intrinsic bubbles the case of stock prices several puzzling aspects of the behavior of united states stock prices may be explained by the presence of a specific type of rational bubble that depends exclusively on aggregate dividends the authors call bubbles of this type intrinsic bubbles because they derive all of their variability from exogenous economic fundamentals and none from extraneous factors intrinsic bubbles provide a more plausible empirical account of deviations from present value pricing than do the traditional examples of rational bubbles their explanatory potential comes partly from their ability to generate persistent deviations that appear to be relatively stable over long periods copyright 1991 by american economic association

the spatial and temporal diffusion of house prices in the uk abstract this paper provides a method for the analysis of the spatial and temporal diffusion of shocks in a dynamic system we use changes in real house prices within the uk economy at the level of regions to illustrate its use adjustment to shocks involves both a region specific and a spatial effect shocks to a dominant region london are propagated contemporaneously and spatially to other regions they in turn impact on other regions with a delay we allow for lagged effects to echo back to the dominant region london in turn is influenced by international developments through its link to new york and other financial centers it is shown that new york house prices have a direct effect on london house prices we analyse the effect of shocks using generalised spatio temporal impulse responses these highlight the diffusion of shocks both over time as with the conventional impulse responses and over space

residential construction using the urban growth model to estimate housing supply abstract this article presents an empirical model of housing supply derived from urban growth theory this approach describes new housing construction as a function of changes in house prices and costs rather than as a function of the levels of those variables which previous studies have used empirical tests support this specification over the leading alternative models our estimates show that a 10 rise in real prices leads to an 0 8 increase in the housing stock which is accomplished by a temporary 60 increase in the annual number of starts spread over four quarters

redevelopment and the urban land price gradient abstract this paper presents the first careful test of an equilibrium model of urban redevelopment in addition it demonstrates a new methodology for recovering vacant urban land prices in areas that have already been developed using data on single family detached homes sold in vancouver b c we estimate the price of vacant land based on properties that were sold and redeveloped the price of developed land is also estimated based on properties that were sold and not redeveloped various tests overwhelmingly support the hypothesis that housing is redeveloped when the price of vacant land exceeds the price of land in its current use this result provides support for various theoretical models of urban spatial growth and indicates that one can recover vacant urban land prices by examining redeveloped properties

to harmonize or to compete that s not the question abstract neoclassical public economists stress economic distortions induced by differential taxation and therefore favour harmonization political economists focus on political distortions and therefore reject harmonization however policy choices on the possibility frontier between economic and political distortions tend to be biased economic advisers politicians and interest groups typically favour harmonization harmonization is moreover undermined by incentives to re establish tax differences both activities prevent the possibility frontier from being simply a menu of choice popular referenda and functional overlapping competing jurisdictions focjs are institutions able to reduce political distortions and to shift the possibility frontier

redevelopment decisions for commercial and industrial properties abstract the empirical work in this study serves as a test of the principle that redevelopment of a property will occur when the value of the existing bundle plus demolition costs is less than or equal to the price of vacant land the probability of a commercial or industrial property being redeveloped is predicted using the difference in the estimated value of a parcel in its redeveloped state and its current use correcting for sample selection bias the empirical results support the hypothesis that land is redeveloped when its value in the redeveloped state is high relative to its value in the current use

shirking and sorting in a political market with finite lived politicians this paper analyzes principal agent slack in the context of a political market composed of voters challengers and incumbents the introduction of a last period via finite livedness in combination with voters imperfect information about politicians preferences causes time varying shirking behavior on the part of politicians political markets eventually sort out those politicians with significantly deviant policy preferences potentially providing a solution to the last period problem and enabling politicians to make credible commitments in the extreme sorting can insure that it is not worthwhile for potential shirkers to run for office a systematic relationship between political shirking and number of terms in office may exist and depends on how quickly sorting takes place we show that evidence of little if any shirking is quite consistent with politicians having diverse and strongly held policy preferences in addition if sorting is a significant feature of political markets cross sectional studies will tend to oversample little and non shirking politicians compared to longitudinal studies reinterpretations of existing empirical work are also discussed

housing bubbles and busts the role of supply elasticity existing studies of the relationship between housing price dynamics and housing supply which have relied upon questionable proxies for supply elasticity have yielded highly mixed results in this paper we provide new evidence on this relationship based on actual estimates of the price elasticity of supply for local markets in florida intermarket differences in housing supply elasticity are found to explain much of the variation in housing price movements and new construction during the most recent boom bust cycle additionally we find that variance in the elasticity of housing supply can be attributed to differences in land availability and the local fiscal and regulatory environment jel r14

