In a two period model of land development, Arrow and Fisher, and Henry have shown that when development is both indivisible and irreversible, a developer who ignores the possibility of obtaining new information about the outcome of such development will invariably underestimate the benefits of preservation and hence favor development. This paper extends aspects of this literature by (i) studying the development question in a dynamic and stochastic framework, and (ii) explicitly incorporating an information production function into the analysis. In such a setting, I ask and answer the question concerning when development should take place.
The Arrow-Fisher-Henry (AFH) analysis of land development under uncertainty has been conducted in a two-period model. Recently, Capozza and Helsley (1990) and Batabyal (1995) have addressed the question of land development under uncertainty in a many-period setting. In this paper, aspects of this literature are extended by analyzing the land development question in a Markov decision theoretic framework. Inter alia, it is shown that the timing of land development is invariant to the manner in which a landowner uses information about the consequences of development. Copyright 1996, Oxford University Press.
We study the impact that the provision of a local public good (LPG) by two cities has on their ability to attract and retain members of the creative class. This creative class consists of two types of members known as engineers and artists. Engineers are wealthier than artists and they also value the LPG more. We first focus on each city in isolation.We compute the marginal value and the marginal cost of the LPG and then determine the provision of this LPG when the provision is determined by uniform contributions and majority voting. Next, we allow the creative class members to migrate between the two cities and analyse whether engineers or artists migrate, the equilibrium distribution of the creative class, and the efficiency of the LPG provision.Finally, we consider the situation in each city just before migration and study how much of the LPG is provided when proportional contributions and majority voting determine this provision. A related question we address is whether engineers or artists now have an incentive to migrate and, if yes, we identify who would like to migrate and to which city.
I model the interaction between a regulator and polluting firms as a Stackelberg differential game in which the regulator leads. The firms create pollution, which results in a stock extermality. I analyze the intertemporal effects of alternate pollution control measures in a competitive industry. The principal issue here concerns the dynamic inconsistency of the optimal solution. Inter alia, I compare the steady state levels of pollution under optimal and under time consistent policies. Copyright Kluwer Academic Publishers 1996environmental economics, regulation, tax, dynamic, game,
We first construct a theoretical model of a regional economy with two sectors. One sector uses physical and creative capital-in the sense of Florida (The rise of creative class. Basic Books, New York, NY, 2002)-to produce a knowledge good that is traded. The other sector uses physical and social capital to produce a good that is not traded. Second, we provide the first formal analysis of the creative capital accumulation decision faced by individuals in this regional economy and we compute the optimal length of time during which creative capital is accumulated. Next, we determine the relative return to creative capital and we use this return to conduct comparative statics exercises with our model's four parameters. Finally, we show that for a given interest rate, the relative price of the nontraded good is higher in regional economies where more creative capital is accumulated.
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