The Risk Structure of Land Markets

Real property as an asset class represents over half of the wealth in the United States. Nevertheless, the structure of risk in real property markets is poorly understood. This paper develops a model of urban and agricultural land prices that integrates spatial and asset pricing theories and characterizes the spatial and temporal risk structure of the land market. Urban land is priced by a CAPM and agricultural land is priced by a real option to convert into urban land. We show that the price of land awaiting conversion increases with the growth rate of urban rents and unsystematic risk but decreases with risk aversion. However, it may be increasing or decreasing in systematic risk. The free boundary for exercise determines city size, which increases with the growth rate of urban rents but decreases with systematic and unsystematic risk.     

Abstracts

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Accident Compensation Reform

The aim of the article is to provide a survey of the major issues involved in the reform of accident Compensation schemes. The article outlines the economic and social pressures for reform of existing accident compensation schemes, discusses the major reform issues and raises the major challenges facing the reform process. The article focuses on the experience of the Victorian Government in developing and implementing its reform of workers compensation (Workcare) and on its proposed reform of the existing compulsory third party motor accidents scheme to illustrate the key issues.     

Editorial

Editorial Introduction

Editorial     

The mixed economy for public service consumers. The case of consumer agencies for public transportation

The phrase mixed economy of welfare refers to the observation that the provision of public services in western countries frequently involves the participation of other sectors in addition to government. For example, a service may be privately financed and produced but regulated by government, financed by government subsidies or vouchers but produced privately, or produced by a commercial or voluntary organization under contract to government. But such different ways in which government can arrange public service supply by no means exhaust the varieties of arrangements in a mixed economic system. Other examples include alternative institutional arrangements for articulating consumer wants for public services, evaluating consumer satisfaction, and holding the producers of services accountable for their performance.This paper examines the role of official public advisory bodies and private, voluntary associations whose purposes are to improve services to users of U.S. public transportation. At variance with some of the theory of political economy, it is found that the public and private consumer organizations generally enjoy a symbiotic rather than substitute or competitive relationship with one another, and that both kinds of organizations arise and complement each other in addressing the problems of consumers of a government service produced under monopoly conditions.

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Die Beteiligung mehrerer Wirtschaftssektoren bei der Versorgung mit öffentlichen Diensten — der Fall der amerikanischen Verbraucher-Agenturen für öffentlichen Nahverkehr

Zusammenfassung Der Ausdruck mixed economy of welfare bezieht sich auf die Beobachtung, daß die Versorgung mit öffentlichen Gütern in westlichen Ländern häufig nicht allein durch den Staat erfolgt. So kann zum Beispiel ein öffentliches Gut privat finanziert und hergestellt werden, aber unter öffentlicher Aufsicht stehen, oder es kann von der öffentlichen Hand bezahlt aber privat produziert werden, oder es kann durch eine kommerzielle oder gemeinnützige Organisation in Absprache mit staatlichen Stellen produziert werden. Ebenso gibt es Fälle, wo öffentlicher und privater Hersteller eines vergleichbaren Gutes verschiedene Marktseggmente versorgen. Beispielsweise stehen in den USA den Bürgern, die mit öffentlichen Schulen unzufrieden sind, private Schulen zur Verfügung.Diese Beispiele zeigen, auf welchen unterschiedlichen Wegen die Versorgung mit öffentlichen Gütern rangiert werden kann. Solche angebotsorientierten Beispiele zeigen aber nur einen Teil der möglichen Sektorverbindungen in einer Mischwirtschaft. Andere Beispiele treffen eher die Nachfrageseite bei öffentlichen Gütern, insbesondere die institutionellen Möglichkeiten für die Artikulation von Verbraucherwünschen hinsichtlich öffentlicher Güter für die Erfassung der Zufriedenheit und dafür, daß die Anbieter öffentlicher Güter für ihr Leistungsniveau einstehen müssen. Solche Beispiele zeigen, daß Einrichtungen wie Kommissionen für öffentliche Dienste, Departements für Konsumentenfragen, Ombudsmänner und eine Vielzahl privater und freiwilliger Organisationen in unterschiedlichster Weise tätig werden, um die Interessen von Bürgern zu schützen, die öffentliche Leistungen in Anspruch nehmen.Der vorliegende Beitrag betrachtet solche Einrichtungen für öffentlichen Nah- und Fernverkehr in den USA. Ebenso wie in England gibt es hier sowohl offizielle öffentliche Beratungsgremien wie auch private freiwillige Einrichtungen, deren Zielsetzung ganz ähnlich sind, nämlich die Leistungen der öffentlichen Verkehrsunternehmungen zu verbessern. Der Beitrag berichtet über die Ergebnisse einer empirischen Studie beider Arten von Gremien und versucht die Rolle beider Arten in einer Mischwirtschaft zu beschreiben. Insbesondere versucht der Beitrag, zu erklären, warum beide Arten von Gremien entstehen, welches Verhältnis sie zu einander und zu den Transportunternehmen haben. Im Gegensatz zu manchen theoretischen Annahmen erwies sich, daß öffentliche und private Verbraucherorganisationen weniger in einem substitutiven oder wettbewerblichen Verhältnis zueinander stehen, sondern eher eine Symbiose miteinander bilden, und daß sich beide Arten von Organisationen häufig bei der Behandlung von Problemen ergänzen.The author is indebted to his former student and research assistant Chester Phillips for carrying out the survey for this paper. He would also like to thank his colleague Richard Silkman for insightful comments and suggestions on the first draft and Beverly Dolinsky of the Permanent Citizens Advisory Committee to the MTA in New York City for the time and information she provided. Finally, the author wants to thank Ken Judge for providing the stimulus to write this paper through the invitation to participate in the 1983 Social Administration Association Conference in Canterbury, England, where this paper was first presented, and Harry Weiner for arranging support to allow attendance at that conference.

