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The Henry George Theorem in A Second-Best World

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  • Kristian Behrens

    (Departement des Sciences Economiques, Universite du Queebec a Montreal (UQAM), CIRPEE, and CEPR)

  • Yoshitsugu Kanemoto

    (Graduate School of Economics and Graduate School of Public Policy (GraSPP), University of Tokyo, National Graduate Institute for Policy Studies)

  • Yasusada Murata

    (Advanced Research Institute for the Sciences and Humanities (ARISH), Nihon University)

Abstract

The Henry George Theorem (HGT), or the golden rule of local public finance, states that, in first-best economies, the fiscal surplus, defined as aggregate land rents minus aggregate losses from increasing returns to scale activities, is zero at optimal city sizes. We derive a general second-best HGT in which the fiscal surplus equals the excess burden, expressed as an extended Harberger formula. We then apply our theorem to various settings encompassing urban eco- nomics, the new economic geography and local public finance to investigate whether or not a single tax on land rents can raise enough revenue to cover aggregate losses from increasing returns to scale activities.

Suggested Citation

  • Kristian Behrens & Yoshitsugu Kanemoto & Yasusada Murata, 2010. "The Henry George Theorem in A Second-Best World," CIRJE F-Series CIRJE-F-773, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2010cf773
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    Cited by:

    1. Behrens, Kristian & Kanemoto, Yoshitsugu & Murata, Yasusada, 2015. "The Henry George Theorem in a second-best world," Journal of Urban Economics, Elsevier, vol. 85(C), pages 34-51.
    2. Behrens, Kristian & Kanemoto, Yoshitsugu & Murata, Yasusada, 2014. "New trade models, elusive welfare gains," CEPR Discussion Papers 10255, C.E.P.R. Discussion Papers.
    3. Yoshitsugu Kanemoto, 2011. "Second-Best Cost?Benefit Analysis with a Microfoundation of Urban Agglomeration," GRIPS Discussion Papers 11-03, National Graduate Institute for Policy Studies.
    4. Kanemoto, Yoshitsugu, 2013. "Second-best cost–benefit analysis in monopolistic competition models of urban agglomeration," Journal of Urban Economics, Elsevier, vol. 76(C), pages 83-92.
    5. Yoshitsugu Kanemoto, 2013. "Pitfalls in estimating “wider economic benefits” of transportation projects," GRIPS Discussion Papers 13-20, National Graduate Institute for Policy Studies.
    6. Kanemoto, Yoshitsugu, 2013. "Evaluating benefits of transportation in models of new economic geography," Economics of Transportation, Elsevier, vol. 2(2), pages 53-62.
    7. Yoshitsugu Kanemoto, 2012. "Cost-Benefit Analysis in Monopolistic Competition Models of Urban Agglomeration," GRIPS Discussion Papers 12-04, National Graduate Institute for Policy Studies.

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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