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Commercial Revitalization in Low-Income Urban Communities: General Tax Incentives vs. Direct Incentives to Developers

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  • Zhou, Li

    ()
    (University of Alberta, Department of Economics)

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Abstract

This paper proposes a commercial development model, based on Fujita's (1988) monopolistic competition model of spatial agglomeration, to examine stores' decisions to enter urban communities. The model focuses on commercial developers and large stores, and identifies a potential holdup problem in the commercial development market arising because developers incur costs before negotiating with anchor tenants over pro fit sharing; the holdup problem is more likely to occur in low-income communities where the profitability of commercial projects is small. The model predicts that direct incentives to developers are preferred to general tax incentives for addressing this market failure.

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File URL: http://www.economics.ualberta.ca/~/media/economics/FacultyAndStaff/WPs/WP2012-04-Zhou
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Bibliographic Info

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2012-4.

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Length: 23 pages
Date of creation: 01 Jan 2012
Date of revision:
Handle: RePEc:ris:albaec:2012_004

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Keywords: urban redevelopment programs; economic agglomeration; holdup problem;

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  1. Gould, Eric D & Pashigian, B. Peter & Prendergast, Canice, 2002. "Contracts, Externalities and Incentives in Shopping Malls," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3598, C.E.P.R. Discussion Papers.
  2. Edward L. Glaeser & Joshua D. Gottlieb, 2008. "The Economics of Place-Making Policies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 155-253.
  3. Matias Busso & Jesse Gregory & Patrick Kline, 2013. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," American Economic Review, American Economic Association, American Economic Association, vol. 103(2), pages 897-947, April.
  4. Kiyoshi Arakawa, 2006. "A Model Of Shopping Centers," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 46(5), pages 969-990.
  5. Michael Greenstone & Richard Hornbeck & Enrico Moretti, 2010. "Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 118(3), pages 536-598, 06.
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 64, University of Warwick, Department of Economics.
  7. Rappaport, Jordan & Kahn, Matthew E. & Glaeser, Edward, 2008. "Why Do The Poor Live In Cities? The Role of Public Transportation," Scholarly Articles 2958224, Harvard University Department of Economics.
  8. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-49, November.
  9. Henkel, Joachim & Stahl, Konrad & Walz, Uwe, 2000. "Coalition Building in a Spatial Economy," Journal of Urban Economics, Elsevier, vol. 47(1), pages 136-163, January.
  10. Patrick Kline, 2010. "Place Based Policies, Heterogeneity, and Agglomeration," American Economic Review, American Economic Association, American Economic Association, vol. 100(2), pages 383-87, May.
  11. Ernest P. Goss & Joseph M. Phillips, 2001. "The Impact of Tax Incentives: Do Initial Economic Conditions Matter?," Growth and Change, Gatton College of Business and Economics, University of Kentucky, Gatton College of Business and Economics, University of Kentucky, vol. 32(2), pages 236-250.
  12. Pashigian, B Peter & Gould, Eric D, 1998. "Internalizing Externalities: The Pricing of Space in Shopping Malls," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 41(1), pages 115-42, April.
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