Muth Model Research Articles

Market power in smart farming and the distribution of gains in two‐stage crop production system

AbstractIn smart farming, agricultural technology providers (ATPs) wield market power in both the upstream (data collection/aggregation) and downstream (crop production) markets. Using a two‐stage Muth model, this study assesses benefit distribution from ATPs' data‐driven services in smart farming. Results show limited farmer returns from data sharing, questioning policymakers' data value focus. While data‐driven services offer notable benefits, ATPs capture a significant share due to market power. Addressing ATP market power promotes equitable rent distribution, but perfect competition risks ATPs' sustainability and R&D incentives, presenting a policy challenge for smart farming outcomes.

Closed vs. open city models: A new empirical approach to an old question

AbstractThe empirical literature examining the determinants of city size almost exclusively uses the closed city version of the Mills–Muth model, in which population is exogenous. The closed city approach is particularly useful in that it yields a single equation empirical framework easily estimated with ordinary least squares (OLS). The general theory, however, offers the open city as an alternative, where population and possibly income are endogenous. The open city, in contrast to the closed version, yields a system of equations that should be estimated with seemingly unrelated regression (SUR). This paper finds that population and income are endogenous for broad samples of small and large American urbanized areas and explores the extent to which the empirically preferred open city SUR approach yields empirical results that resemble the closed city OLS model.

Statistical theory and practice of the inverse power Muth distribution

The Muth distribution and its derivation have been used to construct numerous statistical models in recent years, with applications in a variety of fields. In this paper, we use the inverse scheme to introduce the inverse power Muth distribution. It thus constitutes a new three-parameter heavy-tailed lifetime distribution belonging to the family of inverse distributions, which does not appear to have received adequate attention in the literature. We naturally call it inverse power Muth distribution. Two complementary parts compose the article. The first part aims to determine the main statistical properties of the inverse power Muth distribution, such as the shape behavior of the probability density and hazard rate functions, the expression of the quantile function and the related quantities, and some moment measures. The second part is devoted to its practical aspects, with a focus on its modeling capabilities. We examine the estimation of the model parameters via several well-established methods, including classical and Bayesian estimation methods. Then, we illustrate the flexibility and potential usefulness of the inverse power Muth model by means of a simulation study and two real datasets. A fair investigation reveals that it can outperform existing and comparable three-parameter models also based on the inverse scheme.

Guidelines for a Polycentric Region to Reduce Vehicle Use and Increase Walking and Transit Use

Problem, research strategy, and findings: The monocentric development pattern in the Alonso–Mills–Muth model underpinned theoretical discussions of urban form in the 1960s and 1970s and truly dominated theory up to the point when Joel Garreau published Edge City: Life on the New Frontier in the early 1990s. Monocentric development patterns remain dominant to this day among smaller metropolitan areas in the United States. However, for larger metropolitan areas in the United States, regional transportation plans suggest a paradigm shift to a polycentric structure. We review 126 regional transportation plans in the United States and find that a hierarchy of centers connected by high-quality transit has become the dominant vision for most of them. The plan for Salt Lake City (UT), for example, strives for a multicentered region even though secondary centers are only beginning to emerge beyond a dominant downtown. Generally missing from regional transportation plans are quantitative criteria for designating and guiding centers: In no case are the quantitative criteria empirically based on proven transportation benefits. Here we investigate how the built environment characteristics of centers are associated with people’s travel mode choices and vehicle use. We employ visual and exploratory approaches through a generalized additive model (GAM) to identify nonlinear relationships between travel outcomes and “D” variables (density, diversity, design, destination accessibility, and distance to transit) within centers. The model and plots help us recommend the built environment characteristics of centers.Takeaway for practice: The built environment thresholds and relevant tools provided here can enable planners to make informed decisions about future growth patterns, set realistic—yet visionary—goals, and improve the overall health of its residents and communities. We provide strategies and tools that planning agencies, such as metropolitan planning organizations, transit agencies, and municipalities, can adopt to channel developments into centers.

Measuring Diverging House Prices

House price indexes summarize the development of all house prices in a single number, while actual price movements often differ among market segments. We develop a methodology for measuring house prices as a flexible function of housing services – a one-dimensional quality measure – and apply it to test for the common assumption of identical price movements in all parts of the housing market. Our approach is based on a generalization of the familiar (constant unit price) Muth model to a situation of in which the unit price of housing services may depend on the quality level. We apply the method to a rich set of transaction data referring to Amsterdam in the period 1985-2013. We estimate an indicator of housing services based only on the ranking of house prices in postcode areas during periods of three months and compare the results to conventional hedonic price equations that embody the assumption of a unit price for housing services that does not depend on quality. We develop a test for a constant price per unit of housing services and reject it on the basis of price differences occurring over time as well as over space.

