Which School Attributes Matter? The Influence of School District Performance and Demographic Composition on Property Values

Increasing levels of segregation in American schools raises the question: do home buyers pay for test scores or demographic composition? This paper uses Connecticut panel data spanning eleven years from 1994 to 2004 to ascertain the relationship between property values and explanatory variables that include school district performance and demographic attributes, such as racial and ethnic composition of the student body. Town and census tract fixed effects are included to control for neighborhood unobservables. The effect of changes in school district attributes is also examined over a decade long time frame in order to focus on the effect of long run changes, which are more likely to be capitalized into prices. The study finds strong evidence that increases in percent Hispanic has a negative effect on housing prices in Connecticut, but mixed evidence concerning the impact of test scores on property values. Evidence is also found to suggest that student test scores have increased in importance for explaining housing prices in recent years while the importance of percent Hispanic has declined. Finally, the study finds that estimates of property tax capitalization increase substantially when the analysis focuses on long run changes.

Some Law and Economics of Historic Shipwrecks

This paper examines how US and proposed international law relate to the recovery of archaeological data from historic shipwrecks. It argues that US federal admiralty law of salvage gives far less protection to historic submerged sites than do US laws protecting archaeological sites on US federal and Indian lands. The paper offers a simple model in which the net present value of the salvage and archaeological investigation of an historic shipwreck is maximized. It is suggested that salvage law gives insufficient protection to archaeological data, but that UNESCO's Convention on the Protection of the Underwater Cultural Heritage goes too far in the other direction. It is also suggested that a move towards maximizing the net present value of a wreck would be promoted if the US admiralty courts explicitly tied the size of salvage awards to the quality of the archaeology performed.

Private Property, Public Use, and Just Compensation: The Economics of Eminent Domain

The eminent domain clause of the U.S. Constitution concerns the limits of the government's right to take private property for public use. The economic literature on this issue has examined (1) the proper scope of this power as embodied by the 'public use' requirement, (2) the appropriate definition, and implications, of 'just compensation,' and (3) the impact of eminent domain on land use incentives of owners whose land is subject to a taking risk. This essay reviews this literature and draws implications for our understanding of eminent domain law.

Liquidity Constraint and Child Labor In India: Is Market Really Incapable Of Eradicating It From Wage-Labor Households?

One way to measure the lower steady state equilibrium outcome in human capital development is the incidence of child labor in most of the developing countries. With the help of Indian household level data in an overlapping generation framework, we show that production loans under credit rationing are not optimally extended towards firms because of issues with adverse selection. More stringent rationing in the credit market creates a distortion in the labor market by increasing adult wage rate and the demand for child labor. Lower availability of funds under stringent rationing coupled with increased demand for loans induces the high risk firms to replace adult labor by child labor. A switch of regime from credit rationing to revelation regime can clear such imperfections in the labor market. The equilibrium higher wage rate elevates the household consumption to a significantly higher level than the subsistence under credit rationing and therefore higher level of human capital development is assured leading to no supply of child labor.

Murky Waters: The Law and Economics of Salvaging Historic Shipwrecks

The salvage of historic shipwrecks involves a debate between salvors, who wish to maximize profit, and archeologists, who wish to preserve historical value. Traditionally, salvage of shipwrecks has been governed by admiralty law, but the Abandoned Shipwreck Act of 1987 transferred title of historically important wrecks in U.S. waters to the state in whose waters the wreck is found, thereby abrogating admiralty law. This paper examines incentives to locate and salvage historic wrecks under traditional admiralty law and proposes an efficient reward scheme. It then re-considers current U.S. and international law in light of the results.

Identifying Individual and Group Effects in the Presence of Sorting: A Neighborhood Effects Application

Researchers have long recognized that the non-random sorting of individuals into groups generates correlation between individual and group attributes that is likely to bias naive estimates of both individual and group effects. This paper proposes a non-parametric strategy for identifying these effects in a model that allows for both individual and group unobservables, applying this strategy to the estimation of neighborhood effects on labor market outcomes. The first part of this strategy is guided by a robust feature of the equilibrium in the canonical vertical sorting model of Epple and Platt (1998), that there is a monotonic relationship between neighborhood housing prices and neighborhood quality. This implies that under certain conditions a non- parametric function of neighborhood housing prices serves as a suitable control function for the neighborhood unobservable in the labor market outcome regression. The second part of the proposed strategy uses aggregation to develop suitable instruments for both exogenous and endogenous group attributes. Instrumenting for each individual's observed neighborhood attributes with the average neighborhood attributes of a set of observationally identical individuals eliminates the portion of the variation in neighborhood attributes due to sorting on unobserved individual attributes. The neighborhood effects application is based on confidential microdata from the 1990 Decennial Census for the Boston MSA. The results imply that the direct effects of geographic proximity to jobs, neighborhood poverty rates, and average neighborhood education are substantially larger than the conditional correlations identified using OLS, although the net effect of neighborhood quality on labor market outcomes remains small. These findings are robust across a wide variety of specifications and robustness checks.

