Voting on road congestion policy

This paper studies the political economy of urban traffic policy. A city council and a regional government (representing city and suburbs) decide respectively on parking fees and a road toll. Both charges are below the optimum when median voters in city and suburbs prefer cars to public transport sufficiently more than the average. Even if the city government would set an optimal road toll, the regional government blocks it when the median suburban voter prefers cars strongly enough. Letting the city control parking and road pricing may therefore increase chances of adoption of the latter. However, if the city controls parking and the region road pricing, the combined charges are higher than if the city controlled them both. Hence, when voters want all charges below the optimum, the involvement of two governments may be desirable. We also find that earmarking road pricing revenues for public transport is welfare-enhancing, compared to lump-sum redistribution, only if they are topped up by extra funds granted to the city by a higher level of government.     

Is econometrics useful for private policy making? A case study of replacement policy at an auto rental company

The goal of this paper is to illustrate the potential usefulness of econometrics as a tool to assist private policy makers. We provide a case study and detailed econometric analysis of the automobile replacement policy adopted by a large car rental company. Unlike public policy making–where the benefits from using econometric models and “science-based” approaches to policy making are hard to quantify because the outcomes of interest are typically subjective quantities such as “social welfare”–in the case of firms there is an objective, easily quantifiable criterion for judging whether policy A is better than policy B: profits. We introduce and estimate an econometric model of the rental histories of individual cars in the company’s fleet. Via stochastic simulations, we show that the model provides a good approximation to the company’s actual operations. In particular, the econometric model is able to reproduce the extraordinarily high rates of return that the company obtains on its rental cars, with average internal rates of return between purchase and sale of approximately 50%. However, the econometric model can simulate outcomes under a range of counterfactual vehicle replacement policies. We use the econometric model to simulate the profitability of an alternative replacement policy under pessimistic assumptions about the rate maintenance costs would increase and rental rates would have to be decreased if the company were to keep its rental cars longer than it does under the status quo. Depending on the vehicle type, we find that the company’s expected discounted profits would be between 6% to over 140% higher under the suggested alternative operating strategy where vehicles are kept longer and rental rates of older vehicles are discounted to induce customers to rent them. The company found this analysis to be sufficiently convincing that it undertook an experiment to verify the predictions of the econometric model.     

Second-Best Congestion Pricing: The Case of an Untolled Alternative

This paper deals with second-best one-route congestion pricing in case of an untolled alternative. Using a two-link network simulation model, the effects of various demand and cost parameters on the relative efficiency of one-route tolling are analyzed. It is investigated whether the existence of costs of congestion charging may be a reason for one-route tolling to be more “overall efficient” than two-route tolling. Finally, the efficiency of revenue-maximizing one-route and two-route tolling is discussed.     

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.     

Testing for Strategic Interaction Among Local Governments: The Case of Growth Controls

This paper helps to fill a gap in the public economics literature by providing empirical evidence on strategic interaction among local governments. Using the methodology of Case et al. (Journal of Public Economics,52, 285–307 (1993)), the paper focuses on the adoption of growth-control measures by cities in California and looks for evidence of policy interdependence in these choices. The data are drawn from an elaborate survey of growth control practices in California cities, conducted by Glickfeld and Levine (“Regional Growth . . .Local Reaction,” Lincoln Institute of Land Policy, Cambridge, MA, 1992). The survey results are used to compute an index of the stringency of growth controls in each city, which serves as the dependent variable for the study.     

Understanding gentrification: an empirical analysis of the determinants of urban housing renovation

The “back-to-the-city” phenomenon presented an unpredicted countercurrent in the prevalent tide of suburbanization, and this process of upper-income resettlement in the inner city has been thoroughly analyzed in the urban economic literature. Housing renovation, a process that always accompanies gentrification and constitutes a significant portion of residential housing investment, has been studied much less. Contrary to the expectation that “location matters,” the existing empirical studies have concluded that most neighborhood amenities and structural attributes are insignificant as determinants of renovation. Using a detailed parcel-level data set that documents all residential renovation activity in Chicago between 1995 and 2000, this paper establishes that the characteristics of a building and its neighborhood do indeed influence the likelihood that it will be renovated.     

Forecasting with vector autoregressive (VAR) models subject to business cycle restrictions

In the last decade VAR models have become a widely-used tool for forecasting macroeconomic time series. To improve the out-of-sample forecasting accuracy of these models, Bayesian random-walk prior restrictions are often imposed on VAR model parameters. This paper focuses on whether placing an alternative type of restriction on the parameters of unrestricted VAR models improves the out-of-sample forecasting performance of these models. The type of restriction analyzed here is based on the business cycle characteristics of U.S. macroeconomic data, and in particular, requires that the dynamic behavior of the restricted VAR model mimic the business cycle characteristics of historical data. The question posed in this paper is: would a VAR model, estimated subject to the restriction that the cyclical characteristics of simulated data from the model “match up” with the business cycle characteristics of U.S. data, generate more accurate out-of-sample forecasts than unrestricted or Bayesian VAR models?     

