Housing supply elasticity in local government areas of Sydney

We report supply elasticity estimates of residential property (houses and apartments) for local government areas (LGAs) in metropolitan Sydney. Using annual data for 1991–2012, the average supply elasticity estimate across all LGAs is 0.2 for houses and 0.8 for apartments. The supply of houses is inelastic in all 43 LGAs; in contrast, apartment supply is elastic – greater than unity – in about one-third of LGAs. We develop theoretical and empirical models to explain the cross-section variation in supply elasticity across LGAs. For houses, supply elasticity is negatively related to an LGA’s population density, the time taken by a local council to process a development application and to different measures of the amount of land in an LGA that is unavailable for new housing development. In contrast to houses, variation in supply elasticity for apartments across LGAs is unrelated to any of the available regressors.     

Currency Unions,Export Margins,and Product Differentiation: An Empirical Assessment for European Monetary Union

This paper reconsiders the trade effects of the euro, providing a decomposition into its effects on the extensive margin and intensive margin. Furthermore, it relates the more disaggregated estimates for 93 two‐digit HS product groups to the elasticity of substitution, thereby testing a key hypothesis of heterogenous firm trade theory. The estimates for the period 1996–2011 suggest a trade effect of the euro of some 28%, which has mainly materialized through the intensive margin. A negative net effect of the euro on the extensive margin is found for several product groups, supporting anecdotal evidence that firms have consolidated their product varieties in response to the elimination of exchange rate variability. Finally, the disaggregated estimates are in line with heterogenous firm trade theory models, suggesting that a large elasticity of substitution dampens the effect of a trade cost reduction on the extensive margin and amplifies its effect on the intensive margin.     

The College Wage Premium and the Expansion of Higher Education in the UK*

This paper reports estimates of the UK “college premium” for young graduates across successive cohorts from large cross‐section datasets for the UK pooled from 1994 to 2006—a period when the higher education participation rate increased dramatically. The growth in relative labour demand suggests that graduate supply considerably outstripped demand which ought to imply a fall in the premium. We find no significant fall for men and even a large, but insignificant, rise for women. Quantile regression results reveal a fall in the premium only for men in the bottom quartile of the distribution of unobserved skills.     

ESTIMATING THE EFFECTS OF BROWNFIELDS AND BROWNFIELD REMEDIATION ON PROPERTY VALUES IN A NEW SOUTH CITY

Using data from Charlotte, NC, a New South city without a legacy of heavily contaminated properties, we find the distance from unremediated brownfields—typically former industrial properties believed to have modest contamination—to have no effect on residential sales values, but proposed cleanup and actual remediation have positive, substantial, and significant effects especially within 0.5 miles of the brownfield. Our results are consistent whether we examine all property values within a given distance, such as 0.5 miles, or examine discrete distances, such as 0.3–0.5 miles. An estimate of the benefits is on the order of $4 million. (JEL Q51, Q24, Q28, R52)     

The incidence of heterogeneous residential property taxes

In an economy with multiple tax jurisdictions, the distribution of the burden of heterogeneous residential property taxes is shown to depend on the elasticity of demand for housing, the elasticity of substitution between land and capital in housing production, the elasticity of supply of land to individual tax jurisdictions, and the degree of population mobility between tax jurisdictions. It is demonstrated that the excise effects of the residential property tax may not cancel across jurisdictions and the average rate of tax may overstate or understate the burden on residential capital.     

Trade Elasticities

Conventional aggregate trade elasticity estimates hardly vary across countries. We introduce an aggregate elasticity that is implied by theory: It is the value that equates the welfare gains from trade as implied by one‐ and multi‐sector versions of the model in Arkolakis et al. (American Economic Review, 102 (2012):94–130). These estimates are predicated on sector‐level values for trade elasticites, which we provide at three‐digit levels for 28 developed and developing countries. The values for this aggregate elasticity vary greatly across countries, and they do so because of countries' patterns of production and because a given sector‐level elasticity displays considerable cross‐country heterogeneity.     

Housing Prices in Urban China as Determined by Demand and Supply

This paper studies the demand for and supply of residential housing in urban China since the late 1980s when the urban housing market became commercialized. Using aggregated annual data from 1987 to 2012 in a simultaneous equations framework we show that the rapid increase in the urban residential housing price can be well explained by the forces of demand and supply, with income determining demand and cost of construction affecting supply. We find the income elasticity of demand for urban housing to be approximately 1, the price elasticity of demand to be approximately ?1.1 and the price elasticity of supply of the total housing stock to be approximately 0.5. The resulting long‐run effect of income on urban housing prices in elasticity terms is approximately 0.7, because the increase in income has shifted the demand curve outward more rapidly than the supply curve.     