drawing inferences about housing supply elasticity from house price responses to income shocks abstract the purpose of this paper is to provide information about the price elasticity of the supply of housing i examine the relationship between the average price of single family housing and the amount of personal income a two equation vector error correction system is estimated using a panel data set consisting of 76 msas from 1980 to 1998 the results suggest an elastic long run supply function but a relatively slow pace of adjustment to long run equilibrium hence a major demand shock can be expected to impact housing prices for several years following the shock differences in the responsiveness among subgroups of msas are examined and found to be generally minor

testing the efficiency of the norwegian housing market abstract the question of whether or not the housing market is efficient is posed by an increasing number of economists policymakers homebuyers and homesellers this article tests the efficiency hypothesis on data from the housing market in oslo over the period 1991 2002 employing the case shiller time structure test on a repeat sales house price index and returns to housing we demonstrate that both the repeat sales house price index and returns contain time structure and that the housing market is characterized by inefficiencies we also find surprisingly that the housing market consistently yields higher appreciation at lower volatility than the stock market over the period

testing the present value relation for housing prices should i leave my house in san francisco abstract we examine the efficiency of residential housing markets by examining price rent and cost of capital indices generated from a transactions level data base for alameda and san francisco counties in northern california we can reject both constant and nonconstant discount rate versions of the housing price present value relation in the short run long run results are consistent with the housing price present value relation when we adjust the discount factor for changes in both tax rates and borrowing costs that characterize our 1970 1988 sample period our preferred explanation for the short run rejection of but long run consistency with the present value model is the high transaction costs that characterize the housing market however we cannot rule out the possibility that deviations of actual and present value price are due to asset market bubbles or nonrational expectations

efficiency in housing markets which home buyers know how to discount abstract we test for efficiency in the swedish co op market by examining the negative relationship between the sales price and the present value of future monthly payments or rents if the co op housing market is efficient the present value of co op rental payments due to underlying debt obligations of the cooperative should be fully reflected in the sales price however a one hundred kronor increase in the present value of future rents only leads to an approximately 75 kronor reduction in the sales price these inefficiencies are larger at the lower end of the housing market and in poorer less educated regions and appear to reflect both liquidity constraints and the existence of more sophisticated buyers in higher educated areas overall our findings suggest that there is some systematic failure to properly discount the future stream of rent payments relative to the up front sales price

leviathan and fiscal illusion in local government overlapping jurisdictions this paper integrates twomodels of local government behavior leviathan and fiscal illusion into theframework of overlapping jurisdictions estimation of the leviathan and fiscalillusion variables without accounting forvertical effects between overlappingjurisdictions results in overestimation ofthe horizontal effects using a medianvoter model and municipal and county datawe find support for the leviathan modelusing traditional tests these effects arelargely offset however when the test isset within the context of the verticalrelationship we find that municipal percapita expenditures and county per capitaexpenditures are symmetricallycomplementary

optimal delivery strategies considering carbon emissions time dependent demands and demand supply interactions abstract the study addresses a distributor s delivery strategy problem with consideration of carbon emissions retailers time dependent demands and demand supply interactions a mathematical programming model is formulated for solving optimal number and time window of service cycles a case study is presented the results show that the distributor would adopt a frequent delivery strategy if carbon taxes are insufficiently high providing the retailers with price discounts does not work out since retailers would value the delays in receiving their ordered products more than the compensations of less frequent delivery given by the distributor in response to carbon taxes models with demand supply interactions can result in larger profit and market share than those without demand supply interactions this study sheds new light to the distributors the retailers and the regulators in greening the logistics transport

integration and consolidation in air freight shipment planning an economic and environmental perspective abstract measuring carbon footprint and controlling carbon emissions across a supply chain have gained considerable attention this study investigates the effects of carbon emissions within the framework of air freight integrator shipment planning with integration and consolidation a mixed 0 1 linear programming lp model is formulated to examine the effects of operational adjustments on carbon emissions and cost performance as well as the effects of carbon emissions regulations on operational decisions sensitivity analysis is performed to examine different carbon emissions policies and operational environments reducing carbon emissions through operational adjustments is feasible at the expense of some increase in cost thus reducing carbon emissions may be considered an alternative or a supplement to more costly carbon reducing technologies policies implemented to control carbon emissions can affect operational decisions when carbon tax price is high enough

