cover image: Private Cities : Implications for Urban Policy in Developing Countries (English)

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Private Cities : Implications for Urban Policy in Developing Countries (English)

10 Feb 2022

Institutional weaknesses limit the capacity of local governments to support efficient urbanization in developing countries. They also lead to the emergence of large developers with the clout to build entire cities. This paper analyzes the urbanization process when local governments are weak and large developers are powerful. Results from a non-cooperative game setting with minimal assumptions show that multiple equilibria can emerge depending on key institutional parameters of the model and the nature of the game, but all of them are inefficient. In this simple setting, increasing the capacity of the local government may not lead to better outcomes, because it may crowd out urban land development by the more effective private investor. Subsidizing the large investor can ensure efficiency, but it makes the rest of society worse off. Selling the rights to the city can be Pareto efficient, but only provided that the price at which the rights are sold are sufficiently high. However, more analytical and empirical work is needed before these analyses can be deemed relevant in practice. Competition among jurisdictions, time consistency challenges, and the social implications of private cities deserve special attention.
rural area urban development regional science urban economics urban land urban policy reaction function business improvement district optimization problem law and economics urban agglomeration international financial institution advanced economy property right allocation of resource private investor cost of land new city concentration of people institutional feature private developer redistribution of resource amount of land minimum level strategic city massachusetts institute of technology urban authority quality of public local government capacity private actor political economy approach urbanization process natural resource economics local business community approach to policy making development research center use of subsidies lump-sum tax urban land development local public good political economy model university press types of city increasing government capacity maximum return political science literature form of privatization social optimum partial equilibrium setting

Authors

Li,Yue - ETIIC, Rama,Martin G.

Disclosure Date
2022/02/10
Disclosure Status
Disclosed
Doc Name
Private Cities : Implications for Urban Policy in Developing Countries
Originating Unit
Off of Sr VP Dev Econ/Chief Econ (DECVP)
Published in
United States of America
Series Name
Policy Research working paper; no. WPS 9936;
Total Volume(s)
1
Unit Owning
Office of the President (EXC)
Version Type
Final
Volume No
1

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