The general equilibrium effects of the industrial property tax: Incidence and excess burden

A model of a small, open central business district (CBD) is used to derive the conditions that define the market-equilibrium and rent-maximizing CBD. It is shown that, in general, the market equilibrium CBD radius differs from the rent-maximizing CBD radius. Land-use zoning will, under certain conditions, increase the aggregate net return on CBD land.     

The general equilibrium effects of congestion externalities

This is the second in a series of three articles on the topic of congestion externalities. We use an urban general-equilibrium model to compute two types of cities: the market-equilibrium city, in which congestion externalities occur, and the optimum city. The optimum city has a more dispersed distribution of employment, and a more concentrated distribution of residence. If the population of the city is fixed, the optimum pricing of transportation generates a per capita welfare gain of $3.78 per week. If the population of the city is endogenous, the internalization of congestion externalities causes the city to grow.     

Perfect substitution in models of the CD market

As the CD market has become an important source of bank funds, it has also become an important market for policymakers to understand. So far, however, model builders have not recognized the significance of assuming that new and old CDs are perfect substitutes. Therefore, they have misused the assumption, discarded relevant data, and ignored evidence inconsistent with perfect substitution. This study shows that models of the CD market should not treat new and old issues as perfect substitutes and that they should not drop observations when market rates are above the Regulation Q ceiling.     

VALUATION AND RISK-ADJUSTED DISCOUNT RATES

There is a continuing controversy as to whether the use of a constant risk adjusted discount rate in capital budgeting decisions implies that the risk of the cash flows increases over time. This paper shows that valuation using these discount rates implies an increasing premium for risk over time but that the increasing premium is due to the net impact of the uncertainty in the cash flow; uncertainty in future market expectations of the cash flow; and changes in the market price of risk. The risk of the cash flow itself need not be increasing over time.     

Toward the Development of an Urban Growth Model that Recognizes the Importance of the Basic Nature of Services

This exploratory research examines selected service sectors of a defined local economy. Using export base theory, preliminary models linking these services sectors to exogenous influences are developed. These models are found to be statistically diverse. Further model-building efforts should recognize the heterogeneous nature of services through disaggregation of services sectors and a thorough consideration of potential exogenous variables.