tax competition and tax coordination in a median voter model this paper analyzes the welfare effects of capital tax coordination in a simple model of fiscal competition where fiscal policy is subject to majority voting and households differ with respect to their labor and capital income it turns out that a coordinated capital tax increase may raise or reduce welfare depending on the relative magnitude of i economic distortions induced by a labor tax and ii political distortions resulting from the influence of the median voter on fiscal policy decisions a negative welfare effect is more likely the smaller the marginal excess burden of the labor tax and the smaller the ratio of the median voter s labor income to average labor income we also use empirical estimates of the marginal excess burden of taxation to determine the welfare effects of tax coordination it turns out that a negative welfare effect of coordinated tax increases may emerge in our model for empirically reasonable parameters

residential buildings and the cost of construction new evidence on the efficiency of the housing market present value studies of asset market efficiency are controversial because they compare asset prices to unobserved discounted streams of future rents as an alternative if housing markets are efficient then the price of residential capital or buildings should satisfy the following two conditions i deviations between new building prices and construction costs should disappear faster than construction lags and have no effect on construction and ii temporary building price shocks should dissipate at a similar rate for different vintage buildings results from an error correction model support both hypotheses for single family housing in vancouver british columbia this implies that the implicit market for residential buildings is efficient and that any inefficiencies in the housing market must lie in the market for land itself

the political economy of tax coordination as a bargaining game between bureaucrats and politicians in the public finance literature the view prevails that taxcompetition among countries gives rise to an underprovision ofpublic goods and that coordinated tax increases are thereforedesirable public choice arguments in contrast suggest thattax coordination may not be in the interest of thetaxpayers citizens because imperfections of the politicalprocess political distortions may lead to a waste of taxmoney according to this view tax competition is a desirablecheck on the power to tax whereas tax coordination would onlyrelax the budget constraint of an inefficient public sector the present paper integrates the underprovision argument andthe public choice view into a common theoretical framework the government is assumed to consist of politicians andbureaucrats with diverging interests fiscal policy ismodelled as the outcome of a bargaining game between thebureaucrats and the politicians it turns out that coordinatedtax increases always raise the provision of public goods butalso increase the cost of political distortions the effect onthe welfare of the representative citizen may be positive ofnegative depending in particular on the distribution ofbargaining power between bureaucrats and politicians

urban spatial development with durable but replaceable capital the theory of urban spatial development until recently has been primarily a static theory of economic equilibrium the models of alonso l mills 6 and muth 7 determine a complete spatial equilibrium between the supply and demand for urban land the study of growth or change in such models therefore has been limited exclusively to comparative statics wheaton 8 it should be clear that the central and in many respects unrealistic assumption of such models is that housing capital is neither physically nor economically durable without durability there is no opportunity cost to old capital no barrier to change and no history to an urban area within such a framework a common set of conclusions emerges regarding urban spatial structure residential density and the price per unit of land decline monotonically from the location of employment a greater population results in higher density at all locations while increases in income or decreases in the cost of travel create a more steeply sloped density and price gradient in the last few years there has been a growing awareness that the equilibrium portrayed by such models does not correctly reflect the process of urban development theoretical papers by anas 2 31 and brueckner 4 and an empirical model by harrison and kain 5 develop an alternative theory of urban spatial development in which the process of growth is explicitly modeled and in which capital is completely durable in their models the spatial development of cities occurs incrementally over time in successive rings from the center of employment outwards the development of each ring is done with myopic foresight and is therefore determined exclusively by market conditions at the time of development once built

pricing and timing of consolidated deliveries in the presence of an express alternative financial and environmental analysis shipment consolidation has been advocated by researchers and politicians as a means to reduce cost and improve environmental performance of logistics activities this paper investigates consolidated transport solutions with a common shipment frequency when a service provider designs such a solution for its customers she faces a trade off to have the most time sensitive customers join the consolidated solution the frequency must be high which makes it difficult to gather enough demand to reach the scale economies of the solution but by not having the most time sensitive customers join there will be less demand per time unit which also makes it difficult to reach the scale economies in this paper we investigate the service provider s pricing and timing problem and the environmental implications of the optimal policy the service provider is responsible for multiple customers transports and offers all customers two long term contracts at two different prices direct express delivery with immediate dispatch at full cost or consolidated delivery at a given frequency at a reduced cost it is shown that the optimal policy is largely driven by customer heterogeneity limited heterogeneity in customers costs leads to very different optimal policies compared to large heterogeneity we argue that the reason so many consolidation projects fail may be due to a strategic mismatch between heterogeneity and consolidation policy we also show that even if the consolidated solution is implemented it may lead to a larger environmental impact than direct deliveries due to inventory build up or a higher than optimal frequency of the consolidated transport c 2015 elsevier b v and association of european operational research societies euro within the international federation of operational research societies ifors all rights reserved