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Dennis R. Young is a Professor at W. Averell Harriman College for Policy Analysis and Public Management, State University of New York at Stony Brook, Stony Brook, New York 11794, USA.     

An Analysis of SBA Loan Defaults by Maturity Structure

The financial intermediation literature on small business lending focuses on the determinants and costs to credit access. There is, however, little research examining the repayment behavior of small firms that actually receive loans. In this paper, we address this shortcoming in the literature by examining the default behavior of a sample of Small Business Administration 7(a) guaranteed loans with three distinct maturity structures. We employ a discrete-time hazard approach and show that SBA defaults are time-dependent and that the factors impacting default behavior, as well as its timing, are maturity specific. Specifically, we show the importance of loan maturity, seasoning, economic conditions, and other firm-specific factors in predicting the likelihood of SBA loan defaults. JEL classification: G21     

An Anatomy of Price Dynamics in Illiquid Markets: Analysis and Evidence from Local Housing Markets

This research analyzes the dynamic properties of the difference equation that arises when markets exhibit serial correlation and mean reversion. We identify the correlation and reversion parameters for which prices will overshoot equilibrium ("cycles") and/or diverge permanently from equilibrium. We then estimate the serial correlation and mean reversion coefficients from a large panel data set of 62 metro areas from 1979 to 1995 conditional on a set of economic variables that proxy for information costs, supply costs and expectations. Serial correlation is higher in metro areas with higher real incomes, population growth and real construction costs. Mean reversion is greater in large metro areas and faster growing cities with lower construction costs. The average fitted values for mean reversion and serial correlation lie in the convergent oscillatory region, but specific observations fall in both the damped and oscillatory regions and in both the convergent and divergent regions. Thus, the dynamic properties of housing markets are specific to the given time and location being considered.     

Pay dispersion among the top management team and outside directors: Its impact on firm risk and firm performance

Two key groups central to improving firm performance are the top management team (TMT) and the board of directors. Executives undertake strategic actions, whereas board members fulfill their resource provision and monitoring roles. Drawing on tournament theory and equity theory, we propose that high pay dispersion among outside directors and the TMT is positively associated with strategic risk, whereas high (low) TMT pay dispersion and low (high) outside director pay dispersion are positively associated with firm performance. Our predictor is the unexplained component of horizontal pay dispersion, or the residual of pay dispersion resulting from regressing pay on observable firm, industry, period, and individual characteristics. Our results highlight the importance of unexplained pay dispersion for TMTs, but not for boards of directors, in improving firm performance.     

Citizen participation in public administration: investigating open government for social innovation

In recent years, public sector organizations have increasingly focused on citizen contribution by adopting instruments known from open innovation. By collaborating with the periphery and leveraging external knowledge, government institutions initiate social innovation and stimulate a positive change for society. This article examines the involvement of citizens in an ideation platform initiated by a local government and investigates the motivations affecting participation intensity. Drawing on self‐determination theory, we analyze what motivates citizens to participate in an open government platform and how these motivations influence participation quantity. Based on a survey among platform users and the analysis of usage data from the platform operator, we find that motivations of citizen participation in public administration greatly vary across forms of participation. Whereas, intrinsic motivation is positively associated with producing and consuming platform content, external and introjected regulation negatively relate to individuals’ active contribution. At the same time, external regulation is positively associated with evaluation behavior.