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Economic growth with space and fiscal policies with housing and public goods

Economic growth with space and fiscal policies with housing and public goods Purpose – This study aims to examine dynamic interactions among economic growth, geography and the housing market with public goods financed by the government. A general dynamic equilibrium model of an isolated economy with economic geography, local public goods and capital accumulation is to be constructed. The economy has three sectors, supplying industrial goods, housing, and local public goods. The model synthesizes the main ideas in neoclassical growth theory, the Alonso urban model, and the Muth housing model in an alternative framework to the traditional growth theory. Design/methodology/approach – The model is based on the neoclassical growth theory with an alternative approach to household behavior. The paper shows how to solve the dynamics of the economic system and simulate the model to demonstrate dynamic interactions among economic growth, housing market, residential distribution and public goods over time and space. Findings – The paper simulates equilibrium and motion of the spatial economy with Cobb‐Douglas production and utility functions. The simulation demonstrates, for example, that, as the tax rate on the land income is increased, the total capital stocks and the stocks employed by the three sectors are increased, the rate of interest falls and the output of the industrial sector and the wage rate are increased, the land devoted to local public goods falls and the land rent and housing rent rise over space, the consumption level of the industrial goods and the total expenditures on the public goods are increased. Practical implications – The paper provides some possible implications of the model for complicated consequences of government policy over time and space. In particular, the paper shows that a change in government policy not only has a macroeconomic impact over time, but also affects the economic geography of the national economy. Originality/value – The paper offers insights into the linkage among growth, national public policies and economic geography. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Studies Emerald Publishing

Economic growth with space and fiscal policies with housing and public goods

Wei‐Bin Zhang
Journal of Economic Studies , Volume 38 (4): 31 – Sep 6, 2011
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References (77)

Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
0144-3585
DOI
10.1108/01443581111160897
Publisher site
See Article on Publisher Site

Abstract

Purpose – This study aims to examine dynamic interactions among economic growth, geography and the housing market with public goods financed by the government. A general dynamic equilibrium model of an isolated economy with economic geography, local public goods and capital accumulation is to be constructed. The economy has three sectors, supplying industrial goods, housing, and local public goods. The model synthesizes the main ideas in neoclassical growth theory, the Alonso urban model, and the Muth housing model in an alternative framework to the traditional growth theory. Design/methodology/approach – The model is based on the neoclassical growth theory with an alternative approach to household behavior. The paper shows how to solve the dynamics of the economic system and simulate the model to demonstrate dynamic interactions among economic growth, housing market, residential distribution and public goods over time and space. Findings – The paper simulates equilibrium and motion of the spatial economy with Cobb‐Douglas production and utility functions. The simulation demonstrates, for example, that, as the tax rate on the land income is increased, the total capital stocks and the stocks employed by the three sectors are increased, the rate of interest falls and the output of the industrial sector and the wage rate are increased, the land devoted to local public goods falls and the land rent and housing rent rise over space, the consumption level of the industrial goods and the total expenditures on the public goods are increased. Practical implications – The paper provides some possible implications of the model for complicated consequences of government policy over time and space. In particular, the paper shows that a change in government policy not only has a macroeconomic impact over time, but also affects the economic geography of the national economy. Originality/value – The paper offers insights into the linkage among growth, national public policies and economic geography.

Journal

Journal of Economic Studies – Emerald Publishing

Published: Sep 6, 2011

Keywords: Urban dynamics; Capital accumulation; Public goods; Fiscal policies; Housing; Economic growth; Town planning

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