers in arriving at the market price we also explore what factors appear to be considered differently by the assessors and the market thus contributing to overassessment or underassessment of property taxes the analysis deals with income properties centrally located in stockholm sweden

regions of europe a feasible status to be discussed regions of europe jacques dreze a new concept is proposed that of regions of europe which do not have full statehood and belong not to any state but to the community directly without endorsing this possibility and limiting itself to its economic aspects this article discusses the various dimensions of its economic desirability it appears that in general autonomous regions will not find it advantageous to insure each other investigating how assets and liabilities should be apportioned at the time of secession it argues in favour of distributive neutrality net incomes are unchanged by the secession itself in both the seceding region and the rest of the nation how distributive neutrality could be implemented is explored through a number of suggestive examples in general a region receives a share of the public debt related to its share of the public primary deficit with corrections to account for growth unsustainability of the public debt and so on

increasing the capital income tax may lead to faster growth this paper shows that under rather mild conditions higher capital income taxes lead to faster growth in an overlapping generations economy with endogenous growth government expenditures are financed with labor income taxes as well as capital income taxes since capital income accrues to the old taxing it reliefs the tax burden on the young and leaves them with more income out of which to save we argue that savings are sufficiently interest inelastic so that higher savings and therefore higher growth result the basic argument is not seriously challenged by a grandfather clause for initial capital or by the old receiving some labor income as well the reasoning is similar to feldstein 1978 auerbach 1979 and in particular jones and manuelli 1992 but in contrast to the conventional wisdom about the effect of capital income taxation as say in lucas 1990

exploring spatial dynamics with land price indexes the purpose of this study is to explore the within region spatial dynamics of appreciation and depreciation rates using three different representations of geographical space mean value indexing methods are used to construct global land price indexes sub market land price indexes and local land price indexes using transaction price data for vacant residential land within the city of hamilton ontario between 1995 and 2003 the results are validated against statistics canada s series of new housing price indexes followed by a comparison of the relative performance of the three geographical representations of land price indexes the results indicate that the mean value indexing methods are robust although subject to outliers and sample selection bias and clearly illustrate the spatial dynamics of annual appreciation and depreciation rates across the study area the results also underscore the need for regular surveillance of the spatial dynamics of urban land markets

unfunded liabilities and uncertain fiscal financing we develop a rational expectations framework to study the consequences of alternative means to resolve the unfunded liabilities problem the projected exponential growth in federal social security medicare and medicaid spending with no known plan for financing the transfers resolution requires specifying a probability distribution for how and when monetary and fiscal policies will change as the economy evolves through the 21st century beliefs based on that distribution determine the existence of and the nature of equilibrium we consider policies that in expectation combine reaching a fiscal limit some distorting taxation modest inflation and some reneging on the government s promised transfers in the equilibrium inflation targeting monetary policy and debt targeting tax policy cannot anchor expectations on those target variables expectational effects are always present but need not have large impacts on inflation and interest rates in the short and medium runs in the economy s stationary distribution the capital stock may grow or shrink and substantial probability falls on little or no reneging

inter vivos transfers and intergenerational exchange the surge of interest in intergenerational transfers in the past decade has sparked a debate over the motivation for them are transfers given out of altruism or part of an exchange while each motive is probably at work to some extent we know little about whether one motive predominates the question is relevant for issues concerning public income redistribution and inequality in the family but despite its importance empirical evidence about motives is scarce because of limited data we investigate a new data set the national survey of families and households which remedies many of the shortcomings of other data sets containing private transfer information we find that empirical patterns for inter vivos transfers i e transfers between living persons are more consistent with exchange than altruism

is the dollar high because of large budget deficits abstract it is widely believed that the u s dollar has been high in recent years because of large u s budget deficits using three statistical techniques this paper shows that the belief has no empirical support ricardian equivalence may explain the lack of a positive association between the budget deficit and the dollar s exchange rate

the choice theory approach to market research this paper surveys economic choice theory stressing developments that permit use of data from psychometric and conjoint experiments to produce market demand forecasts alternatives to the widely used multinomial logit model are summarized and a new method for estimating multinomial probits is described an integration of choice models with attitudinal scaling and perceptual mapping within a latent variable system is described estimation of such systems under either random effects or fixed effects descriptions of heterogeneity across individuals is discussed issues in the use of choice models to describe responses from conjoint experiments are presented new regression diagnostic tests for the consistency of multinomial logit representations are discussed

