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Aggregate Land Rents and Aggregate Transport Costs


  • Arnott, Richard J
  • Stiglitz, Joseph E


This paper explores the relationship between aggregate land rents and aggregate transport costs for land markets in which locations differ solely in terms of accessibility. That there exists a relationship between land rents and transport costs has been recognized at least since the time of von Thunen. The precise relationship between the two is, however, not generally well-understood. For instance, until quite recently it was considered correct to estimate the benefits from a transport improvement by the induced change in aggregate land rents at those locations where travel costs are reduced. This procedure can be shown to be correct only in very special circumstances. This paper presents a very general characterization of the relationship between aggregate land rents and aggregate transport costs. In some special cases, the relationship turns out to be remarkably simple: for a circular city with linear transport costs, aggregate transport costs are precisely twice aggregate land rents, independent of the distribution of tastes or income; for a linear city with linear transport costs, aggregate transport costs are equal to aggregate land rents. One corollary of our general analysis is that aggregate land rents may stay the same or actually fall in response to a transport improvement which makes everyone better off. In the first section we consider a simple example. The second derives the basic theorems of the paper, while the third examines their implications for the relationship between the benefits from a transport improvement and the change in aggregate land rents induced by the improvement. And in the fourth section, we examine the extent to which the theorems of section II generalize.
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Suggested Citation

  • 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.
  • Handle: RePEc:ecj:econjl:v:91:y:1981:i:362:p:331-47

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    References listed on IDEAS

    1. Richard J. Arnott & Joseph E. Stiglitz, 1979. "Aggregate Land Rents, Expenditure on Public Goods, and Optimal City Size," The Quarterly Journal of Economics, Oxford University Press, vol. 93(4), pages 471-500.
    2. Getz, Malcolm, 1975. "A model of the impact of transportation investment on land rents," Journal of Public Economics, Elsevier, vol. 4(1), pages 57-74, February.
    3. Herbert Mohring, 1961. "Land Values and the Measurement of Highway Benefits," Journal of Political Economy, University of Chicago Press, vol. 69, pages 236-236.
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    Cited by:

    1. Borck, Rainald & Wrede, Matthias, 2005. "Political economy of commuting subsidies," Journal of Urban Economics, Elsevier, vol. 57(3), pages 478-499, May.
    2. Jacoby, Hanan G. & Minten, Bart, 2009. "On measuring the benefits of lower transport costs," Journal of Development Economics, Elsevier, vol. 89(1), pages 28-38, May.
    3. Duranton, Gilles & Puga, Diego, 2014. "The Growth of Cities," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 5, pages 781-853 Elsevier.
    4. Viguie, V. & Hallegatte, S., 2014. "Urban infrastructure investment and rent-capture potentials," Policy Research Working Paper Series 7067, The World Bank.
    5. Dascher, Kristof, 2015. "Function Follows Form," University of Regensburg Working Papers in Business, Economics and Management Information Systems 486, University of Regensburg, Department of Economics.
    6. repec:hal:wpaper:hal-01136199 is not listed on IDEAS
    7. Bilotkach, Volodymyr & Gorodnichenko, Yuriy & Talavera, Oleksandr, 2012. "Sensitivity of prices to demand shocks: A natural experiment in the San Francisco Bay Area," Transportation Research Part A: Policy and Practice, Elsevier, vol. 46(7), pages 1137-1151.
    8. Borck, Rainald & Wrede, Matthias, 2008. "Commuting subsidies with two transport modes," Journal of Urban Economics, Elsevier, vol. 63(3), pages 841-848, May.
    9. Borck, Rainald & Wrede, Matthias, 2009. "Subsidies for intracity and intercity commuting," Journal of Urban Economics, Elsevier, vol. 66(1), pages 25-32, July.
    10. Duranton, Gilles & Puga, Diego, 2014. "The Growth of Cities," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 5, pages 781-853 Elsevier.
    11. Robert BICHSEL, 1999. "A Silver Rule for Financing Local Transport Facilities," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 9902, Université de Lausanne, Faculté des HEC, DEEP.
    12. Sheppard, Stephen & Stover, Mark Edward, 1995. "The benefits of transport improvements in a city with efficient development control," Regional Science and Urban Economics, Elsevier, vol. 25(2), pages 211-222, April.
    13. Laird, James J. & Venables, Anthony J., 2017. "Transport investment and economic performance: A framework for project appraisal," Transport Policy, Elsevier, vol. 56(C), pages 1-11.
    14. Marvin Kraus, 2003. "Monocentric Cities," Boston College Working Papers in Economics 559, Boston College Department of Economics.
    15. Proost, Stef & Thisse, Jacques-François, 2015. "Skilled Cities, Regional Disparities, and Efficient Transport: The state of the art and a research agenda," CEPR Discussion Papers 10790, C.E.P.R. Discussion Papers.
    16. Joseph E. Stiglitz, 1981. "Public Goods in Open Economies with Heterogeneous Individuals," NBER Working Papers 0802, National Bureau of Economic Research, Inc.
    17. Duranton, Gilles & Puga, Diego, 2015. "Urban Land Use," Handbook of Regional and Urban Economics, Elsevier.
    18. Helsley, Robert, 2001. "An Essay on Urban Economic Theory: Yorgos Y. Papageorgiou and David Pines, Kluwer Academic Publishers, Norwell, Massachusetts, 1999, ISBN 0-7923-8343-5," Regional Science and Urban Economics, Elsevier, vol. 31(5), pages 626-630, September.

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