AN EMPIRICAL ANALYSIS OF THE ASSOCIATION BETWEEN NEIGHBORHOOD INCOME AND UNIT NON‐RESPONSE IN THE SURVEY OF HEALTH,AGEING, AND RETIREMENT IN EUROPE

This paper estimates associations between individual and neighborhood characteristics and unit non‐response in a survey of the population aged 50 and over in the Netherlands in 2004. The statistical model includes interviewer fixed effects to control for the non‐random distribution of addresses over interviewers. The empirical analysis shows that, relative to individuals living in apartments, there is a lower unit non‐response among individuals living in houses and a higher unit non‐response among individuals living in old age institutions. Unit non‐response is positively associated with the size of a city. No age and gender effects are found. Unit non‐response is about 25 percent lower among individuals in the top than among individuals in the bottom of the distribution of neighborhood average income. This latter result implies that the response sample is biased toward individuals living in the more wealthy neighborhoods.     

Local public goods with mobility: Existence and optimality of a general equilibrium

The existence and optimality of a general equilibrium in a model with a finite number of locations among which the continuum of individuals (each individual belonging to one of a finite number of types) have to choose is investigated. Each community finances its own production of public goods by taxes. The way in which the tax burden in shared among the different types in the different regions is left arbitrary. The model allows for: restrictions on the mobility of either residents and/or workers, congestion and externalities in both production and consumption, commuting costs, preferences of an individual may also depend on his location as well as on the distribution of all individuals across locations.     

External Equilibrium in Mobility and Redistribution Economies

We develop a simple model in which individuals, who are differentiated by skill levels, freely choose location among different regions. In each region there is a local labor market that determines the wage and a local redistributive taxation that is exogenously determined. Equilibrium requires that no agent wishes to migrate. We define some sufficient conditions for equilibrium, and we show that the greater the difference in mean skills across regions, the greater the difference in redistributive taxations across regions should be to avoid migration flows. A condition for uniqueness and stability of equilibrium is also provided.     

A discrete-space urban model with environmental amenities

This paper analyzes the effects of providing environmental amenities associated with open space in a discrete-space urban model and characterizes optimal provision of open space across a metropolitan area. The discrete-space model assumes distinct neighborhoods in which developable land is homogeneous within a neighborhood but heterogeneous across neighborhoods. Open space provides environmental amenities within the neighborhood it is located and may provide amenities in other neighborhoods (amenity spillover). We solve for equilibrium under various assumptions about amenity spillover effects and transportation costs in both open-city (with in- and out-migration) and closed-city (fixed population) versions of the model. Increasing open space tends to increase equilibrium housing density and price within a neighborhood. In an open-city model, open space provision also increases housing density and price in other neighborhoods if there is an amenity spillover effect. In a closed-city model, housing density and prices in other neighborhoods can decrease if the pull of the local amenity value is stronger than the push from reduced availability of developable land. We use numerical simulation to solve for the optimal pattern of open space in two examples: a simple symmetric case and a simulation based on the Twin Cities Metropolitan Area, Minnesota, USA. With no amenity spillover, it is optimal to provide the same amount of open space in all neighborhoods regardless of transportation cost. With amenity spillover effects and relatively high transportation cost, it is optimal to provide open space in a greenbelt at the edge of the city. With low transportation cost, open space is provided throughout the city with the exception of neighborhoods on the periphery of the city, where the majority of the population lives. A greenbelt still occurs but its location is inside the city.     

CITY EQUILIBRIUM WITH BORROWING CONSTRAINTS: STRUCTURAL ESTIMATION AND GENERAL EQUILIBRIUM EFFECTS

This article develops a general equilibrium model of location choice where mortgage approval rates determine household‐specific choice sets. Estimation of the model using San Francisco Bay area data reveals that the price sensitivity of borrowing constraints explains about two‐thirds of the price elasticity of neighborhood demand. General equilibrium analysis of the 2000–2006 relaxation of lending standards predicts the following impacts on prices and neighborhood demographics: (i) an increase in house prices accompanied by a compression of the price distribution and (ii) a reduction in the isolation of Whites reflecting gentrification. Both predictions are supported by empirical observation.     

A welfare analysis of social security in a dynastic framework*

In this article, we study the welfare effects of unfunded social security in a general equilibrium model populated with overlapping generations of altruistic individuals that differ in lifetime expectancy and earnings ability. Contrary to previous research, our results indicate that steady‐state welfare increases with social security for most households, although by very different amounts. This result is mainly due to two factors. First, the presence of two‐sided altruism significantly mitigates the crowding out effect of unfunded social security. Second, ability shocks and uncertain lifetimes generate significant heterogeneity among households to yield different induced preferences for social security.     

