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A Silver Rule for Financing Local Transport Facilities

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  • Robert BICHSEL

Abstract

According to the Henry George Theorem (HGT), the cost of a pure local public good can be covered through a tax on related land-rents. As we show in this paper, this general proposition does not apply to transport facilities. Nonetheless, even if the "Golden Rule" does not apply in this context, land value and transport facilities are related. We show that (i) an improvement of the transport facilities does have a positive effect onto land value when taking into account the effect on the equilibrium city size; (ii) a simple relationship, similar to the HGT, does exist between the cost of optimal transport facilities and aggregate land rents; (iii) any exogenous shock reducing travel costs leads to higher optimal spending in transport facilities and higher land value. This suggests that associated changes in land value could, in a way that we define, subsidize optimal improvements in transport facilities land rents are related to spending in transport facilities.

Suggested Citation

  • Robert BICHSEL, 1999. "A Silver Rule for Financing Local Transport Facilities," Cahiers de Recherches Economiques du Département d'économie 9902, Université de Lausanne, Faculté des HEC, Département d’économie.
    • Handle: RePEc:lau:crdeep:9902
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    References listed on IDEAS

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    1. D B Lee Jr. & C P Averous, 1973. "Land Use and Transportation: Basic Theory," Environment and Planning A, , vol. 5(4), pages 491-502, August.
    2. Arnott, Richard J & Stiglitz, Joseph E, 1981. "Aggregate Land Rents and Aggregate Transport Costs," Economic Journal, Royal Economic Society, vol. 91(362), pages 331-347, June.
    3. William Vickrey, 1977. "The City as a Firm," International Economic Association Series, in: Martin S. Feldstein & Robert P. Inman (ed.), The Economics of Public Services, chapter 13, pages 334-343, Palgrave Macmillan.
    4. Robert Murray Haig, 1926. "Toward an Understanding of the Metropolis: II. The Assignment of Activities to Areas in Urban Regions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 40(3), pages 402-434.
    5. Richard J. Arnott & Joseph E. Stiglitz, 1979. "Aggregate Land Rents, Expenditure on Public Goods, and Optimal City Size," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(4), pages 471-500.
    6. Kanemoto, Yoshitsugu, 1980. "Theories of urban externalities," MPRA Paper 24614, University Library of Munich, Germany.
    7. Flatters, Frank & Henderson, Vernon & Mieszkowski, Peter, 1974. "Public goods, efficiency, and regional fiscal equalization," Journal of Public Economics, Elsevier, vol. 3(2), pages 99-112, May.
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    Cited by:

    1. Angela S. Bergantino & Francesco Porcelli, 2013. "Housing market prices: capitalisation of efficiency in local public service provision. An application with data on Italian urban transport related expenditures," SERIES 0047, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Aug 2013.
    2. Pacheco-Raguz, Javier F., 2010. "Assessing the impacts of Light Rail Transit on urban land in Manila," The Journal of Transport and Land Use, Center for Transportation Studies, University of Minnesota, vol. 3(1), pages 113-138.

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    More about this item

    Keywords

    land rents: transport facilities; Henry George theorem;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock
    • R42 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government and Private Investment Analysis; Road Maintenance; Transportation Planning

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