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The Henry George Theorem in A Second-Best World

Kristian Behrens (), Yoshitsugu Kanemoto and Yasusada Murata

No CIRJE-F-773, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: The Henry George Theorem (HGT), or the golden rule of local public finance, states that, in first-best economies, the fiscal surplus, defined as aggregate land rents minus aggregate losses from increasing returns to scale activities, is zero at optimal city sizes. We derive a general second-best HGT in which the fiscal surplus equals the excess burden, expressed as an extended Harberger formula. We then apply our theorem to various settings encompassing urban eco- nomics, the new economic geography and local public finance to investigate whether or not a single tax on land rents can raise enough revenue to cover aggregate losses from increasing returns to scale activities.

Pages: 30pages
Date: 2010-11
New Economics Papers: this item is included in nep-geo and nep-ure
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Related works:
Journal Article: The Henry George Theorem in a second-best world (2015) Downloads
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
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