revealing space in spatial externalities edge effect externalities and spatial incentives abstract this paper analyzes the spatial incentives created by distance dependent negative spatial externalities titled edge effect externalities it illustrates standard externality results in a spatial context and derives several new results while the externality creates an incentive for a recipient to distance himself from the externality generating land use this distance is too small from a social standpoint rationalizing buffer zones imposed by regulatory authorities further the market rental rate of land for the externality recipient is higher than socially optimal resulting in a potential barrier to entry for the impacted land use finally although the recipient understands and can geographically avoid externality damage standard market failure occurs results are demonstrated using graphical and land rent interpretations of familiar aspatial general equilibrium conditions the paper thus strives to provide a more thorough exposition of the spatial impacts of this class of externalities than provided elsewhere in the literature

the geography of market failure edge effect externalities and the location and production patterns of organic farming abstract perceptions of increasing land scarcity and negative impacts of chemical based agriculture have led to increasing concern regarding the sustainability of food systems incompatible production processes among farming systems may lead to spatial conflicts and production losses between neighboring farms and the magnitude of such losses may depend not only on the scale of each activity but also on patterns of land use such conflicts can be classified as edge effect externalities spatial externalities whose marginal impacts decrease as distance from the border generating the negative impact increases this paper tests the hypothesis that edge effect externalities have influenced the location and production patterns of certified organic farms using data from california central valley certified organic farmers using concepts from landscape ecology and spatial statistics we investigate difference in parcel geometry and surrounding land uses between organic and non organic parcels using a generalized method of moments gmm spatially autoregressive econometric model we demonstrate that both parcel geometry and surrounding land uses influence the probability of a given parcel being certified organic we conclude with suggestions for policies to encourage development of organic farming regions

depletable externalities and pigouvian taxation abstract in their book baumol and oates the theory of environmental policy externalities public outlays and the quality of life prentice hall englewood cliffs n j 1975 argue that whether an externality is depletable private or undepletable public is the key characteristic in determining the optimal pricing pattern they argue that unlike the undepletable case a negative depletable externality requires not only a charge or tax on the generator of the externality but a payment or compensation to the victim in order to achieve pareto optimality it is shown that the key characteristic determining whether compensation of victims is required for efficiency is not the depletability of the externality but whether the victim can costlessly control or limit the amount of the damaging substance received

equilibrium of a residential city attributes of housing and land use zoning this paper investigates the impact of land use zoning such as building height and building density restrictions on housing rent land rent the design parameters of a building and population density in a residential city a theoretical land use model with several new features is used building capital the demand for and the supply of housing are explicitly defined housing is treated as a multi dimensional good the elements of which are floor area finishing cost of a dwelling unit garden space and building height building costs are the sum of structural frame costs which are a function of building height and building area and finishing costs which are independent of design parameters zoning restrictions are explicitly considered the utility and profit maximisations are simultaneous through the housing attributes which are implicitly priced there are six major conclusions first the relative gradients of the endogeneous variables all with regard to distance depend not only on demand speci

predicting bank failures the role of structure in affecting the acceleration in the number of us bank failures during recent years provides valuable data for developing bank failure prediction models a probit models which incorporates various bank structure variables as well as traditional financial ratios is used to explain bank failures during the 1982 3 period the empirical findings suggest that important information regarding a bank s likelihood of failure is contained in its balance sheet and income accounting data it is also found that banks which affiliate with holding companies or are larger in size have a significantly lower probability of failure this suggests that states which impose unit banking rules or block holding company formation may be adding to failure risks

on the political economy of zoning abstract households choose a community in a metropolitan area and collectively set a minimum housing quality and a property tax to finance a local public good the collective imposition of a lower bound on housing consumption induces an income stratified equilibrium in a specification where meaningful community differentiation would not arise without zoning we show computationally that zoning restrictions are likely to be stringent with a majority facing a binding constraint in communities that permit it by inducing a stratified equilibrium zoning causes tiebout welfare gains in aggregate but with large welfare transfers relative to stratified equilibrium without zoning the zoning equilibrium is significantly more efficient as it reduces housing market distortions