co evolution of gated communities and local public goods gated communities are often seen as steps towards the privatization of the public realm this is too simple a characterization however privately and publicly governed infrastructure and services exist and adapt symbiotically there is little empirical research focusing on the co evolution of private and public neighbourhoods in this paper we focus on a specific question that has not yet been answered does the spatial pattern of privately supplied public goods co evolve with the pattern of publicly supplied public goods we examine this question through a case study of seoul where club residential communities are common enough to test co evolution hypotheses we identify co evolutionary relationships between club goods supplied in condominiums and public goods supplied by municipalities and market we also find evidence of tieboutian intra urban market and show how the substitution of club goods for positive urban externalities seems to weaken the influence of general accessibility on residential loca

generational accounting and intergenerational welfare we investigate the intergenerational welfare implications of generational accounting when it is used as the basis for intertemporal fiscal policy decisions in particular we consider an economy with a paygo social security system out of steady state due to a permanent fall in fertility in a highly stylized cge overlapping generations model we illustrate that policy recommendations based on a standard application of generational accounting may not be compatible with intertemporal welfare maximization our model provides an example where such policies are either time inconsistent or welfare decreasing

leviathan and competition among jurisdictions the case of benefit taxation abstract this paper shows that interjurisdictional competition for mobile factors of production forces the government to raise the efficiency of the public sector and thus helps to tame leviathan governments however this result is derived under some restrictive assumptions concerning the kind of tax policy used by the government in the case of benefit taxes e g user charges a leviathan may be tamed by interjurisdictional competition whereas this is not necessarily true in the case of lum sum taxes

on the irrelevance of government debt when taxes are distortionary abstract we consider a government that can only raise funds by levying distortionary taxes we allow the government to collect taxes in a given period that are based on incomes earned in previous periods we show that once we do so given any debt path the government can adjust its tax policy so as to attain that debt path without affecting equilibrium allocations or prices

modelling spatial structures in local housing market dynamics a multilevel perspective there has been a long history of research into the development and estimation of hedonic house price models there is however a discrepancy between the empirical and theoretical approaches to this research a major issue lies in the integration of the conceptual and theoretical models of local housing markets with the context insensitive nature of the standard hedonic model specification this paper explores this inconsistency by using multilevel modelling to move towards a more empirically and conceptually appealing specification of the hedonic house price model it uses price data from cardiff to investigate how a multilevel approach can explicitly incorporate the spatial structures of housing market dynamics and the ad hoc nature of the valuation process the paper concludes that successful empirical analysis depends upon a clear theoretical understanding of the processes under investigation

spatial heterogeneity in hedonic house price models the case of austria modelling spatial heterogeneity sh is a controversial subject in real estate economics single family home prices in austria are explored to investigate the capability of global and locally weighted hedonic models even if regional indicators are not fully capable to model sh and technical amendments are required to account for unmodelled sh the results emphasise their importance to achieve a well specified model due to sh beyond the level of regional indicators locally weighted regressions are proposed mixed geographically weighted regression mgwr prevents the limitations of fixed effects by exploring spatially stationary and non stationary price effects besides reducing prediction errors it is concluded that global model misspecifications arise from improper selected fixed effects reported findings provide evidence that the sh of implicit prices is more complex than can be modelled by regional indicators or purely local models the existence of both stationary and non stationary effects implies that the austrian housing market is economically connected

the specification of hedonic indexes for urban housing most studies evaluating the effect on housing prices of regulatory programs for controlling urban growth use econometric methods hedonic price models without considering the research design aspects of the task this article examines the strengths and

economic integration and political disintegration in a world of trade restrictions large countries enjoy economic benefits because political boundaries determine the size of the market under free trade and global markets even relatively small cultural linguistic or ethnic groups can benefit from forming small homogeneous political jurisdictions this paper provides a formal model of the relationship between openness and the equilibrium number and size of countries and successfully tests two implications of the model firstly the economic benefits of country size are mediated by the degree of openness to trade secondly the history of nation state creations and secessions is influenced by the trade regime

aggregate wealth in canada this paper describes a comprehensive measure of aggregate private sector wealth in canada that includes both human and nonhuman wealth wealth and its components are measured at a quarterly frequency from 1963 to 1994 human wealth is computed as the expected present value of aggregate labor income net of government expenditures using a finite state markov approximation to an estimated bivariate var for the real interest rate and net income growth nonhuman wealth is constructed by consolidating the assets and liabilities of the various sectors of the economy to the extent possible assets and liabilities are measured at market value