Spatial agglomeration in a monetary multi-regional growth model with urban residential distribution

The purpose of this study is to examine a dynamic interdependence between national and interregional growth, money, monetary policy, residential structures, spatial amenity, price of goods, land rent, housing rent in a comprehensive analytical framework. The economy consists of multiple regions and each region has industrial and housing sectors. The model is a synthesis of the four models in the growth theory, urban economics and monetary economics in a multi-regional context. Industrial production and capital accumulation follow the Solow model. Regional population distributes over the urban area according to the Alonso model and regional housing production follows the Muth model. The microeconomic foundation for determining time distribution, savings, spatial location and consumption follows the approach proposed by Zhang. We simulate the model and examine effects of changes in some parameters.

Spatial agglomeration in a monetary multi-regional growth model with urban residential distribution

The purpose of this study is to examine a dynamic interdependence between national and interregional growth, money, monetary policy, residential structures, spatial amenity, price of goods, land rent, housing rent in a comprehensive analytical framework. The economy consists of multiple regions and each region has industrial and housing sectors. The model is a synthesis of the four models in the growth theory, urban economics and monetary economics in a multi-regional context. Industrial production and capital accumulation follow the Solow model. Regional population distributes over the urban area according to the Alonso model and regional housing production follows the Muth model. The microeconomic foundation for determining time distribution, savings, spatial location and consumption follows the approach proposed by Zhang. We simulate the model and examine effects of changes in some parameters.

The Financial Crisis and Diverging House Prices: Evidence from the Copenhagen Metropolitan Area

This paper investigates the development of house prices in Copenhagen in the period 1994-2013, while paying special attention to the heterogeneous impact of the boom and bust periods along the dimensions of housing type (single vs multifamily housing), geography and quality. To allow for price developments that can differ by quality, we use a recently developed generalization of the conventional Muth model that assumes a constant unit price across the quality spectrum. It allows us to separately consider the development of house prices and quality in Copenhagen neighbourhoods. Moreover, we investigate the validity of the common assumption of a constant unit price and reject it decisively. We use detailed housing transaction data for the greater Copenhagen area. We show that the housing boom of the 2000’s and the bust that followed hit the lowest quality segments significantly harder than the high quality segments of the housing market.

Land use and rent gradients with a monopoly vendor and two central business districts

Dispersed consumer amenities such as shopping and cultural attractions greatly influence land use patterns and rent gradients. Lai and Tsai (J Urban Econ 63:536–543, 2008) generalize the traditional Alonso–Mills–Muth model by introducing a monopoly vendor and show that the vendor will choose a boundary location. We generalize their model by allowing for inter-city shopping, which is very common in the real world. The location choice of a monopoly vendor and the consequent changes of urban configuration in two adjacent cities are discussed. This paper shows that as the distance between two CBDs decreases, the vendor may choose to locate at an inner city boundary, at the mid-point between the two cities, and at one of the outer boundaries, respectively. In many cases, a core-periphery urban structure will result.

Fertilizer industry subsidies in China: who are the beneficiaries?

Purpose – Since 2004, subsidies increased by 670 percent in the Chinese fertilizer industry to reduce the farmer's burden. The purpose of this paper is to assess whether subsidies benefit the target groups, the fertilizer subsidy distribution pattern and benefit allocation pattern among fertilizer producers and other sectors were investigated. Design/methodology/approach – The Muth model is extended to evaluate the impacts of a subsidy on multi-stage markets. Findings – It is found that the total benefits from the policy are about RMB 7.7 billion yuans. The fertilizer suppliers gain about RMB 51 billion yuans from the favorable policy with mean subsidy incidence 0.8 and capturing about 70 percent of total surplus. Social implications – The results suggest that transferring parts of subsidies to the non-fertilizer sectors could be considered an efficient way to redistribute welfare indifferent sectors. Originality/value – This study first use the equilibrium displacement model to quantity the distribution of fertilizer subsidy in a vertical market in China.

Location competition in an Alonso–Mills–Muth city

The purpose of this paper is to explain the decentralization process of an urban spatial structure in terms of the strategic interactions between firms. For that purpose, we expand the Hotelling model of a linear city to incorporate two aspects of the urban spatial structure, namely, the variation in land rent over space and the endogenous determination of city limits, both of which play important roles in the standard Alonso–Mills–Muth model. Our analysis reveals, among others, that decentralization occurs in a city when commuting costs decline more rapidly than shopping travel costs.

REPLICATOR DYNAMIC LEARNING IN MUTH'S MODEL OF PRICE MOVEMENTS

We investigate the stability properties of Muth's model of price movements when agents choose a production level using replicator dynamic learning. It turns out that when there is a discrete set of possible production levels, possible stable states and stability conditions differ between adaptive learning and replicator dynamic learning.

