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Book part
Publication date: 8 December 2006

Peter Johnson

Abstract

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Astute Competition
Type: Book
ISBN: 978-0-08045-321-7

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Article
Publication date: 14 September 2021

Soran Mohtadi

The purpose of this paper is to investigate the resource rents–quality-adjusted human capital nexus and the impact of quality of institutions.

Abstract

Purpose

The purpose of this paper is to investigate the resource rents–quality-adjusted human capital nexus and the impact of quality of institutions.

Design/methodology/approach

For a large data set of 161 countries for the period 1996–2018 (yearly and 4-year periods), fixed effect estimation method is applied to investigate the impact of resource rents on quality-adjusted human capital and the role of quality of institutions on this relationship.

Findings

The paper found little evidence on the negative, significant and direct impact of total resource rents on quality-adjusted human capital. However, the results show that the negative effect of resource rents can be mediated by the quality of institutions. This result is robust to a long list of controls, different specifications and estimation techniques, as well as several robustness checks. Therefore, institutional quality seems to play a critical role in determining the indirect impact of natural resources on human capital. Moreover, the obtained results demonstrate that this resource adverse effect depends on the type of resource rents; in particular, high dependency on oil rents in developing countries appears to harm human capital.

Research limitations/implications

The paper shows that it is not obvious that total resource rents decrease human capital and found that the coefficient is no longer significant in the two-way fixed effects model. However, the analysis has emphasized the crucial role of political institutions in this relationship and has shown that countries with higher quality of institutions make the most of their resource rents transiting to a better human capital environment. This result is found to be robust to a list of controls, different specifications and estimation techniques, as well as several robustness checks. In addition, we demonstrate that not all resources affect human capital in the same way and found that oil rents have a significant negative effect on human capital. This is an important distinction since several countries are blessing from oil rents. From this we conclude that the effect of natural resources on human capital varies across different types of commodities. On the other hand, the interaction between institutions and the sub-categories of resource rents shows that oil rents can increase human capital only in developing countries with higher quality of institutions (above the threshold). This result is also still hold while using alternative measures of political institutions.

Practical implications

The results in this paper have important policy implications. In particular, results highlight important heterogeneities in the role resource rents to the economy. As international commodity prices have shown high volatility in recent years, it is important for policy makers to understand the rents. Rents which are the difference between the price of a commodity and the average cost of producing it can have different effects in the economy, including the human capital. It is shown that in countries with low-quality institutions, natural resource rents negatively affect institutional quality, leading to conflicts, corruption and fostering rent-seeking activities. Overall, this reinforces the elite at the power that, obviously, is interested in preserving the status quo. In other words, there is a vicious circle between resource rents and low-quality institutions that impedes institutional change. How to regulate this in the best possible way requires a good understanding of how resource rents are generated and appropriated for different sectors, their different effects and how people react to these rents. The evidence suggests the policy toward better political institutions may help countries to improve social outcomes such as health and education which offer high social returns.

Originality/value

The paper is part of the author's PhD research and is an original contribution.

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Journal of Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 16 September 2021

Putri Arumsari and Hendrik Sulistio

Public-rented flats in Jakarta Province operated by the Management Unit of Public-Rented Flats (MUPRF) experienced budget cuts for the maintenance and treatment activities…

Abstract

Purpose

Public-rented flats in Jakarta Province operated by the Management Unit of Public-Rented Flats (MUPRF) experienced budget cuts for the maintenance and treatment activities during the COVID-19 pandemic that hit Indonesia in the early 2020. Currently, the budgeting scheme of the MUPRF uses the local government’s budget in determining the expenditures of public-rented flat. This papers aims to propose an alternative budgeting scheme for the MUPRF.

Design/methodology/approach

Soft system methodology (SSM) was adopted to understand the public-rented flats as a whole system, so an alternative budgeting scheme for the MUPRF can be identified and developed. Interviews with an employee of the Department of Community Housing and Settlement of Daerah Khusus Ibukota Jakarta Province were conducted. A rich picture, customer, action, transformation, worldview, owner and environment analyses, conceptual model and a proposed model were developed during the process.

Findings

Based on the SSM, it is found that becoming a local public service agency, the MUPRF can be more independent and flexible in managing their budget. The income generated by the public-rented flats can be used directly for their expenditure.

Research limitations/implications

Through the SSM, only a conceptual model is developed, which has not yet been implemented in practice. Future studies need to be carried out to evaluate the feasibility of the conceptual model.

Originality/value

This research analyses the public-rented flat as a whole system through SSM to identify factors and parties that are involved in the daily activities in public-rented flats to propose a suitable alternative for its budgeting scheme.