defining the government s debt and deficit although the budget deficit and the public debt feature prominently in political debate and economic research there is no agreement about how they should be measured they can b e defined for different sets of public institutions including the nested sets corresponding to central government general government and the public sector and for any definition of government there are many measures of the debt and deficit including those generated by four kinds of accounts cash financial full accrual and comprehensive which can be derived from four nested sets of assets and liabilities each debt and deficit measure says something about public finances but none tells the whol e story each is also vulnerable to manipulation and is likely to be manipulated if it is subject to a binding fiscal rule or target narrow definitions of government encourage the shifting of spending to entities outside the defined perimeter of governme nt narrow definitions of debt and deficit encourage operations involving off balance sheets assets and liabilities while broad measures are susceptible to the mismeasurement of on balance sheet assets and liabilities reviewing the literature on these is sues the paper concludes that governments should publish several measures of the debt and deficit in a form that clearly reveals their interrelationships

interest rates and expected future budget deficits in the united states several recent empirical studies have found no evidence of a positive association between interest rates and current and past budget deficits one possible explanation for this finding is that interest rates are related much more to the expectation of future budget deficits than to current and past budget deficits in this paper i investigate whether this explanation is valid finding no evidence that it is section ii briefly formulates and discusses the hypothesis under consideration stating some of its implications section iii presents the results of regressing the commercial paper rate moody s aaa bond rate and the ex post real commercial paper rate on current and past government spending budget deficits and real money supplies the regressions have been fitted to the entire sample of monthly data spanning the period between june 1908 and march 1984 and to 11

market potential for smart growth neighbourhoods in the usa a latent class analysis on heterogeneous preference and choice with data from a 2011 national association of realtors community preference survey we examined individuals preferences and the resulting market potential for smart growth neighbourhoods in the usa using a latent class choice model we discovered four classes of individuals that reveal distinctive behaviours when choosing smart growth neighbourhoods based on the interplay between aspects of community design socioeconomic characteristics and personal attitudes based on these results we estimated the demand for smart growth neighbourhoods given the way they are planned and built by linking the results of the latent class choice to a market diffusion model we were able to evaluate the effectiveness of a proposed smart growth neighbourhood design in inducing less sprawling development

assessing the role of futures position substitutability in a monthly slaughtered pork factor demand by us processors a cointegrated var model approach abstractthis article combines cointegrated var modelling with basic neoclassical production microeconomics in a new way that tests for and illuminates the empirical nature of the monthly us pork processing sector s factor demand for slaughtered pork statistical evidence strongly suggests that the us pork processing sector has a hicksian cobb douglas slaughtered pork demand that arises from applying shephard s lemma to the sector s cost function and that us pork processors treat slaughtered pork and related futures positions as close factor substitutes in the wake of major and ongoing futures market events and trends this study establishes and statistically tests a theoretical link between futures price movements and impacts on the underlying slaughtered pork market through monthly formation of us pork processors factor demand for slaughtered pork evidence suggests that demand agents shift between demands for the two substitutes based on movements in the slaughter futures price ratio that results in

traffic congestion accessibility to employment and housing prices a study of single family housing market in los angeles county this study mainly addresses two main questions 1 whether traffic congestion negatively affects single family house price by constraining accessibility to jobs 2 whether congestion effects and

compact development and preference heterogeneity in residential location choice behaviour a latent class analysis the success of compact development depends in part on accurately gauging its public demand and understanding residents preferences towards it drawing upon a stated preference survey in the wasatch front region in utah this paper estimates preferences for compact walkable and transit friendly neighbourhoods through the application of a discrete choice experiment results derived from a latent class analysis reveal significant heterogeneity in residential location preferences overall strong preferences for compact development are more likely to occur among families with fewer school age children low income and renter occupied households and those who appreciate social heterogeneity and have less desire for privacy these tastes are also associated with personal preferences for walking and biking and supportive opinions toward environmental protection and urban growth boundary policies by comparing respondents preferences to their actual residential and travel choices in two contrasting subregions we further address the complex relationships between environment preferences residential locations and travel

bargaining power in apartment sales in corsica a latent class approach this paper extends the bargaining model of harding et al harding j rosenthal s and sirmans cf 2003 estimating bargaining power in the market for existing homes review of economics and statist

