A Silver Rule for Financing Local Transport Facilities
According to the Henry George Theorem (HGT), the cost of a pure local public good can be covered through a tax on related land-rents. As we show in this paper, this general proposition does not apply to transport facilities. Nonetheless, even if the "Golden Rule" does not apply in this context, land value and transport facilities are related. We show that (i) an improvement of the transport facilities does have a positive effect onto land value when taking into account the effect on the equilibrium city size; (ii) a simple relationship, similar to the HGT, does exist between the cost of optimal transport facilities and aggregate land rents; (iii) any exogenous shock reducing travel costs leads to higher optimal spending in transport facilities and higher land value. This suggests that associated changes in land value could, in a way that we define, subsidize optimal improvements in transport facilities land rents are related to spending in transport facilities.
|Date of creation:||Feb 1999|
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- Arnott, Richard J & Stiglitz, Joseph E, 1981.
"Aggregate Land Rents and Aggregate Transport Costs,"
Royal Economic Society, vol. 91(362), pages 331-347, June.
- Richard J. Arnott & Joseph E. Stiglitz, 1980. "Aggregate Land Rents and Aggregate Transport Costs," NBER Working Papers 0523, National Bureau of Economic Research, Inc.
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- 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.
- D B Lee Jr. & C P Averous, 1973. "Land Use and Transportation: Basic Theory," Environment and Planning A, , vol. 5(4), pages 491-502, August. Full references (including those not matched with items on IDEAS)