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Private Investment, Public Aid and Endogenous Divergence in the Evolution of Urban Neighborhoods

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Author Info
Lanny Arvan ()
David Nickerson ()

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Abstract

This paper offers a novel explanation for urban blight and endogenous divergence in the overall quality and wealth of neighborhoods and simultaneously derives the salient features of actual urban renewal and other aid programs from optimizing government behavior based on collective public preferences. These features appear when the objective of such public aid programs is to restore the ex ante distribution of wealth or property values within a blighted neighborhood, while equilibria exhibiting deficient levels of private investment and blight itself can arise when residents accurately anticipate the potential provision of public aid to an affected neighborhood and ex ante investment in private insurance diminishes neighborhood eligibility for such aid. Examples of antipodal equilibria in which urban renewal programs entirely crowd out local private investment or in which neighborhood residents invest in efficient levels of private mitigation illustrate these results, which stand in direct contrast to both traditional explanations of urban blight and to the new “social-interaction” models of neighborhood divergence. Copyright Springer Science + Business Media, Inc. 2006

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File URL: http://hdl.handle.net/10.1007/s11146-005-5179-7
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Publisher Info
Article provided by Springer in its journal The Journal of Real Estate Finance and Economics.

Volume (Year): 32 (2006)
Issue (Month): 1 (February)
Pages: 83-100
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Handle: RePEc:kap:jrefec:v:32:y:2006:i:1:p:83-100

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Web page: http://www.springerlink.com/link.asp?id=102945

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Related research
Keywords: blight; housing; neighborhood effects; urban renewal;

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Syron, Richard F, 1973. "Administered Prices and the Market Reaction: The Case of Urban Core Property Insurance," Journal of Finance, American Finance Association, vol. 28(1), pages 147-56, March. [Downloadable!] (restricted)
  2. Mitchell Polinsky, A. & Shavell, Steven, 1976. "Amenities and property values in a model of an urban area," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 119-129. [Downloadable!] (restricted)
  3. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-87, May.
  4. Schall, Lawrence D, 1976. "Urban Renewal Policy and Economic Efficiency," American Economic Review, American Economic Association, vol. 66(4), pages 612-28, September. [Downloadable!] (restricted)
  5. Frame, David E., 2001. "Insurance and Community Welfare," Journal of Urban Economics, Elsevier, vol. 49(2), pages 267-284, March. [Downloadable!] (restricted)
  6. Smith, Lawrence B & Rosen, Kenneth T & Fallis, George, 1988. "Recent Developments in Economic Models of Housing Markets," Journal of Economic Literature, American Economic Association, vol. 26(1), pages 29-64, March. [Downloadable!] (restricted)
  7. Lewis, Tracy & Nickerson, David, 1989. "Self-insurance against natural disasters," Journal of Environmental Economics and Management, Elsevier, vol. 16(3), pages 209-223, May. [Downloadable!] (restricted)
  8. Galster, George, 2002. "An economic efficiency analysis of deconcentrating poverty populations," Journal of Housing Economics, Elsevier, vol. 11(4), pages 303-329, December. [Downloadable!] (restricted)
  9. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Paul Raschky & Hannelore Weck-Hannemann, 2007. "Charity hazard - A real hazard to natural disaster insurance," Working Papers 2007-04, Faculty of Economics and Statistics, University of Innsbruck. [Downloadable!]
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