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Urban Economics Theory and Policy

Paper Session

Sunday, Jan. 7, 2018 10:15 AM - 12:15 PM

Loews Philadelphia, Washington A
Hosted By: American Real Estate and Urban Economics Association & American Economic Association
  • Chair: Nathaniel Baum-Snow, University of Toronto

Employer-paid Parking, Mode Choice, and Suburbanization

Jan K. Brueckner
,
University of California-Irvine
Sofia Franco
,
Nova University of Lisbon

Abstract

This paper constructs a theoretical model that facilitates analysis of the effects of employer-paid parking on mode choice, road investment and suburbanization. The model simplifies urban space by dividing it into two zones (islands), center and suburbs, which are connected by a congested road and public-transit line. Each road commuter requires an allotment of CBD land for parking, and because the central zone's area is fixed, parking land reduces the amount available for central residences and CBD production. The model characterizes optimal resource allocation from the perspective of a social planner. The planning solution can be decentralized, which requires employee- rather than employer-paid parking, congestion tolls, and a tax (subsidy) to offset the road capacity deficit (surplus). The analysis then considers the effect of switching to employer-paid parking, with the burden of parking costs shifting from road users to employers, thus reducing the wage for all workers. This switch inefficiently increases road usage and capacity investment, while spurring an inefficient increase in suburbanization.

Cyclical Housing Prices in Flatland

Joseph Williams
,
Professors Capital

Abstract

The most volatile housing markets in the United States during the 2000s were concentrated in Arizona, Florida, Nevada, and noncoastal California. This volatility is puzzling because these "Sand States" are characterized by sprawling cities surrounded by ample supplies of flat, buildable land. Here, this combination of highly volatile prices and highly elastic supply is shown to be consistent with the predictions from a model of vacant land as an option to build. In the model a monocentric city has a negative price gradient with constant development costs at its expanding outer edge. Also, all agents, including perfectly competitive developers and landowners, are equally informed about uncertain, mean-reverting, future growth rates of housing demand. In equilibrium all development of rural land occurs on the buildable share of land at the expanding outer edge of the city. Prices are procyclical at the outer edge and even more so inside the city. These properties persist with a nearly flat housing price gradient. Calibrated numerical solutions correspond closely with observed volatilities of housing prices and construction. Other empirical predictions match the existing evidence.

Do Spatially Targeted Redevelopment Incentives Work? The Answer Depends on How You Ask the Question

Andrew Hanson
,
Marquette University
Shawn Rohlin
,
Kent State University

Abstract

We compare several common program evaluation techniques in evaluating the Empowerment Zone (EZ) program, a large urban redevelopment program of primarily tax credits, run by the federal government. Studying the federal EZ program as a means to examine methodology is advantageous for several reasons. First, the federal program had an application process- generating a set of areas that were qualified and applied, but that did not receive the program, creating a comparison group that should not suffer from application bias. Second, the program also had pre-application rules for which areas were considered- generating a rules-based group of comparison areas. Third, the program is uniform across areas, so that program characteristics are not endogenous to local needs. Lastly, the geography of recipient boundaries is (and comparison areas are) accounted for by census tract areas. We examine outcomes of the program under standard cross-section, difference-indifference, triple difference, instrumental variable, and regression discontinuity style models, constructing comparison groups using several alternatives for each style of model including trimming by propensity score. Our results generally show wide-ranging estimates of program effectiveness, with both positive and negative point estimates and a range of statistical significance. The most robust result suggests that EZs may have increased the number of firms in targeted areas in the short term, but the longer-term impact is less clear. We conclude that caution should be taken when interpreting the results of any one evaluation method as definitive, and suggest that the effect of the EZ program on outcomes of interest is uncertain.

Absentee Ownership, Land Taxation, and Surcharge

Kangoh Lee
,
San Diego State University

Abstract

This paper studies the efficiency of land taxation in a system of jurisdictions with absentee ownership of land. The government of a jurisdiction exploits absentee owners and sets the land tax rate at a level higher than the socially efficient level. Hence, even if land taxation does not distort the use of land, it distorts the allocation of resources between the private and public goods, creating an efficiency loss. If individuals choose their land ownership by trading it in the asset market, they do not necessarily choose an efficient ownership. In addition, the government of a jurisdiction imposes an absentee owner surcharge, reducing the return to absentee ownership and eliminating absentee ownership. Land taxation, however, is still inefficient due to endowed absentee ownership.
Discussant(s)
Alex Anas
,
State University of New York-Buffalo
Edward Coulson
,
University of California-Irvine
Matthew Freedman
,
University of California-Irvine
David Yves Albouy
,
University of Illinois-Urbana-Champaign
JEL Classifications
  • H2 - Taxation, Subsidies, and Revenue
  • R1 - General Regional Economics