Cross-industry asset allocation with the spatial interaction on multiple risk transmission channels

Taking into consideration the real link and information risk transmission channels, we used a spatial econometric approach to construct an economic distance-based spatial weight matrix, which can capture the spatial interaction across industries, and built a return estimation model with spatial interaction using the matrix. On this basis, we derived the covariance matrix and constructed the cross-industry asset allocation model. The empirical results showed that 1) the spatial interaction has a strong explanatory power to return and integrating the spatial interaction on multiple risk transmission channels can improve the effectiveness of the return estimation model; 2) the covariance matrix includes unsystematic risk (idiosyncratic risk) and systematic risk (market risk and cross-industry spillover risk); 3) the asset allocation model with spatial interaction can improve the performance of the portfolio and provide a valuable reference for investors' risk management and investment decision.     

Efficient growth boundaries in the presence of population externalities and stochastic rents

This paper investigates how the uncertain demand for urban land affects the design of efficient growth boundaries. Landowners decide both the timing of conversion and the capital intensity when facing a population externality that decreases urban rents. While growth controls induce landowners to convert their land earlier than planned, these controls do not affect their intensity choices. Growth controls also raise the prices of both urban and undeveloped land. To accommodate the uncertain demand for urban land, the regulator should slacken the growth boundary control once urban rents pass historically high levels. In general, the regulator should also tighten the control when urban rents become volatile.     

The effects of potential land development on agricultural land prices

We conduct a national-scale analysis of the determinants of agricultural land values. The theoretical basis for the study is a spatial city model with stochastic returns to future land development. The empirical model of agricultural land prices is estimated with a cross-section on approximately three thousand counties in the contiguous US. The results provide evidence that option values associated with irreversible and uncertain land development are capitalized into current farmland values. For each county, we decompose the current agricultural land value into components measuring rents from agricultural production and rents from future land development.     

Price competition in the spatial real estate market: allies or rivals?

This paper examines whether real estate firms can avoid price competition when properties in the vicinity are priced by allies. An oligopoly model with differentiated products generally suggests that real estate firms engage in price competition with their spatially closest rivals. Yet, they can raise property prices when the market share of their allies increases. To test this prediction, a spatial autoregressive model with spatial autoregressive disturbances, including a share of allies in the vicinity, is estimated using data on the prices of residential condos in central Tokyo, Japan. The model prediction is supported by the empirical results. In the data set, the magnitude of the market share on property prices increases with the expansion of the size of the spatial market.     

Land Taxes in Agriculture

A bstract Farmland , which occupies two thirds of America's privately owned territory, provides more than food and fiber. Agricultural uses of land preserve open space, filter and store water, supfwrt wildlife, conserve rural resources, enlarge life style opportunities for an urban society. One instrument for preserving agricultural land from urban developmental pressures is the preferential assessment for real property tax, essentially a two rate tax favoring farming as a land use. Preferential assessment, administered typically at small, nonrollback differentials, has not deterred intensive land use changes. Indeed, it may have had the opposite effect. Changes in the tax on land and buildings are recommended as improvements in the preferential assessment of agricultural land.     

Congestion,agglomeration, and the structure of cities

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

Political Economy of Property Tax Reform: Hawaii's Experiment with Split‐Rate Property Taxation

Economic theory suggests that switching from a general property tax to a split‐rate tax increases land use efficiency and stimulates urban core development while preserving the environment and reducing urban sprawl. Under split‐rate property taxation, land is typically taxed at a significantly higher rate than improvements. Beginning in 1965 Hawaii experimented with a statewide split‐rate property tax system to encourage economic growth and effect land reform. The experiment was ended in 1977. Following the transfer of property taxing powers to the counties in 1978, some counties brought back the split‐rate property tax at times. Since 2006, Kauai County has adopted the unusual practice of taxing improvements at a higher rate than land for most property classes. This article chronicles and explains the rationale behind Hawaii's state and county experiments with split‐rate property taxation.     