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Facilities , vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0263-2772

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Article
Publication date: 28 September 2021

Olga Filippova, Jeremy Gabe and Michael Rehm

Automated valuation models (AVMs) are statistical asset pricing models omnipresent in residential real estate markets, where they inform property tax assessment, mortgage…

Abstract

Purpose

Automated valuation models (AVMs) are statistical asset pricing models omnipresent in residential real estate markets, where they inform property tax assessment, mortgage underwriting and marketing. Use of these asset pricing models outside of residential real estate is rare. The purpose of the paper is to explore key characteristics of commercial office lease contracts and test an application in estimating office market rental prices using an AVM.

Design/methodology/approach

The authors apply a semi-log ordinary least squares hedonic regression approach to estimate either contract rent or the total costs of occupancy (TOC) (“grossed up” rent). Furthermore, the authors adopt a training/test split in the observed leasing data to evaluate the accuracy of using these pricing models for prediction. In the study, 80% of the samples are randomly selected to train the AVM and 20% was held back to test accuracy out of sample. A naive prediction model is used to establish accuracy prediction benchmarks for the AVM using the out-of-sample test data. To evaluate the performance of the AVM, the authors use a Monte Carlo simulation to run the selection process 100 times and calculate the test dataset's mean error (ME), mean absolute error (MAE), mean absolute percentage error (MAPE), median absolute percentage error (MdAPE), coefficient of dispersion (COD) and the training model's r-squared statistic (R2) for each run.

Findings

Using a sample of office lease transactions in Sydney CBD (Central Business District), Australia, the authors demonstrate accuracy statistics that are comparable to those used in residential valuation and outperform a naive model.

Originality/value

AVMs in an office leasing context have significant implications for practice. First, an AVM can act as an impartial arbiter in market rent review disputes. Second, the technology may enable frequent market rent reviews as a lease negotiation strategy that allows tenants and property owners to share market risk by limiting concerns over high costs and adversarial litigation that can emerge in a market rent review dispute.

Details

Property Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0263-7472

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Article
Publication date: 29 July 2014

Malcolm Dowden

The purpose of this legal update is to examine the recent case law relating to rent review in England and Wales. The paper argues that as rent terms have reduced in…

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405

Abstract

Purpose

The purpose of this legal update is to examine the recent case law relating to rent review in England and Wales. The paper argues that as rent terms have reduced in length, and as market conditions have tended to produce nil-uplifts, there have been relatively few review cases before the court. Cases that reach court tend to fall into two broad categories: contractual interpretation and challenges to third-party determination.

Design/methodology/approach

Review and analysis of case law in England and Wales.

Findings

There are no special rules for interpreting rent review clauses. The court's approach to contractual interpretation follows House of Lords and Supreme Court rulings culminating in Rainy Sky SA v Kookmin Bank (2011). There are also very limited circumstances in which the court will set aside an arbitrator's award, informed by a policy that favours upholding arbitration awards as a quick and cost-effective way to settle rent review disputes.

Practical implications

Rent review clauses must be interpreted in accordance with the normal rules of contractual interpretation. The court is unlikely to be swayed by submissions asserting the “general purpose” of rent review.

Originality/value

This is an original analysis of case law.

Details

Journal of Property Investment & Finance, vol. 32 no. 5
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 1 December 1998

Charles Ward, Patric H. Hendershott and Nick French

Complicated leasing terms make both the valuation of lease contracts and the calculation of effective rent levels difficult. These complications are compounded by the…

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1616

Abstract

Complicated leasing terms make both the valuation of lease contracts and the calculation of effective rent levels difficult. These complications are compounded by the existence of option‐like features in many contracts. For example, retail leases in the USA generally have overage rent clauses that allow the landlord additional rent if sales exceed a breakpoint, but set a minimum rent level under any sales conditions. Similarly, upward‐only rent review clauses are common in the UK and Australia (as well as other commonwealth countries). Here the rent is fixed at the commencement of the contract, with the option to review the rental figure in line with market conditions at pre‐determined intervals (normally every five years). If rents in the market have increased over the interim period, the rent of the subject property will be adjusted upwards accordingly and this higher level becomes the minimum possible future rent. However, if market rents have either remained static or decreased, the landlords would choose not to operate the rent review clause and the existing rent will continue. The US overage contract can be valued using a binomial approach. The upward‐only adjusting leases cannot because the value of the option is “path‐dependent”. Here, Monte Carlo valuation methods must be used. In this paper we describe both approaches. We show the relationship between the rents on these contracts relative to those without overage or with up and downward adjustment. The key determinants in establishing this relationship are the expected drift and the volatility of either sales (in the case of overage) or market rents (in the case of upward‐only leases).