spreading versus concentrating damages environmental policy in the presence of nonconvexities abstract this paper examines the role of nonconvexities in externality control from a policy perspective nonconvexities can arise from a number of sources and can significantly alter the optimal solution to an externality problem for instance it may be socially desirable to concentrate externality damages in one area and prohibit them in another rather than spread the effects of the externality across a number of sites if this solution is optimal a pollution tax will not achieve the social optimum but a system of marketable permits will

economic spillovers in spatial harvest behavior abstract there has been a strong push within natural resource management to incorporate spatial structure into management regimes however discussions surrounding the appropriate designs of spatial management have largely been conceptual this paper develops a spatial econometric model of fishing location choice using non confidential data from the great barrier reef coral trout commercial fishery harvest location decisions are modeled as a function of spatial patterns of expected economic returns the preferred spatially dependent econometric model is shown to outperform ordinary least squares and fixed effects models in out of sample forecasting estimates from the spatial model reveal spatial spillover effects in fleet harvest location behavior in particular harvest activity at any given site is equally sensitive to same site economic returns and surrounding site economic returns the econometric results are illustrated using a fee based policy simulation results suggest non spatial management is characterized by two inefficiencies first heterogeneity between sites is averaged resulting a fee that is too high or too low across space second fees that are too high or too low affect the fishing effort in nearby locations

urban growth controls transitional dynamics of development fees and growth boundaries abstract this paper investigates how development fees and urban growth boundaries affect urban development when the short run construction supply function is upward sloped i e convex development costs whereas the policies are equivalent in the traditional static model dynamic analysis reveals important differences out of the steady state in particular the development fee that is efficient in the steady state is also dynamically efficient in contrast the long run efficient urban growth boundary generates inefficiently fast development out of the steady state the results are robust with or without location rents and perfect or myopic foresight assumptions

bank capital regulation as an incentive mechanism implications for portfolio choice abstract this paper contrasts the conventional interpretation of prudential capital regulation as a system of ex ante enforcement hard wired with an alternative interpretation as a system of sanctions for ex post violation incentive based under the incentive based interpretation risk weightings affect portfolio choice only when assets are illiquid under both interpretations the medium term impact on portfolio allocation depends upon the relative costs of debt and equity finance viewing enforcement as incentive based suggests there is relatively less need to match risk weightings accurately to portfolio risk

optimal regulation of deposit taking financial intermediaries a correction abstract this paper corrects a paper of david miles published in the european economic review in 1995 reversing some of the conclusions he draws solving his model correctly it turns out that because depositors are unable to monitor the default risk of individual banks moral hazard gives banks an incentive to increase risky lending prudential capital requirements reduce incentives to hold risky loans

the logical foundations of urban economics are consistent the logical foundations of models in urban economics with continua of agents distributed over continuous spaces have recently been questioned it was argued among other things that these models cannot represent properly models with discrete numbers of households each occupying a parcel of land in this paper we propose a mapping based on the continuous model utility and defined over discrete parcels of land which determines the discrete model utility so that the equilibrium solutions of the two models coincide hence the continuous model of urban economics can be used as a tool for studying equilibria and comparative statics of a discrete model which appears to have sound logical foundations journal qf economic literature classification numbers 022 930 1990 academic press inc

too much investment a problem of asymmetric information this paper shows that under plausible assumptions the inability of lenders to discover all of the relevant characteristics of borrowers results in investment in excess of the socially efficient level raising the rate of interest above the free market level will restore optimality this conflicts with generally held views and is contrasted with the stiglitz weiss model it is shown that the assumptions which yield overinvestment support debt as the equilibrium method of finance however under the stiglitz weiss assumptions used to derive an underinvestment result equity is shown to be the equilibrium method of finance