A theory of persistent income inequality

This paper explores the dynamics of income inequality by studying the evolution of human capital investment and neighborhood choice for a population of families. Parents affect the conditional probability distribution of their children's income through the choice of a neighborhood in which to live. Neighborhood location affects children both through local public finance of education as well as through sociological effects. These forces combine to create incentives for wealthier families to segregate themselves into economically homogeneous neighborhoods. Economic stratification combines with strong neighborhoodwide feedback effects to transmit economic status across generations, leading to persistent income inequality.     

Assessing the evidence on neighborhood effects from Moving to Opportunity

The Moving to Opportunity (MTO) experiment randomly assigned housing vouchers that could be used in low-poverty neighborhoods. Consistent with the literature, I find that receiving an MTO voucher had no effect on outcomes like earnings, employment, and test scores. However, after studying the assumptions identifying neighborhood effects with MTO data, this paper reaches a very different interpretation of these results than found in the literature. I first specify a model in which the absence of effects from the MTO program implies an absence of neighborhood effects. I present theory and evidence against two key assumptions of this model: that poverty is the only determinant of neighborhood quality and that outcomes only change across one threshold of neighborhood quality. I then show that in a more realistic model of neighborhood effects that relaxes these assumptions, the absence of effects from the MTO program is perfectly compatible with the presence of neighborhood effects. This analysis illustrates why the implicit identification strategies used in the literature on MTO can be misleading.     

The single deviation property in games with discontinuous payoffs

We study equilibrium existence in normal form games in which it is possible to associate with each nonequilibrium point an open neighborhood, a set of players, and a collection of deviation strategies, such that at any nonequilibrium point of the neighborhood, a player from the set can increase her payoff by switching to the deviation strategy designated for her. An equilibrium existence theorem for compact, quasiconcave games with two players is established as an application of a general equilibrium existence result for qualitative games. A new form of the better-reply security condition, called the strong single deviation property, is proposed.     

Peer effects in learning HIV results

How do neighbors positively or negatively influence individuals living in rural Malawi to learn their HIV results? Using data of location of homes and distance to neighbors, we measure the social network effects of neighbors' learning their HIV results on individuals own learning. Using the fact that neighbors were randomly offered monetary incentives of varying amounts to learn their HIV results, we find positive effects of neighbors attending clinics on others living nearby: a 10 percentage point increase of the percentage of neighbors (approximately 2.4 individuals) learning their HIV results increases the probability of learning HIV results by 1.1 percentage points. The strongest network effects are among closest neighbors; we find no effect among religious social networks. We also find a negative interaction between direct cash incentives and peers: the effect of peers doubles among those who were not offered any individual financial incentive to learn their HIV results.     

School finance reform: Assessing general equilibrium effects

In 1994 the state of Michigan implemented one of the most comprehensive school finance reforms undertaken to date in any of the states. Understanding the effects of the reform is thus of value in informing other potential reform initiatives. In addition, the reform and associated changes in the economic environment provide an opportunity to assess whether a simple general equilibrium model can be of value in framing the study of such reform initiatives. In this paper, we present and use such a model to derive predictions about the effects of the reform on housing prices and neighborhood demographic compositions. Broadly, our analysis implies that the effects of the reform and changes in the economic environment are likely to have been reflected primarily in housing prices and only modestly on neighborhood demographics. We find that evidence for the Detroit metropolitan area from the decade encompassing the reform is largely consistent with the predictions of the model.     

Factor Ownership and Governmental Strategic Interaction

A fiscal policy of a jurisdiction alters the allocation of mobile factors among jurisdictions, affecting other jurisdictions and creating an externality. Since each jurisdiction does not take into account the externality, the equilibrium fiscal policy on mobile factors is inefficient. However, individuals of a jurisdiction may own immobile factors located in other jurisdictions. The government for the jurisdiction then considers the effects of its policy on the returns to the immobile factor located in other jurisdictions. The cross–ownership of immobile factors thus affects the efficiency of fiscal policies. The present paper considers capital tax competition as an example to illustrate the effects of the ownership structure of immobile factors on the equilibrium fiscal policy, and extends the analysis to other types of fiscal competition.     

Local public good provision: Voting,peer effects,and mobility

Few empirical strategies have been developed that investigate public provision under majority rule while taking explicit account of the constraints implied by mobility of households. The goal of this paper is to improve our understanding of voting in local communities when neighborhood quality depends on peer or neighborhood effects. We develop a new empirical approach which allows us to impose all restrictions that arise from locational equilibrium models with myopic voting simultaneously on the data generating process. We can then analyze how close myopic models come in replicating the main regularities about expenditures, taxes, sorting by income and housing observed in the data. We find that a myopic voting model that incorporates peer effects fits all dimensions of the data reasonably well.     

