Private Investment, Public Aid and Endogenous Divergence in the Evolution of Urban Neighborhoods
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
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Giorgio Fagiolo, 2002.
"Coordination, Local Interactions, and Endogenous Neighborhood Formation,"
Computing in Economics and Finance 2002
98, Society for Computational Economics.
- 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.
- 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.
- Lewis, Tracy & Nickerson, David, 1989. "Self-insurance against natural disasters," Journal of Environmental Economics and Management, Elsevier, vol. 16(3), pages 209-223, May.
- 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.
- Matthew Haag & Roger Lagunoff, 2000.
"social Norms, Local Interaction and Neighborhood Planning,"
Levine's Working Paper Archive
2049, David K. Levine.
- 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, 02.
- Matthew Haag & Roger Lagunoff, 1999. "Social Norms, Local Interaction, and Neighborhood Planning," Game Theory and Information 9907004, EconWPA.
- H. Peyton Young, 1996. "The Economics of Convention," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 105-122, Spring.
- Schall, Lawrence D, 1976. "Urban Renewal Policy and Economic Efficiency," American Economic Review, American Economic Association, vol. 66(4), pages 612-28, September.
- 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.
- Hoff, Karla & Sen, Arijit, 2004.
"Homeownership, community interactions, and segregation,"
Policy Research Working Paper Series
3316, The World Bank.
- Karla Hoff & Arijit Sen, 2005. "Homeownership, Community Interactions, and Segregation," American Economic Review, American Economic Association, vol. 95(4), pages 1167-1189, September.
- 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.
- 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 147-56, March.
- 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 623-48, July-Aug..
- Frame, David E., 2001. "Insurance and Community Welfare," Journal of Urban Economics, Elsevier, vol. 49(2), pages 267-284, March.
- Edward L. Glaeser & Jose A. Scheinkman, 2001.
Harvard Institute of Economic Research Working Papers
1914, Harvard - Institute of Economic Research.
- Galster, George, 2002. "An economic efficiency analysis of deconcentrating poverty populations," Journal of Housing Economics, Elsevier, vol. 11(4), pages 303-329, December.
- Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
- Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-87, May.
- 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.
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: (Guenther Eichhorn)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.