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Journal of Property Valuation and Investment, vol. 16 no. 5
Type: Research Article
ISSN: 0960-2712

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Article
Publication date: 1 January 1987

Peter Fisher

At the Conservative Party Conference of 1986, the Minister of State for Housing, Mr John Patten, outlined his intentions for a new Rent Bill to be included in his party's…

Abstract

At the Conservative Party Conference of 1986, the Minister of State for Housing, Mr John Patten, outlined his intentions for a new Rent Bill to be included in his party's general election manifesto. This directs the spotlight onto rented housing and Mr Patten's slogan ‘the right to rent’ will no doubt lead to a lively discussion. This paper aims to contribute to the debate by reviewing two major housing reports as they relate to rents and making further suggestions.

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Property Management, vol. 5 no. 1
Type: Research Article
ISSN: 0263-7472

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Article
Publication date: 1 January 1992

Geoffrey Reed

As deregulation takes place in the UK, rent tribunals areconfronted with the problem of setting a “market rent” forpreviously controlled property. A simple partial…

Abstract

As deregulation takes place in the UK, rent tribunals are confronted with the problem of setting a “market rent” for previously controlled property. A simple partial equilibrium model of a sector of the rented accommodation market is used to examine the question of setting a “market rent” in the controlled‐rent subsector. It is shown that setting the controlled rent equal to the rent prevailing in the uncontrolled part of the market is sub‐optimal, and a simple formula is suggested which will give a better estimate of the true free market rent.

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Journal of Economic Studies, vol. 19 no. 1
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 1 February 1987

Martin Ricketts

Recent months have seen increasing public concern with the state of the housing stock in Britain. Symptoms of the malaise include physical decay, empty property…

Abstract

Recent months have seen increasing public concern with the state of the housing stock in Britain. Symptoms of the malaise include physical decay, empty property, homelessness, geographical immobility of households, overcrowding, and large numbers of people in bed and breakfast accommodation. In the search for causes and cures, attention has been directed at the structure of tenures in the UK and in particular at the inefficient operation of the rented sector of the housing market. The UK is characterised by a relatively large municipally‐controlled rented sector, and a relatively small sector of private lettings, compared with many other advanced countries. Neither the public nor the private sector of the rented housing market seems at present capable of meeting the demand placed upon it. In particular, public policy over 70 years has systematically undermined the privately rented sector. From housing around 90 per cent of households in 1915, the sector has declined to a mere ten per cent in 1985. Two forces explain this extra‐ordinary collapse of private renting. Firstly, as more and more people have become taxpayers during the course of the 20th century, the advantages of receiving lightly taxed income ‘in kind’ by investing in owner‐occupied housing have become increasingly pronounced. Landlords pay tax on the income (including capital gains) derived from housing, owner‐occupiers do not. Secondly, some form of rent control or regulation has been in force for most privately‐rented property continuously since the early years of the First World War. The restriction of prices below market clearing levels in the private rented sector has inevitably discouraged supply, reduced repair and maintenance expenditures, hastened sales of hitherto rented property to owner‐occupiers, gravely impeded geographical mobility of households, distorted the allocation of available housing space, and exacerbated housing shortages (homelessness). As a long term component of social policy, rent control has almost nothing to commend it. Its predicted consequences can all be derived from the simplest application of microeconomic analysis, and many elementary textbooks use rent control as an outstanding example of the effects on markets of intervention in the process of price formation. However, in spite of the widely perceived disadvantages of rent control, it is a policy which it is very difficult to reverse. The purpose of this paper is to discuss briefly the main features of a scheme which was recently advocated by the present writer in a paper published by the Centre for Policy Studies.

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Property Management, vol. 5 no. 2
Type: Research Article
ISSN: 0263-7472

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Article
Publication date: 1 May 1997

Charles Ward and Nick French

The upwards‐only rent review is a characteristic feature of the institutional property lease in the UK. It has been subject to increased attention by investors and…

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1241

Abstract

The upwards‐only rent review is a characteristic feature of the institutional property lease in the UK. It has been subject to increased attention by investors and regulators in the 1990s with various proposals which sought to make upwards‐only rent reviews illegal. Applies an arbitrage method based on market pricing which enables consistent valuations of different investment opportunities to be compared in a rigorous yet consistent approach. In this way the value of the upwards‐only option can be assessed. Uses the arbitrage approach to value the difference between a lease in which the rents are reviewed upwards‐only and that in which rents can be reviewed upwards or downwards. Starts by applying the arbitrage approach to a simple lease in which rent may take only two values. This simple approach is well established in the finance literature when analysing options, and the valuation of the upwards‐only lease may be seen as a multi‐option contract.

Details

Journal of Property Valuation and Investment, vol. 15 no. 2
Type: Research Article
ISSN: 0960-2712

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