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

Abstract

PurposeThis 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/approachThe 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.FindingsThe 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 implicationsThe 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/valueThe paper offers insights into the linkage among growth, national public policies and economic geography.

Public Debt and Economic Growth in Uzawa’s Two-Sector Model With Public Goods

“…Markets are competitive; thus labor and capital earn their marginal products, and firms earn zero profits. We interpret the variables as public goods such as physical and institutional infrastructures (Zhang, 2009(Zhang, , 2011. The aggregate public goods   t F p is supplied by the government and is taken as given by the firms.…”

The impact of transport, land and fiscal policy on housing and economic geography in a small, open growth model

“…We use the linear monocentric city as this allows us to explicitly analyze the model. This paper is based on a spatial growth model of an isolated state by Zhang (2010) but is different from Zhang in that this paper is concerned with the dynamics of a small, open economy. The paper is organized as follows.…”