The Mills—Muth Model of Urban Spatial Structure: Surviving the Test of Time?

This paper examines the viability of some basic predictions of the Mills—Muth model of city structure for modern cities using US data for the year 2000. The estimation strategy used to test the predictions is very similar to that of Jan Brueckner and David Fansler, who use 1970 data to find support for the model's basic comparative statics predictions—namely, that city area is increasing in population and income but decreasing in agricultural land value and commuting costs. This paper uses different measures for land values and commuting costs where possible and a measure of polycentricity to estimate a slightly modified empirical model. Despite the changing structure of cities, there is evidence that the Mills—Muth comparative statics predictions hold for modern US cities, that densely populated cities are more likely to have sub-centres and that market forces drive urban spatial structure.

Simplified Alonso–Mills–Muth model with a monopoly vendor

One important but unrealistic assumption in the simplified Alonso–Mills–Muth (AMM(0)) model is that the composite good is ubiquitous and thus there is zero shopping cost for residents. This paper assumes that the composite good is only sold by a monopoly vendor inside the city and hence a shopping cost is inevitable for residents. It is shown that the vendor will locate at the city boundary in equilibrium. In contrast to the symmetric land rent pattern in the AMM(0) model, the current AMM( k) model offers an asymmetric land rent pattern in equilibrium. Moreover, this paper shows that a rent-maximizing government either regulates the vendor to locate at the central business district (CBD) (when income is high) or does not enact any regulation (when income is low).

Upstream Effects of Generic Advertising: The Case of Catfish

Muth's model is adapted to determine the effects of generic advertising on upstream factor markets in a competitive industry where funds for promotion are raised through a feed tax. Optimality conditions indicate that a feed tax is an inferior funding mechanism. That is, the resulting promotion budget, in general, is too small to maximize producer surplus at the farm level. Applying the model to the U.S. catfish industry, results suggest that raising the feed tax from $5 to $6 per ton is welfare increasing for farm, feed, and non-feed sectors alike. Distributional analysis suggests that the processing sector captures most of the long-term benefits (51%), followed by the non-feed sector (42%). Despite the feed sector's modest share of total benefits (7%), owing to tax shifting its long-run benefit-cost ratio (1.8:1) is favorable. Because feed and non-feed inputs are gross substitutes, the feed tax generates a positive externality for non-feed suppliers. Accounting for this externality raises the non-feed sector's net benefit by 36%. Overall, about one-half of the program's long-term net benefits accrue to input suppliers.

Effect of U.S. Immigration Reform on Labor‐Intensive Agricultural Commodities

AbstractA major concern in development of the 1986 Immigration Reform and Control Act was the potential for reductions in seasonal farm labor supply. Although the act appears to have increased farm labor supply, future immigration policy will likely be affected by similar concerns. Muth's model of industry supply and factor demand is adapted to analyze effects of labor supply reductions on selected U.S. crops. Labor factor share and output demand elasticity are the most important factors influencing the impact of labor supply on production, and effects of moderate supply decreases will be small if recent output demand conditions continue.

Location, Housing, and Leisure Demand under Local Employment

Muth's model of CBD-employed household behavior has been successfully extended to include labor/leisure choice in order to deal with the original version's deficient treatment of commuting time. The extension demonstrates how all the basic results of the simpler formulation remain valid. This paper provides a similar extension for the locally employed household variant of Muth's model. The analysis demonstrates a surprising difference between the demand gradient and comparative static results for the locally employed household without leisure choice and the locally employed household with leisure choice not observed for the CBD-employed household model.

Speculation, rational expectations, and stability of the foreign exchange market

This paper uses Muth's model of rational expectations to analyze foreign exchange speculation under floating exchange rates when a trade balance ‘J-curve effect’ exists. It extends the existing literature by basing speculative behavior explicity on maximizing behavior, by relating expectations to the underlying structure of the model, i.e. by assuming rational expectations, and by explicitly incorporating uncertainty. A surprising result is that, if speculation takes place, decreases in risk aversion increase the variance of the exchange rate.

Income and Residential Location: Muth Revisited

In Cities and Housing, Muth modeled residential location by income in terms of the conflicting desires for a low price of housing and access to CBD. This paper expands Muth's model to include in the location decision locational amenities other than access. Land values around Chicago are then used to estimate the income elasticities of the bids for access and five other amenities. The results indicate that the value of access may rise more rapidly with income than Muth expected and that, in the absence of other amenities and a durable housing stock, higher income residents would live closer to the CBD than low-income residents. Furthermore, other amenities may be important determinants of residential location patterns.