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

Marché du Crédit Imparfait, Rente Foncière Urbaine, et le Théorème d'Henry George

Roberto Brunetti (), Carl Gaigne and Fabien Moizeau
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Roberto Brunetti: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique

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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.

Keywords: Credit constraint; Land use; Henry George Theorem; Land taxation; Local public good; Contrainte de crédit; Usage du sol; Théorème d’Henry George; Taxe foncière; Bien public local (search for similar items in EconPapers)
Date: 2023
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-04405036v1
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Published in Revue Economique, 2023, Avancées de la recherche en microéconomie appliquée à l'occasion des XXXVIIIe JMA (Rennes 2022), 74 (5), pp.681-703. ⟨10.3917/reco.745.0681⟩

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Related works:
Working Paper: Credit Market Imperfections, Urban Land Rents and the Henry George Theorem (2024)
Journal Article: 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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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-04405036

DOI: 10.3917/reco.745.0681

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