Quantifying land-use regulation and its determinants
with: Simon Büchler
Journal of Economic Geography, 2023
We analyze land-use regulation and the determinants thereof across Swiss municipalities. We construct several residential development stringency indices based on a comprehensive survey. These indices capture various aspects of local regulation and land-use coordination across jurisdictions. Combining these indices, we construct an index that provides harmonized information about what local regulation entails and the local regulatory environment across municipalities. Our analysis shows that historical building density, natural amenities, socio-demographic factors, cultural aspects and municipal competition are important determinants of local land-use regulation. However, a large share of land-use regulation variation remains unexplained. Moreover, our results indicate that more stringent land-use regulation is associated with steeper house price increases but less urban sprawl.
The amplifying effect of capitalization rates on housing supply
with: Simon Büchler and Olivier Schöni
Journal of Urban Economics, 2021
We provide empirical evidence that increases in housing rental income lead to a larger supply response than price increases of the same percentage value. We rationalize this differential in supply responsiveness with an amplification mechanism arising from a downward revision of capitalization rates following a rental income increase. We document that the amplification of the housing supply price elasticity is less pronounced in geographically constrained and tightly regulated neighborhoods and areas having more sophisticated investors. Our findings hold valuable lessons for public policies affecting the housing rental income, such as rent control and housing subsidies.
Cities and the Structure of Social Interactions: Evidence from Mobile Phone Data
with: Konstantin Büchel
Journal of Urban Economics, 2020
The impact of telecommunication technologies on the role of cities depends on whether these technologies and face-to-face interactions are substitutes or complements. We analyze anonymized mobile phone data to examine how distance and population density affect calling behavior. Exploiting an exogenous change in travel times as well as permanent relocations of individuals, we find that distance is highly detrimental to link formation. Mobile phone usage significantly increases with population density even when spatial sorting is accounted for. This effect is most pronounced for local interactions between individuals in the same catchment area. This indicates that face-to-face interactions and mobile phone calls are complementary to each other, so that mobile phone technology may even increase the dividends of density.
Place-Based Policies and Spatial
Disparities across European Cities
with: Henry G. Overman
Journal of Economic Perspectives, 2020
Spatial disparities in income levels and worklessness in the European Union are profound, persistent and may be widening. We describe disparities across metropolitan regions and discuss theories and empirical evidence that help us understand what causes these disparities. Increases in the productivity benefits of cities, the clustering of highly educated workers and increases in their wage premium all play a role. Europe has a long-standing tradition of using capital subsidies, enterprise zones, transport investments and other place-based policies to address these disparities. The evidence suggests these policies may have partially offset increasing disparities but are not sufficient to fully offset the economic forces at work.
Calling from the outside: The role of networks in residential mobility
with: Konstantin Büchel, Diego Puga, Elisabet Viladecans-Marsal
Journal of Urban Economics, 2020
Using anonymised cellphone data, we study how social networks shape residential mobility decisions. Individuals with few local contacts are more likely to change residence. Movers strongly prefer neighbourhoods where they already know more people nearby. Contacts matter because proximity to them is valuable and makes attractive locations more enjoyable. They also provide hard-to-find local information and reduce frictions, especially in home-search. Effects are not driven by similar people being more likely to be friends and move between certain locations. Recently-moved and more central contacts are particularly influential. With age, proximity to family gains importance over friends
On the optimal design of place-based policies: A structural evaluation of EU regional transfers
with: Yashar Blouri
Journal of International Economics, 2020
We quantify general equilibrium effects of place-based policies in a multi-region framework with population mobility, trade and agglomeration economies. Using detailed data on EU transfers, we estimate the local effects of different transfer types on productivity, income and transportation costs. Integrating these estimates into the model, we derive the spatial distribution of economic activity and corresponding welfare that would have materialized without transfers. We show that EU transfers have improved welfare. Substantial further welfare gains could be reached by reallocating funds across regions without increasing the budget. We identify the welfare-optimal spatial distribution for each transfer type and show that wage subsidies should rather be directed to few poor and peripheral regions while investments in transport infrastructure are most efficient in highly productive and/or central regions.
