The Henry George Theorem in A Second-Best World
AbstractThe Henry George Theorem (HGT), or the golden rule of local public finance, states that, in first-best economies, the fiscal surplus, defined as aggregate land rents minus aggregate losses from increasing returns to scale activities, is zero at optimal city sizes. We derive a general second-best HGT in which the fiscal surplus equals the excess burden, expressed as an extended Harberger formula. We then apply our theorem to various settings encompassing urban eco- nomics, the new economic geography and local public finance to investigate whether or not a single tax on land rents can raise enough revenue to cover aggregate losses from increasing returns to scale activities.
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Other versions of this item:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-11-20 (All new papers)
- NEP-GEO-2010-11-20 (Economic Geography)
- NEP-URE-2010-11-20 (Urban & Real Estate Economics)
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