interregional tax competition and intraregional political competition the optimal provision of public goods under representative democracy abstract this paper explores the implications of the interaction between inter regional tax competition and intra regional political competition for the optimal provision of public goods under representative democracy a la osborne and slivinski 1996 and besley and coate 1997 as an extension of hoyt s 1991 finding that intensified tax competition is always harmful and aggravates the extent to which public goods are undersupplied in a region we show that intensified tax competition can be beneficial if political as well as tax competition is considered in particular we identify plausible conditions under which i there is an optimal intensity of tax competition such that the interaction between interregional tax competition and intraregional political competition will result in the optimal provision of public goods and ii intensified tax competition will be beneficial if and only if the degree of tax competition is less than this optimal intensity

economic and political foundations of tax structure this paper derives the essential elements of tax systems as the outcome of rational behavior in a model w here government maximizes expected support and where opposition to ta xation depends on the loss in full income the analysis treats the le vel of expenditures as endogenous and integrates the influence of adm inistration costs with that of political and economic factors tax st ructure is shown to be a system of related components in equilibrium a final section compares results to two alternative approaches opti mal taxation and the leviathan model copyright 1988 by american economic association

swings in commercial and residential land prices in the united states abstract we use a large dataset of land sales dating back to the mid 1990s to construct land price indexes for 23 msas in the united states and for the aggregate of those msas the price indexes show a dramatic increase in both commercial and residential land prices over several years prior to their peak in 2006 2007 and a steep descent since then these fluctuations have exceeded those in well known indexes of home prices and commercial real estate prices because those indexes price a bundle of land and structures this comparison implies that land prices have been more volatile than structures prices over this period this result is a key element of the land leverage hypothesis which holds that home prices and commercial property prices will be more volatile all else equal in areas where land represents a larger share of real estate value

the stochastic city abstract this paper analyzes a simple model of an urban area with growth and uncertainty household income rents and prices for land follow stochastic processes even though investors are risk neutral uncertainty affects both land rents and land prices in equilibrium because the conversion of land from agricultural to urban use is irreversible growth on the other hand affects urban and agricultural land prices but not the level of rents we show that uncertainty i delays the conversion of land from agricultural to urban use ii imparts an option value to agricultural land iii causes land at the boundary to sell for more than its opportunity cost in other uses and iv reduces equilibrium city size

a spatial tax harmonization model abstract policies to harmonize value added tax rates are controversial in the european union this paper formulates a multi country model over a one dimensional space as a non cooperative nash game in which each country aims at maximizing its tax revenue subject to the constraint that its tax rate lies within a given common band then we examine the effects of changes in the common band on tax rates tax revenues and the number of cross border shoppers at nash equilibrium we also analyze the effects of geographical variation in country size and location

housing price bubbles new supply and within city dynamics abstract although there is broad recognition that cities differ in their tendency to experience house price bubbles most studies assume away any possibility of within city heterogeneity in response to a bubble we develop a model that suggests that this assumption may be appropriate when markets are rising but can be far from reality on the bust side of a bubble during a housing boom new construction and related supply adjustments by developers ensure stable relative prices between low and high quality segments of the housing market on the bust side of a bubble however reduced housing starts allow demand side forces and mortgage default to create pressure for relative prices to diverge across market segments absent a change in technology as markets recover and new construction rebounds relative prices should revert back to pre crash levels evidence based on 2000 2013 single family home sales in phoenix arizona supports this modeling framework additional evidence also suggests that high rates of mortgage default contributed to divergence in relative prices when markets crashed

