Readings for the week

• Blog: Sounds like the UK housing market is overheating. Problem seems… again the lack of construction activity.
• WSJ: Singapore house prices falling. Is Singapore finally getting to grips with its overheating housing market?

And in the Journal of Urban Economics, the fundamental law of road congestion is worse than it seems:

Hsu, Wen-Tai, and Hongliang Zhang. “The fundamental law of highway congestion revisited: Evidence from national expressways in Japan.” Journal of Urban Economics 81 (2014): 65-76.

The fundamental law of highway congestion states that when congested, the travel speed on an expanded expressway reverts to its previous level before the capacity expansion. In this paper, we propose a theory that generalizes this statement and finds that if there exists a coverage effect, that is, the effect of longer road length on traffic conditional on capacity, then the new equilibrium travel speed could be lower than its previous level. Given the fundamental law, the theory predicts that the elasticity of traffic to road capacity is at least 1. We estimate this elasticity for national expressways in Japan and test this prediction. Using the planned national expressway extension as an exogenous source of variation for capacity expansion, we obtain elasticity estimates ranging between 1.24 and 1.34, consistent with the prediction of our theory. We further investigate the sources of the larger-than-unity elasticity and find that the coverage effect plays a critical role, compared with the effect due to lane expansion.

 

 

American Racial Segregation in the 21st Century

Racial segregation peaked in the US in the 1970s, and then declined dramatically without interruption. Edward Glaeser, an urban economist and a Harvard professor, published a report for the conservative Manhattan Institute that updates the segregation trends with the latest data from the 2010 census. The decline continues, and the authors argue that there are no more neighborhoods without black residents.

The link is here, the report is titled “The End of the Segregated Century -1890-2010”. In some sense, it is a (very) quick update to their seminal paper in the Journal of Political Economy on “The Rise and Decline of the American Ghetto.”

Now, what strikes me in the report is the absence of a discussion of the impact of Hispanic migration and Hispanic families residential location choices on the degree of segregation across neighborhoods. Cities in the South, Texas, the South-West experienced tremendous demographic changes. Glaeser and Vigdor argue that the decline in segregation is primarily due to the mobility of black families to the suburbs. However, it is well-known that segregation measures such as isolation and dissimilarity would mechanically decline in case of a large positive migration shock such as the influx of Hispanics — Austin’s population grew by 40% from 1995 to 2006.

There is still a great deal of racial segregation in American cities. The average black lives in a neighborhood with around 50% black neighbors, even though there are only 13% of blacks in the United States overall. If that is not racial segregation, then what is? Also, newly arrived Hispanic migrants tend to settle in Hispanic enclaves, as David Card pointed out in his Ely lecture on Immigration and Inequality.