Universal telecommunication service: A world perspective

Worldwide telecommunications demand is estimated in models for business and residential mainline telephone, and for mobile telephone service using separate models for developed and developing countries for the period 1996–2001. We test for cross-price elasticities between mainline and mobile service and find that the results are generally suggestive of current complementary relationships. We find residential monthly price elasticity to be no different than zero for a sample of developing countries, but the connection elasticity is statistically significant. Mobile monthly service elasticity is much larger than those for mainline service, suggesting that universal service in developing countries might be promoted more effectively with subsidies for mobile service. Income elasticities for the residential model are modest while the mobile service model income elasticity for developing countries is much higher. Expanding markets, income growth and enhanced education may be the ultimate universal service promoters.     

A variance equality test of the ICAPM on Philippine stocks: post-Asian financial crisis period

Analysis of the data generated from various residential time-of-day electricity pricing projects often involves estimation of a system of demand equations. Both ad hoc demand models and neoclassical demand models have been estimated, often resulting in considerably different estimates of price elasticities. In this paper, elasticity estimates are presented from each type of demand model using data from the Arizona and North Carolina rate demonstration projects. The relationship between the elasticities generated from ad hoc models and separable neoclassical models is explored and the divergent price elasticity estimates are reconciled.     

ESTIMATES OF THE PRICE ELASTICITY OF SWITCHING BETWEEN BRANDED AND GENERIC DRUGS

We estimate price elasticities of switching from branded to generic drugs for two widely used drugs: Prozac and Zocor. We find the price elasticity of switching varies by drug and is between 0.01 and 0.10. While elasticity estimates for Zocor are robust to the inclusion of controls for supply‐side factors, those for Prozac are not. Our results indicate consumers in managed care plans are most responsive to differences in out‐of‐pocket (OOP) cost, and we estimate that a 10% increase in the OOP cost difference between Zocor and generic Simvastatin increases an individual's probability of switching to the generic by approximately 0.3%. This would result in a modest total savings of $36,700 among our sample of 114,218 privately insured Zocor users. Our finding that individuals are relatively unresponsive to the lower prices caused by generic introduction implies that policies targeting supply‐side behavior are likely to have a larger effect on generic uptake than price‐based inducements. If generic‐uptake did occur immediately within the first 18 months after generic introduction, the total savings among individuals and insurance companies within our sample would be approximately $7 million for Zocor and $255,000 for Prozac. (JEL I11, I18)     

STATE‐LEVEL CAPITAL AND INVESTMENT: UPDATES AND IMPLICATIONS

This paper presents state‐by‐state capital stock and gross investment estimates for 1990–2007. I follow the methodology of Garofalo and Yamarik (The Review of Economics and Statistics, 84, 2002, 316–23) and apportion the national capital stock to the individual states using one‐digit NAICS income data. I then test the soundness of the data by estimating a Cobb–Douglas production function and a Solow growth model using a variety of panel data estimators. Under both models, I obtain estimates of the output elasticity for capital that are plausible and close to the observed national income share of one‐third. (JEL O47, O51, R11)     

Moonlighting Politicians: Motivation Matters!

We study self‐selection into politics and effort once in office of citizens with different abilities and motivations in a framework where moonlighting is allowed. We find that high‐ability motivated (public‐fit) politicians exert higher effort in politics than high‐ability non‐motivated (market‐fit) politicians, and that high‐ability citizens, both public‐fit and market‐fit, may decide to enter politics. We test our predictions using a database of Italian parliamentarians for the period 1996–2006. We find evidence of advantageous selection of both market‐fit and public‐fit parliamentarians. We also show that public‐fit parliamentarians have higher voting attendance and that only voting attendance of market‐fit parliamentarians is negatively affected by income opportunities.     

Estimation of a Stratified Error‐Components Model*

This article shows that the presence of incidental parameters in Baltagi and Griffin's (International Economic Review 29 (1988), 745–53) generalized error‐components model implies there is no guarantee feasible and true GLS estimators have the same asymptotic distribution. The article then considers a related stratified error‐components model that has no incidental parameters. In this model, unobserved heterogeneity occurs through variances changing across strata. The article provides an EM algorithm for calculating estimates of the model's parameters without assuming observations can be classified into strata, derives a bootstrap test for identifying the number of strata, and applies the new methods in an example.     