landscape preferences and patterns of residential development abstract i analyze a model of residential location choice where people derive utility from their proximity to open space when people have such landscape preferences then 1 equilibrium residential development is mixed with undeveloped land 2 equilibrium land price gradients depend sensitively on how land markets are organized are not generally monotonic and may or may not reflect the value of open space and 3 dynamic equilibria generally have the property that more remote areas are developed before more central areas finally when compared to optimal development equilibrium development houses too many residents too close together and remote areas are developed too soon these results imply that equilibrium development may not be sprawling enough and that policies to encourage infill development are not welfare improving

deregulation and bank financial policy the standard view that banks can value maximize by exploiting non risk rated deposit insurance ignores the potential loss of a valuable bank charter due to insolvency recognition of this effect changes the bank s optimal financial policy and can induce extreme risk averting as well as risk taking behavior however as the value of the bank charter falls the risk taking strategy is more apt to dominate therefore current deregulation of the banking industry by easing entry and devaluing charters holds the potential for increases in the incidence of insolvency unless offsetting policies are instituted

path modelling to bankruptcy causes and symptoms of the banking crisis this article studies the bankruptcy of us banks since 2009 it first analyses the financial symptoms that precede bankruptcy such as low profitability insufficient revenue or low solvency ratios it also goes into the causes of these symptoms it poses several hypotheses on causes of failure such as loan growth some of them risky specialization in this case concentration in real estate and the pursuit of a turnover driven strategy neglecting margin it presents and tests a structural equation modelling based on partial least squares path modelling pls pm and logistic regression results show that 5 years before the crisis failed banks had compared to solvent banks the following higher loan growth higher concentration on real estate loans higher risk ratios higher turnover but lower margins a relationship is found between symptoms and causes failed banks present a significant relationship between the percentage of real estate loans and risk this relationship is negative in excellent b

diminishing marginal returns from r d investment evidence from manufacturing firms this study analyses the association between r d investment rdi and growth opportunities and show that there exists diminishing marginal returns in manufacturing firms extant literature has found that besides r d investment systematic risk financial leverage and complementary asset investment are also associated with growth opportunities accordingly we employ structural equation modelling to simultaneously estimate both a direct influence of rdi as well as indirect influences of rdi on growth opportunities via these three mediating effects we find that the direct effect of incremental rdi on growth opportunities is independent of r d intensity instead the heterogeneous effects of rdi on systematic risk financial leverage and complementary asset investment across firms with different r d intensity level accounts for the diminishing marginal returns to r d investment we specifically observe that the greatest indirect effect is via the financial leverage of the firm this study shows the importanc

initial human and financial capital as predictors of new venture performance abstract this research seeks to predict the performance of new ventures based on factors that can be observed at the time of start up indicators of initial human and financial capital are considered to determine how they bear upon the probability of three possible performance outcomes 1 failure 2 marginal survival or 3 high growth four categories of initial human and financial capital are examined general human capital represented here by the entrepreneur s education gender and race may reflect the extent to which the entrepreneur has had the opportunity to develop relevant skills and contacts management know how embodied in the entrepreneur or available through advisors or partners reflects management specific skills and knowledge without regard to the kind of business industry specific know how reflects specific experience in similar businesses financial capital is one of the most visible resources it can create a buffer against random shocks and allow the pursuit of more capital intensive strategies which are better protected from imitation the study utilizes a longitudinal study of 1053 new ventures representative of all industry sectors and geographical regions the research departs from most previous studies in considering different measures of performance marginal survival and growth and in considering explicitly whether the factors contributing to marginal survival differ from those contributing to high growth it was found that measures of general human capital influenced both survival and growth except for gender with women owned ventures being less likely to grow but just as likely to survive management know how variables had more limited impact having parents who had owned a business contributed to marginal survival but not to growth number of partners contributed to growth but not to survival management level prior employment in non profit organizations or not having been in the labor force and the use of professional advisors did not have significant effects industry specific know how contributed to both survival and growth amount of initial financial capital also contributed to both the usefulness of the model is enhanced by the fact that the resource variables considered are relatively easy to assess and all can be considered at the time of start up although some of the human capital variables cannot easily be changed the benefits or risks associated with each can be assessed in some cases potential problems can be identified so that plans can be modified to improve prospects overall it appears that using a model based upon the initial human and financial capital of the venture it is possible to predict the performance of new ventures with some degree of confidence