A model of residential change and neighborhood tipping

This paper applies the theory of probabilistic consumer demand to an analysis of residential change at the urban neighborhood scale. By developing the profit maximizing pricing behavior of housing suppliers, it is shown that neighborhood transitions from high income to low income and from white to black can be explained on purely economic grounds without involving prejudicial preferences. The analytical model explains two types of transition. In the first, a neighborhood's social mix changes gradually in response to gradual exogenous changes. In the second, a neighborhood “tips” suddenly in response to similar exogenous changes. The two transitions can occur depending on the characteristics of the demand functions for the two competing groups.     

The general equilibrium effects of congestion externalities

This is the second in a series of three articles on the topic of congestion externalities. We use an urban general-equilibrium model to compute two types of cities: the market-equilibrium city, in which congestion externalities occur, and the optimum city. The optimum city has a more dispersed distribution of employment, and a more concentrated distribution of residence. If the population of the city is fixed, the optimum pricing of transportation generates a per capita welfare gain of $3.78 per week. If the population of the city is endogenous, the internalization of congestion externalities causes the city to grow.     

Externalities, Indivisibility, Nonreplicability, and Agglomeration

In this paper we argue that the impact of external scale economies and diseconomies on city size is not nearly as clear-cut as it is tacitly believed in urban economics. Similarly, city-size distortions are not caused by externalities alone. Indivisibility and nonreplicability, which prevent establishing the “right” number of cities, may represent a source for city-size distortions which can be stronger than the standard resource misallocation resulting from external scale economies and diseconomies. It follows that a direct population dispersion policy is not just an inferior substitute to Pigouvian taxes and subsidies but rather a useful complement.     

Intertemporal price–quality discrimination and the Coase conjecture

We examine time-consistent intertemporal price–quality discrimination by a durable goods monopolist, when there are a continuum of buyer demand-intensities with respect to product quality, and it is profitable for the monopolist to trade with the marginal buyer-type (i.e., the “gap” case). We show that along every subgame perfect equilibrium path, with probability 1, prices and qualities decline over time, and the market is completely and monotonically depleted according to buyer-type in a finite number of offers. But, unlike the fixed quality literature, the monopolist may randomize over price–quality offers along the equilibrium path. We also show that the Coase conjecture continues to be valid here, but in a form that is significantly different from the usual formulation. In the limit, as the time between offers evaporates, the monopolist makes a continuum of offers and perfectly screens the market. However, he effectively cannot price-discriminate, because the equilibrium profits converge to the complete “pooling” profits that would be made if the entire market had the marginal buyer-type’s valuation.     

A fuzzy-QFD approach to supplier selection

This article suggests a new method that transfers the house of quality (HOQ) approach typical of quality function deployment (QFD) problems to the supplier selection process. To test its efficacy, the method is applied to a supplier selection process for a medium-to-large industry that manufactures complete clutch couplings.The study starts by identifying the features that the purchased product should have (internal variables “WHAT”) in order to satisfy the company's needs, then it seeks to establish the relevant supplier assessment criteria (external variables “HOW”) in order to come up with a final ranking based on the fuzzy suitability index (FSI). The whole procedure was implemented using fuzzy numbers; the application of a fuzzy algorithm allowed the company to define by means of linguistic variables the relative importance of the “WHAT”, the “HOW”–“WHAT” correlation scores, the resulting weights of the “HOW” and the impact of each potential supplier.Special attention is paid to the various subjective assessments in the HOQ process, and symmetrical triangular fuzzy numbers are suggested to capture the vagueness in people's verbal assessments.     

An extension of the monocentric urban spatial equilibrium model to a multicenter setting: The case of the two-center city

Firms in a monocentric city conforming in substance to the “new urban economics” produce an export commodity under agglomeration economies and employ homogeneous labor and capital. Workers reside about the CBD in decreasing densities with distance. A developer establishes a second export production center within the city's residential area. Conditions for economic viability and growth of the subcenter are examined, and its impacts on short-run and long-run city location patterns are discussed. A limiting condition on subcenter employment size is provided.     

One-stage structural models to explain city size

Several papers have estimated the parameters of Pareto distributions for city sizes in different countries, but only one has attempted to explain the differing magnitudes of these parameters with a set of country-specific explanatory variables. While it is reassuring that there has been some research which advances beyond simple “curve-fitting” to explore the determinants of city size distributions, the existing research uses a two-stage OLS method which yields invalid second-stage standard errors (and, consequently, questionable hypothesis tests). In this paper, we develop candidate one-stage structural models with normal and non-normal errors which accommodate truncated size distributions, potentially Pareto-like shapes, and city-level variables. In general, these new models are nonlinear in parameters. We illustrate with data on U.S. urban areas.     

