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Profit maximizing developers and the optimal provision of local public good in a closed system of a few cities

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  • David Pines

Abstract

[fre] Un changement de la valeur de la terre associé à un projet d'investissement peut donner, selon la littérature existante à ce sujet, une estimation faussée du vrai bénéfice social qui est une source potentielle de l'échec du marché (market failure). Cet article est consacré à l'analyse systématique de la direction de la déviation (biais). Deux conditions suffisantes de rechange sont proposées afin que le bénéfice social dépasse l'augmentation de la valeur de la terre. L'une est déterminée par l'absence des propriétaires et l'autre par la constance de l'utilité marginale du revenu. Cependant, il est démontré, à l'aide d'un exemple, que le bénéfice social ne doit pas toujours dépasser l'augmentation de la valeur de la terre. Il est démontré que, pour une zone urbanisée se composant de villes iden­tiques, la direction de la déviation (biais) ne dépend pas du nombre de villes, en accord avec la littérature existante, la déviation (biais) disparaît à mesure que le nombre de villes identiques tend à l'infini. [eng] Profit maximizing developers and the optimal provision of local public good in a closed system of a few cities. David Pines. Accordins, to the existing literatnre a change in land value associated with an investment project may be a biased estimate of the true social benefit, and is a potential source for market failure. This paper extends the above finding by systematically analzying the direction of the bias. Two alternative sufficient conditions are provided for the social benefit to exceed the increase in land value. One is when landlords are absentes, and. the other is when the marginal. utility of income is constant. However, it is shown, by using an example, that this benefit need not always exceed thc increase in land value. For an urbanized area consisting of identical cities, it is shown that the direction of the bias is independent of the number of the cities, but, consistentlywith existing literature, the bias vanishes as the number of the identical cities tends to infinitif.

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  • David Pines, 1985. "Profit maximizing developers and the optimal provision of local public good in a closed system of a few cities," Revue Économique, Programme National Persée, vol. 36(1), pages 45-62.
    • Handle: RePEc:prs:reveco:reco_0035-2764_1985_num_36_1_408833
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    References listed on IDEAS

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    1. Schall, Lawrence D, 1976. "Urban Renewal Policy and Economic Efficiency," American Economic Review, American Economic Association, vol. 66(4), pages 612-628, September.
    2. Pines, David & Weiss, Yoram, 1976. "Land improvement projects and land values," Journal of Urban Economics, Elsevier, vol. 3(1), pages 1-13, January.
    3. Pines, David, 1984. "On the capitalization of land improvement projects," Economics Letters, Elsevier, vol. 15(3-4), pages 377-384.
    4. Helpman, Elhanan & Pines, David, 1977. "Land and Zoning in an Urban Economy: Further Results," American Economic Review, American Economic Association, vol. 67(5), pages 982-986, December.
    5. Sonstelie, Jon C. & Portney, Paul R., 1978. "Profit maximizing communities and the theory of local public expenditure," Journal of Urban Economics, Elsevier, vol. 5(2), pages 263-277, April.
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