Dynamics of neighborhood formation and segregation by income
AbstractThis paper analyzes some determinant conditions under which neighborhood formation gives rise to segregation by income. In contrast to the literature, we explore the sequential arrival of poor and rich individuals to neighborhoods exploited by oligopolistic land developers. These developers try to maximize a discounted flow of lot prices during neighborhood formation, taking advantage of the local externalities generated by the rich and the poor. Under a speedy arrival of new potential inhabitants and/or low discount rates, competing developers are more likely to concentrate rich people in the same neighborhood. This happens because the benefits from early agglomeration are outweighed by a more profitable matching of rich neighbors within nearby lots.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 16936.
Date of creation: 25 Aug 2009
Date of revision:
land developers; segregation; income distribution; arrival rates;
Find related papers by JEL classification:
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-08-30 (All new papers)
- NEP-GEO-2009-08-30 (Economic Geography)
- NEP-URE-2009-08-30 (Urban & Real Estate Economics)
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