The Trade Effects of Skilled versus Unskilled Migration
with: Peter Egger and Douglas Nelson
Journal of Comparative Economics, 2020
In this paper, we assess the role of skilled versus unskilled migration for bilateral trade in a flexible econometric model. Using a large data-set on bilateral skill-specific migration and a flexible novel identification strategy, the functionally flexible impact of different levels of skilled and unskilled immigration on the volume and structure of bilateral imports is identified in a quasi-experimental design. We find evidence of a polarized impact of skill-specific immigration on imports: highly concentrated skilled or unskilled immigrants induce higher import volumes than a balanced composition of the immigrant base. This effect turns out particularly important when institutions are weak. Regarding the structure of imports, we observe that skilled immigrants specifically add to imports in differentiated goods. Both bits of evidence are consistent with a segregation of skill-specific immigrant networks and corresponding trade patterns.
Productivity Growth, Human Capital, and Technology Spillovers: Nonparametric Evidence for EU Regions
with: Harald Badinger and Peter H. Egger
Oxford Bulletin of Economics and Statistics, 2019
This paper assesses the strength of productivity spillovers nonparametrically in a data set of 12 industries and 231 NUTS2 regions in 17 European Union member countries between 1992 and 2006. It devotes particular attention to measuring the catching up through spillovers depending on the technology gap of a unit to the industry leader and the local human capital endowment. We find evidence of a nonlinear relationship between the technology gap to the leader as well as human capital and growth in logs. Spillovers are smallest for units with a medium-high technology gap to the leader, especially for regions where human capital endowments are low
The Persistent Effects of Place-Based Policy: Evidence from the West-German Zonenrandgebiet
with: Tobias Seidel
American Economic Journal: Economic Policy, 2018
Using a natural experiment, we show that temporary place-based subsidies generate persistent effects on economic density. The spatial regression discontinuity design controls for continuous local agglomeration externalities, so we attribute an important role to capital formation in explaining persistent spatial patterns of economic activity. This persistence is driven by higher local public investment levels, which local governments could maintain after the end of the program because of a persistently higher tax base. We also find evidence for significant local relocation of
economic activity, which raises doubts that the net effect of the policy is positive. Finally, we show that transfers have capitalized in land rents such that pretreatment land owners have benefited from the program.
Financial Development and Inequality in the Global Economy
with: Tobias Seidel
Scandinavian Economic Journal, 2019
We build a heterogeneous firms model with firm-specific wages and credit frictions to study the role of financial development for inequality in the global economy. If there are many small (non-exporting) firms, better access to external funds reduces wage and profit inequality as well as unemployment. In contrast, if there are many large (exporting) firms, financial development might have opposite effects – especially if trade costs are low. In summary, the implications of financial development for inequality depend on the size distribution of firms and on the costs of exporting. Trade liberalization, however, raises inequality unambiguously.
Institutional Settings and Urban Sprawl: Evidence for Europe
with: Christian Hilber and Olivier Schöni
Journal of Housing Economics, 2018
This article explores the role of institutional settings in determining spatial variation in urban sprawl across Europe. We first synthesize the emerging literature that links land use policies and local fiscal incentives to urban sprawl. Next, we compile a panel dataset on various measures of urban sprawl for European countries using high-resolution satellite images. We document substantial variation in urban sprawl across countries. This variation remains roughly stable over the period of our analysis (1990–2012). Urban sprawl is particularly pronounced in emerging Central and Eastern Europe but is comparatively low in Northern European countries. Urban sprawl – especially outside functional urban areas – is strongly negatively associated with real house price growth, suggesting a trade-off between urban containment and housing affordability. Our main novel empirical findings are that decentralization and local political fragmentation are significantly positively associated with urban sprawl. Decentralized countries have a 25–30% higher sprawl index than centralized ones. This finding is consistent with the proposition that in decentralized countries fiscal incentives at local level may provide strong incentives to permit residential development at the outskirts of existing developments.