City of Rents: The limits to the Barcelona model of urban competitiveness

The turn towards the knowledge‐based economy and creative strategies to enhance urban competitiveness within it has been well documented. Yet too little has been said to date about the transformation of land use for new productive activities, and the contradictions inherent to this process. Our case study is Barcelona, an erstwhile ‘model’ for urban regeneration which has sought to transform itself into a global knowledge city since 2000. Through the lens of Marxian value theory, and Harvey's writing on urban monopoly rents especially, we show how the 22@Barcelona project — conceived with received wisdom about the determinants of urban knowledge‐based competitiveness in mind — amounted to an exercise in the capture of monopoly rents, driven by the compulsion of public sector institutions, financiers and developers to pursue rental profit‐maximizing opportunities through the mobilization of land as a financial asset.     

Surprofits et rentes foncières dans la ville capitaliste

In the capitalist city, ground rents reflect for capital the image of its own development and uneven growth, by imposing upon each particular capital the laws of capital as a whole. Therefore, landed property and rent are neither the regulators of urbanization, nor the source of urban contradictions. Capitalist relations of production imply in themselves the autonomy of private poles of accumulation and deny the possibility of a real social control over the formation of the useful effects of agglomeration. These effects thus necessarily constitute for particular capitals non-reproducible or unevenly preconstituted conditions, and consequently so is the basis of surplus profits which can be transformed into ground rents. The existence of strictly non-reproducible conditions is the foundation of the transformation of branch surplus profits into absolute rent, the unevenly preconstituted conditions inducing differential surplus profits transformable into differential rent. It is the non-reproducibility of the commodity itself which is at the basis of surplus profits and monopoly rents. The transformation of these surplus profits into rents in no way implies the existence of a class of landowners, but only relations of production in which landed property is not only autonomous from capital, but also includes a social content which as such can put up an effective resistance to it. The basis of this resistance can as well be capitalist landed property as various forms of non-capitalist landed property.     

Effects of urban transportation system change on land prices in the setting of owner-occupied residence

The purpose of this study is to analyze the impact of transportation improvement on the land development process and land price structure in an owner-occupied residence setting. A dynamic model of household and landowner in which the role of land as an asset is explicitly considered is presented, and the process of land development and land price change after the announcement of transportation improvement is investigated. During the period between the announcement and the completion of urban transportation improvement, it is observed that the price of the land that is presently used for agriculture but will be developed in the future is higher than the agricultural land price.     

Firm risk,investment, and employment growth

This paper examines the relation between firm risk and growth of Finnish firms. The results reveal a negative relation between risk (total and unsystematic risk) and firm investment. This negative relation is robust to the choice of estimation method. The results also suggest that labor-intensive firms respond to increased risk by substituting capital for labor. Discrete decision models reassure the main conclusions by showing that greater risk decreases (increases) the likelihood of simultaneous growth (decline) investment and employment.     

The timing of residential land development: A general equilibrium approach

A formal model of the development process is constructed in order to arrive at a better understanding of the land development process, the change in land prices over time, and the effects of public policy on these variables. The relationship between the rate of interest and the rate of price appreciation on land is shown to depend upon development costs, agricultural opportunity costs, market structure, and the level of Ricardian rents on land. The effects of a land tax and a capital gains tax on the rate of development are also analyzed.     

Recombinant Urbanization: Agrarian–urban Landed Property and Uneven Development in India

This article develops the concept of recombinant urbanization to show how agrarian landed property and land‐based caste/class relations shape the production of post‐liberalization urban real estate markets in India. I focus on two interrelated but differentiated agrarian property regimes in western Maharashtra to argue that real estate development is building on prior uneven agrarian land markets, which were themselves sociotechnically produced by colonial and postcolonial development politics. Through an examination of the organizational form of sugar cooperatives, which mediated agrarian capitalism in an earlier era, I track how these primary agricultural cooperatives are now being reorganized into real estate companies, sometimes with former sugarcane growers as company shareholders. The same caste‐based political and social capital that made sugar cooperatives possible in a capitalist agrarian society is now being leveraged by agrarian elites to ease their own and their constituents’ entry into an urbanizing economy. The concept of recombinant urbanization opens new methodological entryways to analyze the entangled agrarian and urban question in predominantly agrarian and late liberalizing societies.     