Endogenous neighborhood effects on welfare participation

This article examines the impact of neighborhood welfare participation on individual welfare participation, that is, the endogenous neighborhood effects. Endogenous neighborhood effects generate social multipliers. Few existing empirical studies on neighborhood effects distinguish between endogenous neighborhood effects and exogenous neighborhood effects, that is, the effects of neighborhood characteristics. This article constitutes an early attempt to identify and estimate endogenous and exogenous neighborhood effects separately. I construct an instrumental variable for neighborhood welfare participation rate based on the variation in welfare benefits and neighborhood demographic composition to address the reflection problem and the omitted neighborhood variables problem. A two-step method is proposed to separately estimate endogenous and exogenous neighborhood effects. The results show that neighborhood welfare participation plays an important role in a woman’s welfare participation both before and after the welfare reform in 1996.     

Trade and Location with Horizontal and Vertical Multi-region Firms

We analyse the effect on agglomeration tendencies of allowing multi-region firms in a standard trade and location model, the core–periphery (CP) model developed by Kurgman (1991). The introduction of horizontal multi-region firms mitigates the agglomeration effects found in the CP model by reducing the range of trade costs for which the core–periphery equilibrium occurs. The introduction of vertical multi-region firms that separate the location of headquarters and plants has two counteracting effects. While headquarters exhibit a strong tendency to concentrate, plants tend to spread out. The equilibrium is always asymmetric in spite of the underlying symmetry of the model.     

ON THE ROLE OF TAX SUBSIDY SCHEME IN MONEY SEARCH MODELS*

This article investigates the roles of policy in search models with divisible money. Recently, real indeterminacy of stationary equilibria has been found in both specific and general search models with divisible money. Thus if we assume the divisibility of money, it would be quite difficult to make accurate predictions of the effects of simple monetary policies. Therefore, in this article, we introduce a certain tax subsidy scheme and show that this is effective in selecting a determinate efficient equilibrium. In other words, for a given efficient equilibrium and for any real number δ > 0 , a certain tax subsidy scheme induces a locally determinate equilibrium within the δ‐neighborhood of the given equilibrium. Moreover, the size of the tax subsidy can be arbitrarily small.     

Tax Effects in a Model of Product Differentiation: A Note

We investigate how unit (or specific) tax and ad valorem tax affect equilibrium location choice in a model of product differentiation, which includes Hotelling (linear-city) and Vickrey-Salop (circular-city) spatial models as special cases. We find that neither tax affects equilibrium location patterns as long as each firm has the same production cost. Two taxes can yield different location patterns under cost heterogeneity among firms.     

On linking microsimulation and computable general equilibrium models using exact aggregation of heterogeneous discrete-choice making agents

Our paper contributes by bridging the gap between the (partial equilibrium) microsimulation and the computable general equilibrium (CGE) approaches, by making use of exact aggregation results from the discrete choice literature: heterogeneous individuals choosing within a set of discrete alternatives may be aggregated into a representative agent with (possibly multiple-level) constant elasticity-of-substitution/transformation preferences/technologies. These results therefore provide a natural link between the two policy evaluation approaches. We illustrate the usefulness of these results by evaluating potential effects of population ageing on the dynamics of income distribution and inequalities, using a simple overlapping generations model where individuals make leisure/work decisions, and choose a profession among a discrete set of alternatives.     

Approximate equilibria in microeconomic rational expectations models

For general equilibrium models in which prices transmit information among asymmetrically informed traders, strict rational expectations approximate equilibria are defined. A state-dependent price function is an ε-equilibrium if, when agents use their own information and that conveyed by prices, aggregate excess demand (in each state of the world) does not exceed ε. For any positive ε, existence requires only very mild assumptions—continuity and compact support. Moreover, there are revealing ε-equilibria for all smooth economies satisfying a dimensionality condition. In an open neighborhood of this case, existence of maximally revealing ε-equilibria holds.     

Conventions and Local Interaction Structures: Experimental Evidence

We present a series of experimental coordination games with a payoff-dominant and a risk-dominant Nash equilibrium. We examine how much local interaction structures affect players' strategy choices. Our three major observations are the following: First, local interaction with open neighborhoods along a circle leads to less coordination on the payoff-dominant equilibrium than interaction in closed neighborhoods. Second, when players are allocated around a circle, the neighborhood size has, in the long run, no effect on the players' strategy choices. Third, with the same neighborhood size, players allocated on a lattice tend less than players allocated around a circle to coordinate on the payoff-dominant equilibrium. This is true even though the players are given exactly the same instructions. Journal of Economic Literature Classification Numbers: C72, C92.