fiscal policy and educational attainment in the united states a generational accounting perspective in this paper we investigate the consequences of the rise in educational attainment on us generational accounts we build on the 1995 existing accounts and disaggregate them per schooling level contrary to medium and high skill newborns we show that low skill newborns are characterized by negative generational accounts compared to the results obtained with the traditional methodology our baseline forecast is more optimistic nevertheless the rise in educational attainment is not strong enough to restore the generational balance balancing the budget requires increasing taxes by 1 2 or reducing transfers by 2 7 our results are robust to the main assumptions

development of standardized indices for measuring house price inflation incorporating physical and locational characteristics the measurement of house price inflation over time is considered and a methodological approach to the problem proposed the measurement technique presented incorporates physical and locational features in the house price model results are presented for regional and uk data over the time period 1983 1 1989 4

factor mobility risk and redistribution in the welfare state economic integration reduces the costs of factor mobility producing efficiency gains and contributing to equalization of net factor returns this raises the cost of income redistribution policy thus threatening a basic function of the welfare state a simple model of costly factor mobility under uncertainty shows that greater factor mobility enables factor owners to pool industry specific region specific or occupation specific risks due to uncertain technology or terms of trade economic integration may thus reduce some of the potential social insurance benefits of redistributive policy

the rate of return to public sector agricultural r d in the uk 1965 80 1989 the rate of return to public sector agricultural r d in the uk 1965 80 applied economics vol 21 no 8 pp 1063 1086

market accessibility and hotel prices in the caribbean the moderating effect of quality signaling factors abstract the purpose of the paper is to investigate the influence of market accessibility on hotel prices and how this influence is moderated by various quality signaling factors such as online user ratings thumbs up recommendation percentage hotel class and chain affiliation using a randomized sample of hotels in the caribbean islands we employ a three level mixed effect linear regression model to investigate the plausible relationship between market accessibility and hotel prices after controlling for unobserved island level and hotel level characteristics the model indicates that in most periods low market accessibility high flight costs leads to lower hotel prices and this influence is mitigated by well established positive reputations as represented by the quality signaling factors our findings imply that hotels should work to increase their reputations to help buffer the impacts of inaccessibility in an effort to increase market accessibility one course of action is to reduce airport landing taxes and fees

perspectives from the president s commission on social security reform recently we were asked to serve on the president s commission to strengthen social security csss along with 14 other members drawn equally from both major political parties the commission s charge was to provide recommendations to modernize the social security system restore its fiscal soundness and develop a workable system of personal retirement accounts this paper explains how the commission arrived at some of its recommendations and the role that economics played in contributing to these recommendations we describe the key institutional constraints confronting efforts to reform social security and how these constraints influenced commission decisions we also illustrate how economics research influenced the commission s analysis of how to structure personal accounts ways to enhance traditional social security program finances and means of measuring the extent of financial progress achieved through reform

the impact of rental properties on the value of single family residences abstract this study examines the effects that single family rental properties in a residential neighborhood have on the value of single family residences in that area the analysis blends real estate valuation concepts with evidence found in the housing maintenance literature and urban succession theory to develop testable hypotheses regarding the property specific proximity related and neighborhood wide impacts of rental properties on property values the data used to test the hypotheses include the tenure status of 23 119 single family residences and 1 162 single family sales regression results support all three hypotheses although numerous studies on the value impacts of other externalities have been published this is the first study to examine the separation of property rights the results of this study provide additional insights into housing maintenance and also have implications for neighborhood zoning regulations

debt sharing and secession a generational accounting approach cattoir p and docquier f 2004 debt sharing and secession a generational accounting approach reg studies38 293 303 this paper investigates one of the most important financial issues arising from a secession or a country partitioning namely the sharing of the national public debt extending dreze s distributive neutrality condition we use the generational accounting technique and propose a dynamic debt sharing criterion which takes into account both the true debt future generations inherit and their contributive capacity the equivalence with dreze s static rule is only obtained on the balanced growth path and in the absence of initial regional debt an application of our criterion to the belgian case offers striking results cattoir p et docquier f 2004 secession et partage de la dette publique une approche par la comptabilite generationnelle reg studies38 293 303 ce papier analyse l une des principales questions budgetaire posee en cas de secession ou de partage d un etat en plusieurs