Transport subsidies, system choice, and urban sprawl

This paper analyzes the effect of transport subsidies on the spatial expansion of cities, asking whether such subsidies are a source of undesirable urban sprawl. Even though the cost-reducing effect of transport subsidies is offset by a higher general tax burden (which reduces the demand for space), the analysis shows that subsidies nevertheless lead to spatial expansion of cities. If the transport system exhibits constant returns to scale, the subsidies are inefficient, making the urban expansion they entail undesirable. The paper also studies transport “system choice,” with the city portrayed as selecting its transport system from along a continuum of money cost/time cost choices. The analysis shows that subsidies inefficiently bias choice in the direction of a high money cost/low time cost option. Lastly, the paper considers system choice in a city with rich and poor groups, showing that the rich favor a system with a high money cost and low time cost, but that their choice, if implemented, leads to a city whose spatial size is smaller than optimal. Thus, rich control of system choice does not lead to urban sprawl.     

Property taxation and local public spending: the renter effect

The point of departure for this study is the pervasive finding that, other things equal, local jurisdictions tend to spend more on local services the larger the fraction of renters among their residents. This paper seeks to determine the approximate magnitude of this “renter effect” by posing the question “How much smaller would local public budgets be if all residents were home-owners?” Making use of two quite different approaches, the paper finds a typical renter effect on local public expenditure on the order of ten percent. This finding suggests that we might do well to reform the administration of the property tax so that changes in property tax liabilities on rental dwellings are directly and visibly transformed into changes of monthly rental payments.     

Arbitrage and price revelation with asymmetric information and incomplete markets

This paper deals with the issue of arbitrage with differential information and incomplete financial markets, with a focus on information that no-arbitrage asset prices can reveal. Time and uncertainty are represented by two periods and a finite set S of states of nature, one of which will prevail at the second period. Agents may operate limited financial transfers across periods and states via finitely many nominal assets. Each agent i has a private information about which state will prevail at the second period; this information is represented by a subset S_i of S. Agents receive no wrong information in the sense that the “true state” belongs to the “pooled information” set ∩_iS_i, hence assumed to be non-empty.Our analysis is two-fold. We first extend the classical symmetric information analysis to the asymmetric setting, via a concept of no-arbitrage price. Second, we study how such no-arbitrage prices convey information to agents in a decentralized way. The main difference between the symmetric and the asymmetric settings stems from the fact that a classical no-arbitrage asset price (common to every agent) always exists in the first case, but no longer in the asymmetric one, thus allowing arbitrage opportunities. This is the main reason why agents may need to refine their information up to an information structure which precludes arbitrage.     

Option hedging theory under transaction costs

The problem of option hedging in the presence of proportional transaction costs can be formulated as a singular stochastic control problem. Hodges and Neuberger [1989. Optimal replication of contingent claims under transactions costs. Review of Futures Markets 8, 222–239] introduced an approach that is based on maximization of the expected utility of terminal wealth. We develop a new algorithm to solve the corresponding singular stochastic control problem and introduce a new approach to option hedging which is closer in spirit to the pathwise replication of Black and Scholes [1973. The pricing of options and corporate liabilities. Journal of Political Economy 81, 637–654]. This new approach is based on minimization of a Black–Scholes-type measure of pathwise risk, defined in terms of a market delta, subject to an upper bound on the hedging cost. We provide an efficient backward induction algorithm for the problem of cost-constrained risk minimization, whose associated singular stochastic control problem is shown to be equivalent to an optimal stopping problem. This algorithm is then modified to solve the singular stochastic control problem associated with utility maximization, which cannot be reduced to an optimal stopping problem. We propose to choose an optimal parameter (risk-aversion coefficient or Lagrange multiplier) in either approach by minimizing the mean squared hedging error and demonstrate that with this “best” choice of the parameter, both approaches have similar performance. We also discuss the different notions of risk in both approaches and propose a volatility adjustment for the risk-minimization approach, which is analogous to that introduced by Zakamouline [2006. European option pricing and hedging with both fixed and proportional transaction costs. Journal of Economic Dynamics and Control 30, 1–25] for the utility maximization approach, thereby providing a unified treatment of both approaches.     

Information technology and culture: Identifying fragmentary and holistic perspectives of culture

In this paper, we review the literature on information technology (IT) and culture. The construct of “culture” has alternately been defined and studied by international scholars as national culture, and by organizational scholars as organizational or corporate culture. We argue that, despite the considerable amount of research activity in these areas, the two research traditions have existed as “stovepipes,” operating in parallel but not communicating effectively with each other. After reviewing how the linkage between IT and culture has been conceptualized in the literatures on national and organizational culture, we identify some gaps in these research streams, and propose a new conceptualization of culture. Grounding our framework in social identity theory (SIT), we argue that it is necessary to advance from the fragmentary perspectives that exist at present to a more holistic view of culture. We believe that this novel perspective will enable scholars to move toward a more multi-faceted view of culture as a richly layered set of forces that shape individuals’ beliefs and actions. We also identify opportunities for mutual learning, areas of challenge, and domains of possible contradiction between the two research streams as one step toward further theoretical advances.     

宿迁中心城区居民出行特征与优化引导对策研究

从出行次数、出行目的、出行方式、出行距离等各个方面分析城市居民出行特征,探讨其对居民出行的影响关系,结合居民出行意愿、路网情况、经济情况与可持续发展要求,提出宿迁中心城区居民出行优化引导对策。