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

Roberto Brunetti, Carl Gaigne and Fabien Moizeau

Revue économique, 2023, vol. 74, issue 5, 681-703

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. JEL Codes: H20, R14, R21, R50.

Keywords: credit constraint; land use; Henry George theorem; land taxation; local public good (search for similar items in EconPapers)
JEL-codes: H20 R14 R21 R50 (search for similar items in EconPapers)
Date: 2023
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Related works:
Working Paper: Credit Market Imperfections, Urban Land Rents and the Henry George Theorem (2024)
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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