Modeling the externalities and redevelopment of a run-down area
This paper models the redevelopment of a run-down area in terms of the externalities from abandonment to apply to the slow response time of the local government and private firms to redevelop such areas. The conversion of abandoned properties for new uses creates two types of positive externalities, real externalities and pecuniary externalities. The first refers to a productivity gain for all firms due to the elimination of negative nuisance of abandonment, while the latter refers to an output price decrease due to the increased production as a result of the conversion. In the case of private development, these externalities are not fully considered by private firms, leading to delayed conversions. The redevelopment process may also be delayed by the fragmented ownership of properties. This paper shows that conversion occurs earlier in the case of single ownership than for fragmented ownership, if the real externality is dominant to the pecuniary externality. In the case of local optimum, the local government considers both types of externalities but only maximizes the value of the properties within the community. The local government fails to take into account the effect on society as a whole, leading to delayed redevelopment. These results suggest the need for interventions of the central government for managing abandoned properties at the early stage of abandonment. Copyright Springer-Verlag Berlin Heidelberg 2013
Volume (Year): 51 (2013)
Issue (Month): 3 (December)
|Contact details of provider:|| Web page: http://link.springer.de/link/service/journals/00168/index.htm|
More information through EDIRC
|Order Information:||Web: http://link.springer.de/orders.htm|
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.:
- Eckart, Wolfgang, 1985. "On the land assembly problem," Journal of Urban Economics, Elsevier, vol. 18(3), pages 364-378, November.
- Brueckner, Jan K., 1983. "Property value maximization and public sector efficiency," Journal of Urban Economics, Elsevier, vol. 14(1), pages 1-15, July.
- de Leeuw, Frank, 1971. "The Demand for Housing: A Review of Cross-Section Evidence," The Review of Economics and Statistics, MIT Press, vol. 53(1), pages 1-10, February.
- Sonstelie, Jon C. & Portney, Paul R., 1978. "Profit maximizing communities and the theory of local public expenditure," Journal of Urban Economics, Elsevier, vol. 5(2), pages 263-277, April.
- Arnott, Richard & Davidson, Russell & Pines, David, 1983. "Housing Quality, Maintenance and Rehabilitation," Review of Economic Studies, Wiley Blackwell, vol. 50(3), pages 467-94, July.
- Tibor Scitovsky, 1954. "Two Concepts of External Economies," Journal of Political Economy, University of Chicago Press, vol. 62, pages 143.
- Strange William C., 1995. "Information, Holdouts, and Land Assembly," Journal of Urban Economics, Elsevier, vol. 38(3), pages 317-332, November.
- Wooders, Myrna, 1978. "Equilibria, the core, and jurisdiction structures in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 18(2), pages 328-348, August.
- Brueckner, Jan K., 1981. "A dynamic model of housing production," Journal of Urban Economics, Elsevier, vol. 10(1), pages 1-14, July.
- Menezes, Flavio Marques & Pitchford, Rohan, 2001.
"The Land Assembly Problem Revisited,"
Economics Working Papers (Ensaios Economicos da EPGE)
427, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Miceli, Thomas J. & Sirmans, C.F., 2007. "The holdout problem, urban sprawl, and eminent domain," Journal of Housing Economics, Elsevier, vol. 16(3-4), pages 309-319, November.
When requesting a correction, please mention this item's handle: RePEc:spr:anresc:v:51:y:2013:i:3:p:893-915. 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.