the state of the art of environmental valuation with discrete choice experiments abstract this paper provides with a review of the state of the art of environmental valuation with discrete choice experiments dces the growing body of literature on this field serves to emphasize the increasing role that dces are playing in environmental decision making in the last decade the paper attempts to cover the full process of undertaking a choice experiment including survey and experimental design econometric analysis of choice data and welfare analysis the research on this field is found to be intense although many challenges are put forward e g choice task complexity and cognitive effort experimental design preference and scale heterogeneity endogeneity or model uncertainty reviewing the state of the art of dces serves to draw attention to the main challenges that this methodological approach will need to overcome in the coming years and to identify the frontiers in discrete choice analysis

accountability and decentralisation in government an incomplete contracts model this paper approaches the question of the appropriate level of decentralisation of power in government as a problem in the allocation of control rights under incomplete contracts the model of the paper compares allocations of power to local central and regional government as alternative means of motivating governments to act in the interests of citizens centralisation allows benefits from policy coordination but has costs in terms of diminished accountability which can be precisely defined as the reduced probability that the welfare of a given region can determine the re election of the government the model is extended to allow for conflicts of interest within regions and externalities between central and local governments in a federation it is also applied to determining levels of fiscal transfer between localities and to circumstances where governments may act as leviathans appropriating resources for their own use

togetheror separately issues on the costs and benefits of political and fiscal unions abstract around the world one observes a tendency toward political separatism the economic literature generally but not always emphasizes several benefits of large fiscal and therefore political jurisdictions in this paper we discuss several politico economic arguments which reconcile this tension between normative economic models and empirical observations

combining revealed and stated preference data to estimate preferences for residential amenities a gmm approach we show how stated preference information obtained from a choice experiment and revealed preference information based on housing market transactions can be combined via generalized method of moments gmm estimation specifically we use a moment condition matching the predicted marginal willingness to pay wtp from a first stage hedonic model to the marginal wtp formula implied by the choice experiment utility function this is coupled with other moments from the choice experiment to produce gmm based estimates of parameters that reflect the strengths of each data source our application values remediation of a contaminated site in buffalo new york and we find evidence in support of estimates arising from our approach jel q51 q53

sinning in the basement what are the rules the ten commandments of applied econometrics unpleasant realities of real world data force applied econometricians to violate the prescriptions of econometric theory as taught by our textbooks leamer 1978 vividly describes this behavior as wanton sinning in the basement with sinners metamorphizing into high priests as they ascend to the third floor to teach econometric theory but this sinning is not completely wanton applied econometricians do or should follow some unwritten rules of behavior in effect bounding the sinning and promoting a brand of honor among sinners this paper exposits these rules and culls from them an unauthorized list of the ten commandments of applied econometrics

using a choice experiment to account for preference heterogeneity in wetland attributes the case of cheimaditida wetland in greece abstract this paper aims to assist policy makers in formulating efficient and sustainable wetland management policies in accordance with the ramsar convention and the european union water framework directive 2000 60 ec by providing results of a valuation study on the cheimaditida wetland in greece a choice experiment is employed to estimate the values of changes in several ecological social and economic functions that cheimaditida wetland provides to the greek public in addition to the conditional logit model a random parameter logit model a random parameter logit model with interactions and a latent class model are estimated to account for heterogeneity in the preferences of the public for the various functions of the wetland the results reveal that there is considerable preference heterogeneity across the public and on average they derive positive and significant values from sustainable management of this wetland the estimated economic benefits of sustainable wetland management are weighed against the costs of alternative wetland management scenarios results of this cost benefit analysis can aid in the design of socially optimal policies for sustainable management of the cheimaditida wetland with possible implications for other similar wetlands in greece and the rest of europe

the price premium for green labelled housing evidence from china the chinese central government introduced the chinese green building label in 2008 which makes china one of the few developing countries with an official rating system of buildings performance in sustainability this paper investigates the existence and magnitude of the price premium associated with this official green label in the residential sector based on a unique data set of green labelled newly built housing projects and their non labelled counterparts from around the country in 2013 an empirical analysis suggests that the labelled housing projects attract a price premium of 6 9 compared with their non labelled counterparts further analysis suggests that this official green label is more effective as a reliable signal of buildings energy efficiency in the chinese context compared with developers self advertised greenness these results provide preliminary evidence that with this official rating system the investment in buildings energy efficiency could be potentially profitable for ho

