Modeling the externalities and redevelopment of a run-down area

In Park ()

The Annals of Regional Science, 2013, vol. 51, issue 3, 893-915

Abstract: This paper models the redevelopment of a run-down area in terms of the externalities from abandonment to apply to the slow response time of the local government and private firms to redevelop such areas. The conversion of abandoned properties for new uses creates two types of positive externalities, real externalities and pecuniary externalities. The first refers to a productivity gain for all firms due to the elimination of negative nuisance of abandonment, while the latter refers to an output price decrease due to the increased production as a result of the conversion. In the case of private development, these externalities are not fully considered by private firms, leading to delayed conversions. The redevelopment process may also be delayed by the fragmented ownership of properties. This paper shows that conversion occurs earlier in the case of single ownership than for fragmented ownership, if the real externality is dominant to the pecuniary externality. In the case of local optimum, the local government considers both types of externalities but only maximizes the value of the properties within the community. The local government fails to take into account the effect on society as a whole, leading to delayed redevelopment. These results suggest the need for interventions of the central government for managing abandoned properties at the early stage of abandonment. Copyright Springer-Verlag Berlin Heidelberg 2013

Keywords: H23; R11; R33 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1007/s00168-013-0566-0 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:anresc:v:51:y:2013:i:3:p:893-915

Ordering information: This journal article can be ordered from
http://link.springer.com/journal/168

DOI: 10.1007/s00168-013-0566-0

Access Statistics for this article

The Annals of Regional Science is currently edited by Martin Andersson, E. Kim and Janet E. Kohlhase

More articles in The Annals of Regional Science from Springer, Western Regional Science Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().