Use-Value Assessment Tax Expenditures in Urban Areas

Use-value assessment is the practice of valuing land for property tax purposes in its current use, rather than at its full market value. This practice is widespread in the U.S. and is intended to reduce the property tax burden on agricultural land near urban areas and slow the pace of land development. We examine the foregone property tax revenue, or tax expenditure, due to use-value assessment. Data sets for two case studies are employed in empirical estimation of spatial models of the difference between market value and use value, providing the analytic basis for estimates of tax expenditures.     

The fundamentals of land prices and urban growth

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.     

State‐Led Financial Regulation and Representations of Spatial Fixity: The Example of the Spanish Real Estate Sector

This article offers a bottom‐up contribution to the fixity–motion literature. It aims to unravel the apparent contradiction of real estate spatial fixity in Spain, which is portrayed both as a barrier to accumulation and as a unique source of investment by different capitalist actors. Empirically, it describes the shifts in real estate ownership and changes in profit‐making strategies that have taken place across the real estate sector during the crisis years, and the role of the state in these shifts. The article asserts that the idea of spatial fixity representing a spatial barrier for accumulation does not necessarily apply in the Spanish case. It further claims that the tensions in capital circulation through real estate are not only to be found in the action of time, but in different state strategies pursued by various actors. The opposing representations of fixity are the result of state regulation of interest rates, taxation and risk weighting. The state also increasingly promotes land rents as a source of liquidity creation.     

Endogenous job destruction and job matching in cities

We propose a spatial search-matching model where both job creation and job destruction are endogenous. Workers are ex ante identical but not ex post since their jobs can be hit by a technological shock which decreases their productivity. They reside in a city, and commuting to the job center involves both pecuniary and time costs. As a result, workers with high wages are willing to live closer to jobs to save on time commuting costs. We show that, in equilibrium, there is a one-to-one correspondence between the productivity space and the urban location space. Workers with high productivities and wages reside close to jobs, have low per distance commuting costs and pay high land rents. We also show that higher per distance commuting costs and higher unemployment benefits lead to more job destruction.     

An intertemporal CAPM with higher-order moments

We propose an intertemporal asset pricing model that incorporates both preference for higher-order moments and stochastic investment opportunities and encompasses a wide range of existing models. We provide supporting evidence from the U.S. stock market and find that, not only is systematic skewness negatively priced, an extra return premium is also required for accepting high systematic risk associated with a rise in risk aversion. Our findings suggest that considering both skewness preference and intertemporal hedging demands improves the estimated risk-return trade-off, and that cross-sectional anomalies such as value, momentum, and failure probability puzzles can be partially explained by our model.     

Income taxes and urban spatial structure

This paper examines the impact of an income tax in a monocentric city where households equilibriate their allocation of time between work, commuting, and leisure. An increase in the income tax rate lowers the implicit value of time, and hence transportation costs. “Compensated equilibrium” comparative statics analysis shows that under certain conditions, this results in a larger, more dispersed urban area, with lower land rents at the city center and less population within any given distance from the center. The welfare effect of an income tax rate change is also studied, and an expression for the marginal excess burden is derived. The income tax produces welfare losses both because it induces substitution in favor of leisure and in favor of travel—the latter accompanied by excessive spatial dispersion and consumption of space. The marginal excess burden depends not only on the compensated demand elasticity for leisure, but also on that for space. Finally, the problem of benefit measurement for transportation projects in this tax-distorted spatial economy is examined. Benefit measures should be deflated to adjust for the fact that further transportation improvements lead to reduction of land use intensity, exacerbating the problem of spatial resource misallocation in an already excessively dispersed urban area.     

How money illusions and heterogeneous beliefs affect asset prices

We develop a dynamic asset pricing model with two investors with money illusions and heterogeneous beliefs about some aspects of the economy. The model is tractable and delivers closed forms for all equilibrium quantities. The study shows that money illusion leads the nominal shock risk to generate spillover effects on the real side of the economy and affects all equilibrium quantities, even without inflation disagreement. We find that bond yields increase, but the stock price decreases, as money illusion increases. Bond yield and stock price volatilities increase with fundamental disagreement, while the latter decreases with inflation disagreement. We also discover that the stock risk premium is inverse-U shaped as inflation disagreement increases. Moreover, we find that the optimistic investor holds positions in real bonds and stocks, and shorts the nominal bond to hedge against the risk of market changes, which is in line with the pessimistic investor’s beliefs.