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The impact of transport, land and fiscal policy on housing and economic geography in a small, open growth model

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Abstract

This study proposes a spatial model to examine dynamic interactions among growth, economic geography, the housing market, and public goods in a small, open economic growth model. We emphasize the impact of transport, land and fiscal policy on the spatial economy. The economy consists of the industrial sector, housing sector and local public goods. The model synthesizes the main ideas in the neoclassical growth theory, the Alonso urban model and the Muth housing model within the neoclassical open, small-growth framework. We solve the dynamics of the economic system and simulate the model to demonstrate dynamic interactions among economic growth, the housing market, residential distribution and public goods over time and space. Our simulation demonstrates, for instance, that as the tax rate on land income is increased, the total capital stocks and the stocks employed by the housing and public sectors are increased, the land devoted to local public goods falls and land rents and housing rents rise over space, and the consumption level of industrial goods and the total expenditures on public goods are increased. Our integrating model provides some new insights that cannot be obtained from the component models.

Suggested Citation

  • Zhang, Wei-Bin, 2013. "The impact of transport, land and fiscal policy on housing and economic geography in a small, open growth model," The Journal of Transport and Land Use, Center for Transportation Studies, University of Minnesota, vol. 6(1), pages 89-100.
  • Handle: RePEc:ris:jtralu:0102
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    1. Sylvie Démurger & Jeffrey D. Sachs & Wing Thye Woo & Shuming Bao & Gene Chang & Andrew Mellinger, 2002. "Geography, Economic Policy, and Regional Development in China," Asian Economic Papers, MIT Press, vol. 1(1), pages 146-197.
    2. J. Vernon Henderson, Zmarak Shalizi, and Anthony J. Venables, 2001. "Geography and development," Journal of Economic Geography, Oxford University Press, vol. 1(1), pages 81-105, January.
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    4. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    5. Arnott, Richard & Braid, Ralph & Davidson, Russell & Pines, David, 1999. "A general equilibrium spatial model of housing quality and quantity," Regional Science and Urban Economics, Elsevier, vol. 29(3), pages 283-316, May.
    6. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.
    7. Anas, Alex, 1978. "Dynamics of urban residential growth," Journal of Urban Economics, Elsevier, vol. 5(1), pages 66-87, January.
    8. Hochman, Oded, 1981. "Land rents, optimal taxation and local fiscal independence in an economy with local public goods," Journal of Public Economics, Elsevier, vol. 15(1), pages 59-85, February.
    9. Berliant, Marcus & Peng, Shin-Kun & Wang, Ping, 2002. "Production Externalities and Urban Configuration," Journal of Economic Theory, Elsevier, vol. 104(2), pages 275-303, June.
    10. Jordi Galí & Tommaso Monacelli, 2005. "Monetary Policy and Exchange Rate Volatility in a Small Open Economy," Review of Economic Studies, Oxford University Press, vol. 72(3), pages 707-734.
    11. Wei-Bin Zhang, 2011. "Economic growth with space and fiscal policies with housing and public goods," Journal of Economic Studies, Emerald Group Publishing, vol. 38(4), pages 452-482, September.
    12. Brueckner, Jan K. & Pereira, Alfredo M., 1994. "Housing Ownership and the Business Cycle," Journal of Housing Economics, Elsevier, vol. 3(3), pages 165-185, September.
    13. Robert E. Lucas & Esteban Rossi-Hansberg, 2002. "On the Internal Structure of Cities," Econometrica, Econometric Society, vol. 70(4), pages 1445-1476, July.
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    Cited by:

    1. Wei-Bin Zhang, 2013. "Flexible Exchange Rate and Growth of a Small Open Monetary Economy with Imported Good and Externalities," Economic Research Guardian, Weissberg Publishing, vol. 3(1), pages 33-53, June.
    2. repec:ris:betajl:0010 is not listed on IDEAS
    3. repec:ora:jrojbe:v:3:y:2018:i:2:p:7-21 is not listed on IDEAS

    More about this item

    Keywords

    Spatial model; Economic growth; Policy; Housing; Economic geography;

    JEL classification:

    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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