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Commercial Revitalization in Low-Income Urban Communities: General Tax Incentives vs. Direct Incentives to Developers

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  • Zhou, Li

    () (University of Alberta, Department of Economics)

Abstract

This paper proposes a commercial development model, based on Fujita's (1988) monopolistic competition model of spatial agglomeration, to examine stores' decisions to enter urban communities. The model focuses on commercial developers and large stores, and identifies a potential holdup problem in the commercial development market arising because developers incur costs before negotiating with anchor tenants over pro fit sharing; the holdup problem is more likely to occur in low-income communities where the profitability of commercial projects is small. The model predicts that direct incentives to developers are preferred to general tax incentives for addressing this market failure.

Suggested Citation

  • Zhou, Li, 2012. "Commercial Revitalization in Low-Income Urban Communities: General Tax Incentives vs. Direct Incentives to Developers," Working Papers 2012-4, University of Alberta, Department of Economics.
  • Handle: RePEc:ris:albaec:2012_004
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    File URL: https://sites.ualberta.ca/~econwps/2012/wp2012-04.pdf
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    References listed on IDEAS

    as
    1. Ernest P. Goss & Joseph M. Phillips, 2001. "The Impact of Tax Incentives: Do Initial Economic Conditions Matter?," Growth and Change, Wiley Blackwell, vol. 32(2), pages 236-250.
    2. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    3. Michael Greenstone & Richard Hornbeck & Enrico Moretti, 2010. "Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 536-598, June.
    4. Kiyoshi Arakawa, 2006. "A Model Of Shopping Centers," Journal of Regional Science, Wiley Blackwell, vol. 46(5), pages 969-990.
    5. Henkel, Joachim & Stahl, Konrad & Walz, Uwe, 2000. "Coalition Building in a Spatial Economy," Journal of Urban Economics, Elsevier, vol. 47(1), pages 136-163, January.
    6. Matias Busso & Jesse Gregory & Patrick Kline, 2013. "Assessing the Incidence and Efficiency of a Prominent Place Based Policy," American Economic Review, American Economic Association, vol. 103(2), pages 897-947, April.
    7. Glaeser, Edward L. & Kahn, Matthew E. & Rappaport, Jordan, 2008. "Why do the poor live in cities The role of public transportation," Journal of Urban Economics, Elsevier, vol. 63(1), pages 1-24, January.
    8. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-849, November.
    9. Pashigian, B Peter & Gould, Eric D, 1998. "Internalizing Externalities: The Pricing of Space in Shopping Malls," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 115-142, April.
    10. Edward L. Glaeser & Joshua D. Gottlieb, 2008. "The Economics of Place-Making Policies," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 155-253.
    11. Patrick Kline, 2010. "Place Based Policies, Heterogeneity, and Agglomeration," American Economic Review, American Economic Association, vol. 100(2), pages 383-387, May.
    12. Eric D. Gould & B. Peter Pashigian & Canice J. Prendergast, 2005. "Contracts, Externalities, and Incentives in Shopping Malls," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 411-422, August.
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    More about this item

    Keywords

    urban redevelopment programs; economic agglomeration; holdup problem;

    JEL classification:

    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H76 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other Expenditure Categories
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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