Foreign Residents and the Future of Global Cities

Guerreiro, João, Sergio Rebelo, Pedro Teles and Miguel Godinho de Matos

No 18287, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Global cities are attracting a growing number of tourists and foreign residents. This influx generates capital gains for property owners but adversely affects renters, creating potentially important production, congestion, and amenities externalities. We study the optimal policy regarding local and foreign residents in a model with key features emphasized in policy debates. Using this model, we provide sufficient statistics to calculate the optimal tax and transfer policies that internalize agglomeration, congestion, and other potential externalities. We find that it is not optimal to impose zoning regulations or to restrict, tax, or sub- sidize home purchases by foreign residents. However, it may be optimal to charge an entry fee to foreign residents.

JEL-codes: H00 J61 R3 R58 (search for similar items in EconPapers)
Date: 2023-07
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Working Paper: Foreign Residents and the Future of Global Cities (2023)
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