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The Henry George Theorem in a second-best world

Kristian Behrens (), Yoshitsugu Kanemoto and Yasusada Murata

Journal of Urban Economics, 2015, vol. 85, issue C, 34-51

Abstract: The Henry George Theorem (HGT) states that, in first-best economies, the fiscal surplus of a city government that finances the Pigouvian subsidies for agglomeration externalities and the costs of local public goods by a 100% tax on land is zero at optimal city sizes. We extend the HGT to distorted economies where product differentiation and increasing returns are the sources of agglomeration economies and city governments levy property taxes. Without relying on specific functional forms, we derive a second-best HGT that relates the fiscal surplus to the excess burden expressed as an extended Harberger formula.

Keywords: Henry George Theorem; Second-best economies; Optimal city size; Monopolistic competition; Local public goods (search for similar items in EconPapers)
JEL-codes: D43 R12 R13 (search for similar items in EconPapers)
Date: 2015
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Working Paper: The Henry George Theorem in a second-best world (2014) Downloads
Working Paper: The Henry George Theorem in a second-best world (2010) Downloads
Working Paper: The Henry George Theorem in A Second-Best World (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:85:y:2015:i:c:p:34-51

DOI: 10.1016/j.jue.2014.10.002

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