generational accounting a new approach for understanding the effects of fiscal policy on saving working pa er 9107 generational accounting a new approach for understanding the effects of fiscal policy on saving by alan j auerbach jagadeesh gokhale and laurence j kotlikoff alan j auerbach is a professor of economics at the university of pennsylvania and an associate of the national bureau of economic research jagadeesh gokhale is an economist at the federal reserve bank of cleveland and laurence j kotlikoff is a professor of economics at boston university and an asso ciate of the national bureau of economic research working papers of the federal reserve bank of cleveland are preliminary materials circu lated to stimulate discussion and critical comment the views stated herein are those of the authors and not necessarily those of the federal reserve bank of cleveland or of the board of governors of the federal reserve sys tem may 1991

the choice of functional forms for hedonic price equations comment abstract rosen 13 freeman 4 halvorsen and pollakowski 6 and others have stressed that economic theory does not suggest an appropriate functional form for hedonic price functions 1 it consequently is reasonable to try several functional forms and utilize the multiple regression equation with the best performance in this spirit halvorsen and pollakowski 6 recommend using the box cox flexible functional form for hedonic analysis and measuring best performance with a goodness of fit test the box cox methodology has also been adapted in hedonic studies by goodman 5 linneman 10 blomquist and worley 1 and eberts and gronberg 3 2 the box cox is particularly suited for testing functional forms because many familiar forms such as semilog log linear and translog are subsets of the flexible box cox permitting nested hypothesis testing in this note we illustrate that the formal hypothesis testing advantage of the box cox functional form is purchased at the expense of other important goals the goal of most hedonic studies is to estimate the prices of the characteristics to measure the response to changes in the prices and or to predict future expenditures using a best fit criterion to choose functional forms does not necessarily lead to more accurate estimates of characteristic prices in fact the large number of coefficients estimated with the box cox functional form reduces the accuracy of any single coefficient which could lead to poorer estimates of specific prices second because any negative number raised to a noninteger real power is imaginary the traditional box cox functional form is not suited to any data set containing negative numbers third the box cox functional form may be inappropriate for prediction since the mean predicted value of the untransformed dependent variable need not equal the mean of the sample upon which it is estimated the predicted untransformed variable housing value will be biased the predicted untransformed dependent variable may also be imaginary fourth the nonlinear transformation results in complex estimates of slopes and elasticities which are often too cumbersome to use properly we discuss each of these drawbacks and quantify them when possible in the remainder of this note

do budget deficits raise nominal interest rates evidence from six countries abstract it is widely believed that budget deficits raise nominal interest rates this paper shows that the belief has no empirical support for six countries ricardian equivalence may explain the lack of a positive association between budget deficits and nominal interest rates

measuring changes in local house prices an empirical investigation of alternative methodologies abstract this paper investigates whether reliable house price indices can be constructed using a limited set of descriptive variables on a large number of observations four primary index methods are compared 1 median sale price 2 restricted hedonic 3 repeat sales and 4 the assessed value technique the paper examines the precision and accuracy of each of the alternative indices

a multi level analysis of the variations in domestic property prices southern england 1980 87 it is argued that previous research on spatial variations in domestic property prices has failed to consider the multi level nature of the problem in describing underlying temporal trends and spatial patterns at the macro level it is necessary to take account of the attributes of individual properties at the micro level as an empirical illustration of the general approach a number of models are calibrated for southern england using sample data derived from building society mortgages

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

farmland rental prices in gm soybean areas of argentina do contractual arrangements matter abstractin this paper we study the determinants of the rental price of farmland in the argentinian pampas in particular we examine the price of lease contracts using a hedonic price model while controlling for other potential sources of variation using firsthand data for 255 plots our results indicate that both short term contracts and contracts with sowing pools push rental prices upwards we also find that soybean yields have a significant impact on land rental prices these results suggest that if argentina intends to protect the enormous natural advantage it has for agricultural production it should consider strictly regulating land rental contracts

the effects of a new subway line on housing prices in metropolitan toronto an analysis by means of using the estimation results of a modal choice model and the hedonic price regressions model is conducted in order to identify the effects of a subway line in toronto on the values of housing units the modal choice model is used for the estimation of the direct benefits from the improvement in transportation and the hedonic price equations for the identification of subway effects on housing prices empirical results indicate that the direct savings in commuting costs have been capitalized into housing values

is the extended family altruistically linked direct tests using micro data this paper uses panel study of income dynamics data on parents and their adult children to test the standard altruism model this model predicts that within the extended family the distribution of consumption is independent of the distribution of resources the authors findings strongly reject this prediction copyright 1992 by american economic association