The Henry George Theorem in a second-best world

Yasusada Murata and Kristian Behrens
Authors registered in the RePEc Author Service: Yoshitsugu Kanemoto

No 8120, CEPR Discussion Papers from Centre for Economic Policy Research

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 economics, 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.

Keywords: Henry george theorem; Local public goods; Monopolistic competition; Optimal city size; Second-best economies (search for similar items in EconPapers)
JEL-codes: D43 R12 R13 (search for similar items in EconPapers)
Date: 2010-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: The Henry George Theorem in a second-best world (2015)
Working Paper: The Henry George Theorem in a second-best world (2014)
Working Paper: The Henry George Theorem in A Second-Best World (2010)
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