IDEAS home Printed from https://ideas.repec.org/a/kap/jrefec/v32y2006i1p83-100.html
   My bibliography  Save this article

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

Author

Listed:
  • Lanny Arvan

    ()

  • David Nickerson

    ()

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

Suggested Citation

  • Lanny Arvan & David Nickerson, 2006. "Private Investment, Public Aid and Endogenous Divergence in the Evolution of Urban Neighborhoods," The Journal of Real Estate Finance and Economics, Springer, vol. 32(1), pages 83-100, February.
  • Handle: RePEc:kap:jrefec:v:32:y:2006:i:1:p:83-100
    DOI: 10.1007/s11146-005-5179-7
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11146-005-5179-7
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Cabreales, Antonio & Calvo-Armengol, Antoni & Jackson, Matthew O., 2003. "La Crema: A Case Study of Mutual Fire Insurance," Journal of Political Economy, University of Chicago Press, vol. 111(2), pages 425-458, April.
    2. Matthew Haag & Roger Lagunoff, 2006. "Social Norms, Local Interaction, And Neighborhood Planning ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 265-296, February.
    3. Edward L. Glaeser & Jose Scheinkman, 2000. "Non-Market Interactions," NBER Working Papers 8053, National Bureau of Economic Research, Inc.
    4. Giorgio Fagiolo, 2001. "Coordination, Local Interactions and Endogenous Neighborhood Formation," LEM Papers Series 2001/15, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    5. Grieson, Ronald E. & White, James R., 1989. "The existence and capitalization of neighborhood externalities: A reassessment," Journal of Urban Economics, Elsevier, vol. 25(1), pages 68-76, January.
    6. Rothenberg, Jerome & Galster, George C. & Butler, Richard V. & Pitkin, John R., 1991. "The Maze of Urban Housing Markets," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226729510, April.
    7. Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-187, May.
    8. Schall, Lawrence D, 1976. "Urban Renewal Policy and Economic Efficiency," American Economic Review, American Economic Association, vol. 66(4), pages 612-628, September.
    9. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-648, July-Aug..
    10. H. Peyton Young, 1996. "The Economics of Convention," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 105-122, Spring.
    11. Karla Hoff & Arijit Sen, 2005. "Homeownership, Community Interactions, and Segregation," American Economic Review, American Economic Association, vol. 95(4), pages 1167-1189, September.
    12. 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.
    13. Galster, George, 2002. "An economic efficiency analysis of deconcentrating poverty populations," Journal of Housing Economics, Elsevier, vol. 11(4), pages 303-329, December.
    14. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
    15. 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 147-156, March.
    16. 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.
    17. Frame, David E., 2001. "Insurance and Community Welfare," Journal of Urban Economics, Elsevier, vol. 49(2), pages 267-284, March.
    18. Lewis, Tracy & Nickerson, David, 1989. "Self-insurance against natural disasters," Journal of Environmental Economics and Management, Elsevier, vol. 16(3), pages 209-223, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Céline Grislain-Letremy, 2013. "Natural Disters : Exposure and Underinsurance," Working Papers 2013-15, Center for Research in Economics and Statistics.
    2. C. Grislain-Letrémy, 2013. "Natural Disasters: Exposure and Underinsurance," Documents de Travail de la DESE - Working Papers of the DESE g2013-12, Institut National de la Statistique et des Etudes Economiques, DESE.
    3. Andor, Mark & Osberghaus, Daniel & Simora, Michael, 2017. "Natural disasters and governmental aid: Is there a charity hazard?," ZEW Discussion Papers 17-065, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    4. Paul Raschky & Reimund Schwarze & Manijeh Schwindt & Ferdinand Zahn, 2013. "Uncertainty of Governmental Relief and the Crowding out of Flood Insurance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 54(2), pages 179-200, February.
    5. Paul A. Raschky & Reimund Schwarze & Manijeh Schwindt & Ferdinand Zahn, "undated". "Uncertainty of Governmental Relief and the Crowding out of Insurance," Working Papers 2010-03, Faculty of Economics and Statistics, University of Innsbruck.
    6. 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.
    7. repec:dau:papers:123456789/13276 is not listed on IDEAS

    More about this item

    Keywords

    blight; housing; neighborhood effects; urban renewal;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jrefec:v:32:y:2006:i:1:p:83-100. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.