Private Investment, Public Aid and Endogenous Divergence in the Evolution of Urban Neighborhoods

Private Investment, Public Aid and Endogenous Divergence in the Evolution of Urban Neighborhoods This paper offers a novel explanation for urban blight and endogenous divergence in the overall quality and wealth of neighborhoods and simultaneously derives the salient features of actual urban renewal and other aid programs from optimizing government behavior based on collective public preferences. These features appear when the objective of such public aid programs is to restore the ex ante distribution of wealth or property values within a blighted neighborhood, while equilibria exhibiting deficient levels of private investment and blight itself can arise when residents accurately anticipate the potential provision of public aid to an affected neighborhood and ex ante investment in private insurance diminishes neighborhood eligibility for such aid. Examples of antipodal equilibria in which urban renewal programs entirely crowd out local private investment or in which neighborhood residents invest in efficient levels of private mitigation illustrate these results, which stand in direct contrast to both traditional explanations of urban blight and to the new “social-interaction” models of neighborhood divergence. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Private Investment, Public Aid and Endogenous Divergence in the Evolution of Urban Neighborhoods

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2006 by Springer Science + Business Media, Inc.
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-005-5179-7
Publisher site
See Article on Publisher Site

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