Credit Market Imperfections, Urban Land Rents and the Henry George Theorem

Roberto Brunetti, Carl Gaigne and Fabien Moizeau

No 339260, Working Papers from Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2)

Abstract: This paper investigates the credit market impact on urban land rents and the tax policy implications. We introduce a borrowing cost and a down-payment requirement in the canonical urban land use model. We first show that both imperfections lower equilibrium land prices in the most attractive city locations. This downward effect is more likely to occur when land is scarce and cities are large and endowed with inefficient transport infrastructures. Only the down-payment requirement generates utility differentials among homogeneous households (symmetry-breaking). We further show that the Henry George Theorem, which posits that a confiscatory tax on land rents is sufficient to finance public goods, needs to be amended as aggregate land rents are lower than public expenditures. Depending on the nature of mortgage market imperfections, we derive optimal tax schedules.

Keywords: Land Economics/Use; Public Economics (search for similar items in EconPapers)
Pages: 27
Date: 2024-01-19
New Economics Papers: this item is included in nep-ure
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https://ageconsearch.umn.edu/record/339260/files/WP%2024-01.pdf (application/pdf)

Related works:
Journal Article: Credit Market Imperfections, Urban Land Rents and the Henry George Theorem (2023)
Working Paper: Credit Market Imperfections, Urban Land Rents and the Henry George Theorem (2023)
Working Paper: Credit Market Imperfections, Urban Land Rents and the Henry George Theorem (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:inrasl:339260

DOI: 10.22004/ag.econ.339260

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