Income Taxes, Sorting, and the Costs of Housing: Evidence from Municipal Boundaries in Switzerland
with: Christoph Basten and Andrea Lassmann
Economic Journal, 2017
We provide novel evidence on the role of income taxes for housing rents and spatial sorting. Drawing on comprehensive micro-level data, we estimate the responsiveness of households to tax differentials across municipal boundaries. Correcting for unobservable location characteristics and isolating the residential sorting component, we identify an income tax elasticity of rents of about -0.27 to -0.35. In line with non-homothetic preferences, we find that the marginal willingness to pay for lower taxes
increases with income. Counterfactual calculations show how an homogenisation of taxes across jurisdictions and an increase in variation of taxes affect rents and income stratification across space.
The Taxation of Bonuses and its Effect on Executive Compensation and Risk-Taking – Evidence from the UK Experience
with: Doina M. Radulescu
Journal of Economics and Management Strategy, 2017
This paper explores the effects of a bonus tax adopted in the UK in December 2009 on the compensation structure of executives and on risk‐taking behavior in the financial sector. Excessive bonuses are blamed for encouraging risk taking and are regarded as one of the pull factors of the financial crisis. The British government attempted to reduce bonuses and accordingly bank risk taking by means of a special tax on cash‐based bonuses. Using a comprehensive dataset on executive compensation, we show that the introduction of the bonus tax decreased the net cash bonuses awarded to directors by about 40%, accompanied, however, by a simultaneous increases in other forms of pay leaving total compensation as well as risk levels unaffected.
Regional implications of financial market development: Industry location and income inequality
with: Tobias Seidel
European Economic Review, 2015
We develop a heterogeneous-firms model with trade in goods, labor mobility and credit constraints due to moral hazard. Mitigating financial frictions reduces the incentive of mobile workers to migrate to one region such that an unequal distribution of industrial activity becomes less likely. Hence, financial market development has opposite regional implications as trade liberalization. While the former leads to more dispersion of economic activity across space, the latter tends to drive clustering. This has immediate implications for income inequality both between regions and workers. According to our model, financial development reduces inequality in both dimensions.
Absorptive Capacity and the Growth and Investment Effects of Regional Transfers: A Regression Discontinuity Design with Heterogeneous Treatment Effects
with: Peter H. Egger and Sascha O. Becker
American Economic Journal: Economic Policy, 2013
Researchers often estimate average treatment effects of programs without investigating heterogeneity across units . Yet , individuals , firms, regions , or countries vary in their ability to utilize transfers. We analyze Objective 1 transfers of the EU to regions below a certain income level by way of a regression discontinuity design with systematically varying heterogeneous treatment effects. Only about 30 percent and 21 percent of the regions – those with sufficient human capital and good-enough institutions – are able to turn transfers into faster per capita income growth and per capita investment , respectively. In general , the variance of the treatment effect is much bigger than its mean.
The Role of Online Platforms for Media Markets – Two-Dimensional Spatial Competition in a Two-Sided Markets
with: Tanja Greiner
International Journal of Industrial Organization, 2013
We analyze the market for online and offline media in a model of two-dimensional spatial competition where media outlets sell content and advertising space. Consumer preferences are distributed along the style and type of news coverage where the distance costs may vary across dimensions. For integrated provision of online and offline platforms we show that entering the online market reduces average profits and may even constitute a prisoner’s dilemma. Specialized provision may yield polarization in the style and type dimensions. This is in contrast to the maximum–minimum differentiation result previously established in the literature on multidimensional horizontal competition. We show that maximal differentiation in both dimensions occurs due to the discrete nature of the type dimension and asymmetric advertising markets.
Generalized Propensity Scores for Multivalued Multivariate Treatments
with: Peter H. Egger
Economics Letters, 2013
This paper illustrates that the generalized propensity score method can easily be applied with multiple continuous endogenous treatment variables. Consistency proofs carry over straightforwardly to this general case, and the approach is shown to work well in finite samples with various data-generating processes and up to five continuous endogenous treatment variables.