Are Shirking and Leisure Substitutable? An Empirical Test of Efficiency Wages Based on Urban Economic Theory

Recent theoretical work has examined the spatial distribution of unemployment using the efficiency wage model as the mechanism by which unemployment arises in the urban economy. This paper extends the standard efficiency wage model in order to allow for behavioral substitution between leisure time at home and effort at work. In equilibrium, residing at a location with a long commute affects the time available for leisure at home and therefore affects the trade-off between effort at work and risk of unemployment. This model implies an empirical relationship between expected commutes and labor market outcomes, which is tested using the Public Use Microdata sample of the 2000 U.S. Decennial Census. The empirical results suggest that efficiency wages operate primarily for blue collar workers, i.e. workers who tend to be in occupations that face higher levels of supervision. For this subset of workers, longer commutes imply higher levels of unemployment and higher wages, which are both consistent with shirking and leisure being substitutable.

Punishing the Innocent along with the Guilty: The Economics of Individual versus Group Punishment

Standard models of law enforcement involve the apprehension and punishment of a single suspect, but in many contexts, punishment is actually imposed on an entire group known to contain the offender. The advantages of .group punishment. are that the offender is punished with certainty and detection costs are saved. The disadvantage is that innocent individuals are punished. We compare individual and group punishment when social welfare depends on fairness, and when it depends on deterrence. We show that group punishment may dominate in the former case if the detection technology is ineffective but never in the latter case. We discuss our results in the context of several examples.

The Economics of Citation

In this paper, we study the citation decision of a scientific author. By citing a related work, authors can make their arguments more persuasive. We call this the correlation effect. But if authors cite other work, they may give the impression that they think the cited work is more competent than theirs. We call this the reputation effect. These two effects may be the main sources of citation bias. We empirically show that there is a citation bias in Economics by using data from RePEc. We also report how the citation bias differs across regions (U.S., Europe and Asia).

Total Factor Productivity, Human Capital and Outward Orientation: Differences by Stage of Ddevelopment and Geographic Regions

Do openness and human capital accumulation promote economic growth? While intuition argues yes, the existing empirical evidence provides mixed support for such assertions. We examine Cobb-Douglas production function specifications for a 30-year panel of 83 countries representing all regions of the world and all income groups. We estimate and compare labor and capital elasticities of output per worker across each of several income and geographic groups, finding significant differences in production technology. Then we estimate the total factor productivity series for each classification. Using determinants of total factor productivity that include, among many others, human capital, openness, and distortion of domestic prices relative to world prices, we find significant differences in results between the overall sample and sub-samples of countries. In particular, a policy of outward orientation may or may not promote growth in specific country groups. even if geared to reducing price distortion and increasing openness. Human capital plays a smaller role in enhancing growth through total factor productivity.

The Economics of Incentive-Based Health Care Plans

Medical savings accounts (MSAs) belong to a larger class of incentive-based health care plans. Using a model that allows the consumer to invest in healthy activities, we examine the efficiency properties of incentive plans and compare them to traditional full- coverage and deductible plans, under both experience rating and community rating. The model also is extended to include utilization of preventive health care. Properly constructed incentive plans have the capacity to induce socially efficient levels of healthy activities and preventive care, raising the expected wealth of consumers without reducing insurers' profits.

Financial Liberalization and Inflationary Dynamics in the Context of a Small Open Economy

The paper develops a short-run model of a small open financially repressed economy characterized by unorganized money markets, capital good imports, capital mobility, wage indexation, and flexible exchange rates. The analysis shows that financial liberalization, in the form of an increased rate of interest on deposits and tight monetary policy, unambiguously and unconditionally causes deflation. Moreover, the results do not depend on the degree of capital mobility and structure of wage setting. The paper recommends that a small open developing economy should deregulate interest rates and tighten monetary policy if reducing inflation is a priority. The pre-requisite for such a policy, however, requires the establishment of a flexible exchange rate regime.

Deterrence and Incapacitation: Towards a Unified Theory of Criminal Punishment

Economic models of crime have focused primarily on the goal of deterrence; the goal of incapacitation has received much less attention. This paper adapts the standard deterrence model to incorporate incapacitation. When prison only is used, incapacitation can result in a longer or a shorter optimal prison term compared to the deterrence-only model. It is longer if there is underdeterrence, and shorter if there is overdeterrence. In contrast, when a fine is available and it is not constrained by the offender's wealth, the optimal prison term is zero. Since the fine achieves first-best deterrence, only efficient crimes are committed and hence, there is no gain from incapacitation.