is there an equilibrating relationship between house prices and replacement cost empirical evidence from berlin abstract it is a feature of competitive markets with forward looking participants that a good s benefit and its production cost are equalized in equilibrium and that no resources are wasted during the adjustment process for housing markets there is mixed evidence whether they meet this standard of allocative efficiency based on a unique data set with rich information on prices and cost we examine the market for single family houses in germany s capital berlin at the aggregate market level we find that prices and cost tend to equalize in the long run short run adjustment appears to be sufficiently fast and properly anticipated to prevent systematic excess profit opportunities at the cross sectional level of individual houses we find support that resources are allocated efficiently between different market segments taken together our results provide sufficient evidence that the market in berlin is efficient

competition among institutions abstract economic theory offers two different approaches to the analysis of group formation and the role of institutions general equilibrium approach explores the influence of the economic environment on formation of coalitions game theory explores the influence of institutional rules on equilibrium outcomes we introduce an integrative approach an institution s policy depends on its membership while its membership depends on the policies of all the institutions we present three distinct mathematical approaches to these models highlighting the algebraic nature of the question of existence of equilibrium our apparatus cover many economic and political environments including cases with multiple dimensions and multiple institutions journal of economic literature classification numbers c62 d50 d71 d72 h11 h40 r13 r53

is urban land price adjustment more sluggish than housing price adjustment empirical evidence this article hypothesises that due to factors such as thin trading and lack of publicly available data on transactions in the land market urban land prices react more sluggishly to shocks in market fundamentals than housing prices do based on a vector error correction model utilising quarterly data for the helsinki metropolitan area in finland over 1988q1 2008q2 the empirical analysis provides support for this hypothesis in particular the results suggest that new information regarding the market fundamentals is more rapidly reflected in housing prices than in land prices nevertheless it is the housing price level instead of land prices that adjusts towards a cointegrating long run equilibrium between housing prices land prices and construction costs

when is two better than one how federalism mitigates and intensifies imperfect political competition the current paper models power maximizing politicians behavior subject to imperfect political competition and perfect citizen mobility it then analyzes the welfare implications of federal and non federal structures the model abstracts from both heterogeneous preferences the most common argument in favor of federalism and externalities the most common argument against showing that even in this simplified setting federalism has important welfare implications there is one class of equilibria in which more federalism has the purely beneficial effect of offsetting imperfections in the political process however there is also a second class of equilibria in which citizen mobility makes political imperfections more severe by creating safe districts for both political parties 2001 elsevier science b v all rights reserved

the fundamentals of land prices and urban growth abstract in a very simple model in which capital is durable and landowners have perfect foresight the price of urban land has four additive components the value of agricultural land rent the cost of conversion the value of accessibility and the value of expected future rent increases a growth premium in rapidly growing cities the growth premium may easily account for half of the average price of land and may create a large gap between the price of land at the boundary minus conversion cost and the value of agricultural land rent

superstition in the housing market we provide the first solid evidence that chinese superstitious beliefs can have significant effects on house prices in a north american market with a large immigrant population using real estate data on close to 117 000 house sales we find that houses with address number ending in 4 are sold at a 2 2 discount and those ending in 8 are sold at a 2 5 premium in comparison to houses with other addresses these price effects are found either in neighborhoods with a higher than average percentage of chinese residents consistent with cultural preferences or in repeated transactions consistent with speculative behavior jel d03 r2 z1

tax competition rent seeking and fiscal decentralization abstract the present paper provides a basis for evaluating fiscal decentralization of expenditure and tax responsibilities by encompassing the literature on tax competition and rent seeking both tax and rent seeking competitions are conceived of as being wasteful and self defeating we find that rent seeking activities account for political distortions which may be mitigated in the process of fiscal decentralization while tax competition results in economic distortions associated with decentralization welfare evaluation should be based on the balance of the political gain and the economic cost

tax harmonization and tax competition in europe opening europe s borders in 1993 makes the allocation of resources more vulnerable to differences in the national tax rates the first part of the paper demonstrates that direct consumer purchases will imply distortions resulting from diverging vat rates and it clarifies why the frequently cited exchange rate argument is of no help the second part shows that in the case of direct taxation a harmonization of tax bases is more important than a harmonization of tax rates either the combination of true economic depreciation and residence taxation or the combination of immediate write off and source taxation will result in an efficient international allocation of capital independent of the national tax rates the paper concludes with a verdict on tax competition arguing that free migration renders a policy of income redistribution which is interpreted as insurance against the risk of lifetime careers impossible this abstract was borrowed from another version of this item