More Similar Firms More Similar Regions? On the Role of Firm Heterogeneity for Agglomeration
with: Tobias Seidel
Regional Science and Urban Economics, 2013
In contrast to what several papers have argued recently, we show that firm heterogeneity fosters agglomeration of economic activity. If firms are more similar with respect to their total factor productivity, each company faces a lower propensity to export. This renders the home market more important speaking against agglomeration. We also relate changes in firm heterogeneity to technological progress which allows us to derive novel insights on the role of technology for the location of economicactivity.
Too Much of a Good Thing? On the Growth Effects of the EU’s Regional Policy
with: Peter H. Egger and Sascha O. Becker
European Economic Review, 2012
The European Union (EU) provides grants to disadvantaged regions of member states from two pools, the Structural Funds and the Cohesion Fund. The main goal of the associated transfers is to facilitate convergence of poor regions (in terms of per-capita income) to the EU average. We use data at the NUTS3 level from the last two EU budgetary periods (1994–1999 and 2000–2006) and generalized propensity score estimation to analyze to which extent the goal of fostering growth in the target regions was achieved with the funds provided and whether or not more transfers generated stronger growth effects. We find that, overall, EU transfers enable faster growth in the recipient regions as intended, but we estimate that in 36% of the recipient regions the transfer intensity exceeds the aggregate efficiency maximizing level and in 18% of the regions a reduction of transfers would not even reduce their growth. We conclude that some reallocation of the funds across target regions would lead to higher aggregate growth in the EU and could generate even faster convergence than the current scheme does.
We develop a semiparametric approach to the evaluation of the functional form of the relationship between migration stocks and bilateral imports. Specifically, we view bilateral migration stocks (in logs) as a continuous treatment and bilateral imports as an outcome. We provide strong evidence of a positive link between migration and trade consistent with the significant network effects. However, we also find that these effects are exhausted at fairly low levels of migration.
How Much it Pays to Work in the Financial Sector
with Peter H. Egger and Doina M. Radulescu
CESifo Economic Studies, 2012
This article sheds light on the extent of managerial pay in the OECD. It uses a novel database on managerial wages and other types of compensation to compare managerial remuneration across different sectors, especially, the financial sector, and across countries. We find evidence of a significant earnings premium in the financial sector which amounts to about 43% in the average OECD country—after conditioning out observable director-specific and firm-specific characteristics. Yet, there is considerable heterogeneity of earnings across both countries and different types of businesses within the financial sector.
Going NUTS – The Effect of EU Structural Funds on Regional Performance
with: Sascha O. Becker and Peter H. Egger
Journal of Public Economics, 2010
The European Union (EU) provides grants to disadvantaged regions of member states to allow them to catch up with the EU average. Under the Objective 1 scheme, NUTS2 regions with a per capita GDP level below 75% of the EU average qualify for structural funds transfers from the central EU budget. This rule gives rise to a regression-discontinuity design that exploits the discrete jump in the probability of EU transfer receipt at the 75% threshold for identification of causal effects of Objective 1 treatment on outcome such as economic growth of EU regions. We find positive per capita GDP growth effects of Objective 1 transfers, but no employment growth effects.
Public Input Competition and Agglomeration
with: Robert Fenge and Matthias Wrede
Regional Science and Urban Economics, 2009
This paper analyzes the impact of public input competition in a New Economic Geography framework. It is shown that regional competition yields an overprovision of public inputs if trade costs are sizable while it leads to underprovision if regions are highly integrated. Moreover, public input competition assures a dispersion of industry as long as trade costs are high but induces agglomeration even for ex ante identical regions if trade costs have fallen below a certain value. Finally, a trade-off between regional convergence and efficiency arises since the efficient distribution of regional infrastructure requires full agglomeration for sufficiently low trade costs.
For book chapters and policy articles see curriculum vitae.