THE PROPERTY VALUE PREMIUM OF A PLACE OF WORSHIP

Using a unique data set of residential housing values, we improve on previous hedonic pricing and event studies literature to estimate the amenity effects of a new religious structure on local property values. We improve on previous research by extending our analysis with a pre‐ and post‐treatment model. Using a pre‐ and post‐treatment model, we do not find that the religious structure that we examined influenced the value of surrounding properties in the period after its completion. The results suggest that previous research using only post‐completion data may mischaracterize the amenity effects of religious structures. (JEL R3)     

基于Nerlove模型的中国小麦供给反应研究

依据1981—2006年中国小麦播种面积、价格和生产成本的时间序列数据,应用Nerlove模型,测算了我国小麦播种面积对价格和成本的反应程度。研究结果表明:我国小麦播种面积对价格的反应程度短期较小,但长期较大,这说明小麦供给对价格的反应存在滞后性;与价格弹性相比,小麦的成本弹性要小得多。因此,制定小麦政策时,应在稳定小麦生产资料价格的同时,加大对小麦价格支持政策的连续性,以促使麦农形成对小麦价格增长的稳定预期。     

Measuring the Impacts of Global Trade Reform with Optimal Aggregators of Distortions

Aggregation of trade distortion measures is essential in applied work, but traditional trade‐weighted average measures are egregiously flawed. This paper shows how appropriate tariff aggregation can overcome underestimation of both efficiency and terms‐of‐trade gains from reform. The improvement is shown to result from better measurement of a distortion effect that is most important in the early stages of reform and a weighting effect that becomes more important as protection is reduced. Applications confirm that the technique can be applied relatively easily, and—with elasticity estimates suggested by the available econometric evidence—point to close to a doubling of the global welfare gains from global trade reform, and dramatic changes in the measured welfare impacts in many individual cases. Sensitivity analysis suggests that, for global trade reform, the ease of substitution between tariff lines is much more important than that between varieties from different countries. We provide an online aggregation tool to allow replication of our analysis or investigation of alternative scenarios for global reform. We hope that this paper will contribute both to wider use of optimal aggregators and improved estimates of the key elasticity parameters.     

Two‐level CES Production Technology in the Solow and Diamond Growth Models*

The two‐level CES aggregate production function—that nests a CES into another CES function—has recently been used extensively in theoretical and empirical applications of macroeconomics. We examine the theoretical properties of this production technology and establish existence and stability conditions of steady states under the Solow and Diamond growth models. It is shown that in the Solow model the sufficient condition for a steady state is fulfilled for a wide range of substitution parameter values. This is in sharp contrast with the two‐factor Solow model, where only an elasticity of substitution equal to one is sufficient to guarantee the existence of a steady state. In the Diamond model, multiple equilibria can occur when the aggregate elasticity of substitution is lower than the capital share. Moreover, it is shown that for high initial levels of capital and factor substitutability, the effect of a further increase in a substitution parameter on the steady state depends on capital–skill complementarity.     

Intertemporal Labor Supply and Human Capital Accumulation*

We solve and estimate a dynamic model that allows agents to optimally choose their labor hours and consumption and that allows for both human capital accumulation and savings. Estimation results and simulation exercises indicate that the intertemporal elasticity of substitution is much higher than the conventional estimates and the downward bias comes from the omission of the human capital accumulation effect. The human capital accumulation effect renders the life‐cycle path of the shadow wage relatively flat, even though wages increase with age. Hence, a rather flat life‐cycle labor supply path can be reconciled with a high intertemporal elasticity of substitution.     

Does the labour supply of wives respond to husbands' wages? Canadian evidence from micro data and grouped data

Abstract. Using micro data and grouped data, we assess the extent to which Canadian wives adjusted their labour supply in response to changes in husbands' wages during the period 1980‐2000. Grouped data parameters based on weighted least squares and the unbiased‐error‐in‐variables estimator developed by Devereux (2004, 2007a,b) yield cross‐wage elasticities that are substantially higher (in absolute value) than those derived from OLS regressions run on micro data. Both grouping estimators indicate that the labour supply of Canadian wives responded strongly to changes in husbands' wages during the 1980s. For the 1990s, our estimates of wives' cross‐wage elasticity display greater dispersion.     

EXPORTS AND JOBS: THE CASE OF JAPAN, 1975–2006

This paper asks how much employment is created by increasing goods and services exports and how the export dependence of employment has changed over time. Using the newly developed Japanese input‐output table for 1975–2006, this paper estimates the effect of exports on an industry's employment (i.e., direct effect) and the effect on other industries' employment (i.e., indirect effect). One of our major findings is that the magnitude of the indirect effect exceeded that of the direct effect over almost the entire period. This implies that more than half of the effects of exports appeared through intraindustry linkages. We also found the indirect effect of goods exports is not limited to goods industries. As a result, the increases in the export dependence of employment are not limited to major Japanese export‐oriented industries such as electrical machinery, motor vehicles, and general machinery. In identifying the potential risks of negative external shocks, it is important for policy makers to estimate how much employment is indirectly as well as directly dependent on exports. (JEL F16, F14)