evaluation of price policy in the presence of water theft mathematical programming models of representative farms are commonly used to evaluate policies such as input subsidies and output price supports on canals in india upstream farmers routinely use more irrigation water than allotted in such circumstances the programming model should encompass farmers locational heterogeneity here a representative watercourse with thirty farms is calibrated to the eight crops fifteen irrigation turns yield responses to water and seepage in maharashtra not only does water theft increase the social cost of price policies but the policies increased inducement to theft by upstream farmers leaves those downstream with less water and lower incomes

land use and zoning in an urban economy zoning statutes are a nearly ubiquitous phenomenon in urban america allen manvel in his report to the national commission on urban problems p 31 estimated that 90 percent of the cities and towns in the united states with a population of over 5 000 had some kind of zoning statute in 1967 in addition 51 of the 52 largest cities possessed such ordinances in spite of this ubiquity and in spite of the recent public controversy concerning the legality of suburban exclusionary zoning the modern economics literature on the institution is amazingly sparse there have been some significant contributions in recent years notably those by otto davis martin bailey davis and andrew whinston and john crecine davis and robert jackson however i think it is fair to say that economists have barely scratched the surface of what seems to me to be a very complex subject in particular there has been very little progress made in the task of incorporating zoning or land use parameters into the kinds of micro economic models that economists are accustomed to deal with the contrast with another urban economic institution the property taxis rather striking in this respect the basic objective of this paper will be to attempt to fill this gap the first section introduces a simple model of an urban space economy with a manufacturing and residential sector having constructed this model i will show how a change in the allocation of land between the two sectors affects the spatial pattern of land rents the size of the urban labor force and the wage rate the second section of the paper will then be devoted to a discussion of the appropriateness and implications of a land allocation policy which maximizes aggregate land rent

a factor analytic approach to bank condition abstract this paper explores a new approach to early warning systems for commercial banks factor analysis and logit estimation are used to measure the condition of individual institutions and to assign each of them a probability of being a problem bank the model employs widely used financial ratios and information taken from bank examinations the factors produced by the model for use in the logit estimation are very similar to the camel rating system used by bank examiners empirical results show that the combination of factor analysis and logit estimation is a promising method of evaluating bank condition

loan growth and riskiness of banks we investigate whether loan growth affects the riskiness of individual banks in 16 major countries using bankscope data from more than 16 000 individual banks during 1997 2007 we test three hypotheses on the relation between abnormal loan growth and asset risk bank profitability and bank solvency we find that loan growth leads to an increase in loan loss provisions during the subsequent three years to a decrease in relative interest income and to lower capital ratios further analyses show that loan growth also has a negative impact on the risk adjusted interest income these results suggest that loan growth represents an important driver of the riskiness of banks

optimal regulation of deposit taking financial intermediaries abstract this paper analyses the case for special restrictions on the commercial decisions of deposit taking financial intermediaries the existence of asymmetric information between managers of intermediaries and depositors is shown to generate unregulated outcomes where equity capital is underutilised and lending is suboptimally low a form of regulation to correct this market failure is designed the form of regulation is a capital adequacy scheme of the same kind as those used by bank regulators this is an important result because such schemes have lacked a theoretical underpinning even those who have viewed capital requirements as justifiable have assumed that they will reduce the level of intermediation this paper shows that this is not generally the case the ways in which optimal capital adequacy rules differ from the regulations currently used by banking supervisors is also analysed