Henry George Theorem Assumptions • A single city (in a large world with many cities) • It is located on a line • It Downloadable! Suggested Citation: Suggested Citation. Specifically, we prove that the socially optimal level of the public capital stock can be reached by a land rent tax, provided land is a more important production factor than public capital. What is "Henry George Theorem"? In club theory, too, population size is treated as an endogenous variable. JEL classi cation: H21, H54, Q24 Keywords: land rent tax, public investment, infrastructure, Henry George Theorem, social optimum (Corresponding author) Mercator Research Institute on Global Commons and Cli-mate Change and Technical University . His research interests include state and local fiscal sustainability, urban public finance, and property tax reform. Here, we provide a macroeconomic version of the Henry George Theorem. The Henry George Theorem (HGT), or the golden rule of local public finance, states that, in first-best economies, the fiscal surplus, defined as aggregate land rents minus aggregate losses from increasing returns to scale activities, is zero at optimal city sizes. Here, we provide a macroeconomic version of the Henry George Theorem. The Henry George Theorem states roughly that, if economic activity is efficiently organized over a "large" space, aggregate land rents equal the aggregate losses from the decreasing returns to scale activities. About the Author(s) Jeffrey I. Chapman is Foundation Professor emeritus at the School of Public Affairs at Arizona State University. The Henry George Theorem (HGT) states that, in first-best economies, the fiscal surplus of a city government that finances the Pigouvian subsidies for agglomeration externalities and the costs of local public goods by a 100% tax on land is zero at optimal city sizes. Meaning of "Henry George Theorem" as a finance term. The Henry George Theorem (HGT) states that, in first-best economies, the fiscal surplus of a city government that finances the Pigouvian subsidies for agglomeration externalities and the costs of local public goods by a 100% tax on land is zero at optimal city sizes. The Henry George Theorem. … Localized knowledge spillovers and patent citations: A distance-based approach, with Ryo Nakajima, Ryosuke Okamoto, and Ryuichi Tamura, Review of Economics and Statistics 96(5), 967-985, 2014. It is clearly shown that the Henry George theorem and the capitalization hypothesis are completely different from a theoretical point of view, and that in special case the later might be interpreted as the bridge between the conditions cannot be satisfied simultaneously. Land Value Taxes are levied on the market value of the unimproved land. Request PDF | A New Look at the “Henry George Theorem” | The Henry George Theorem states that the level of total rents in a country is nearly equal to the total costs of government in that area. View Henry George Theorem.pptx from ECLU 3971- at Fordham University. Endogenous fertility and the Henry George Theorem. Amongst the topics, it reproduces the correspondence between Moss and Samuels over a paper by Larry presented at a 2005 meeting of the History of Economics Society, entitled 'The Henry George Theorem and the Entrepreneurial Process: Turning Henry George on his Head', and later published in John Laurent (ed. This chapter offers an interpretation of the Henry George Theorem (HGT) that brings it squarely into the study and analysis of entrepreneurship somewhat loosening its ties to the subfield of urban economics. CESifo Working Paper Series No. Keywords: Land Value Tax, Value Capture, Henry George Theorem . The Henry George theorem, named for 19th century U.S. political economist and activist Henry George, states that under certain conditions, aggregate spending by government on public goods will increase aggregate rent based on land value (land rent) more than that amount, with the benefit of the last marginal investment equaling its cost. Keywords: land rent tax, public investment, Henry George Theorem, social optimum. of the Henry George Theorem from urban economics. Unfortunately, this neat result is likely to hinge on the CES specification which displays two peculiar features. Definition of "Henry George Theorem" in the Financial Dictionary - by Free online English dictionary and encyclopedia. Our result is related to the Henry George Theorem, which states that local land rents equal expenditure on a local public good provided the pop-ulation size is optimal (Arnott and Stiglitz, 1979; Arnott, 2004). Kanemoto, Ohkawara, and Suzuki have tentatively applied the Henry George Theorem to investigate whether Tokyo has too large a population. Financing productive public capital through distortionary taxes typically creates a trade-off: the optimal investment is determined as a compromise between efficiency-enhancing public investment and perturbing market efficiency, but is never socially optimal. The Henry George Theorem, which is originally established in a static model, asserts that the cost of public good provision should be equal to the total revenue of the land rent to achieve the optimal size of population of each region. This paper has two aims. "Models of endogenous demographic change deal with population size as an additional object of the welfare analysis. Stiglitz made early contributions to a theory of public finance stating that an optimal supply of local public goods can be funded entirely through capture of the land rents generated by those goods (when population distributions are optimal). Kanemoto, Ohkawara, and Suzuki have tentatively applied the Henry George Theorem to investigate whether Tokyo has too large a population. Suggested Citation. Linus Mattauch & Jan Siegmeier & Ottmar Edenhofer & Felix Creutzig, 2013. " Mattauch, Linus and Siegmeier, Jan and Edenhofer, Ottmar and Creutzig, Felix, Financing Public Capital Through Land Rent Taxation: A Macroeconomic Henry George Theorem (June 25, 2013). The Henry George Theorem, which is originally established in a static model, asserts that the cost of public good provision should be equal to the total revenue of the land rent to achieve the optimal size of population of each region. The Henry George theorem, named for 19th century U.S. political economist and activist Henry George, states that under certain conditions, aggregate spending by government on public goods will increase aggregate rent based on land value (land rent) more than that amount, with the benefit of the last marginal investment equaling its cost. The condition for full capitalization can rarely be met in reality. This paper has two aims. We explain what the Henry George theorem is, and how it proves that the entire government can be funded with only land value taxes. Authors; Authors and affiliations; Colin Read; Chapter. It holds for both neoclassical and endogenous growth. 180 Downloads; Part of the Great Minds in Finance book series (GMF) Abstract. He can be contacted at jeffrey.chapman@asu.edu. The Henry George Theorem states roughly that, if economic activity is efficiently organized over a “large” space, aggregate land rents equal the aggregate losses from the decreasing returns to scale activities. Schweizer U. JEL Classification: H210, H400, H540, Q240. This article combines the Henry George Theorem (HGT) from Urban Economics and Mohring–Harwitz Theorem (MHT) from Transport Economics to suggest a robust strategy of financing infrastructure in cities. The Henry George Theorem (HGT) states that, in first-best economies, the fiscal surplus of a city government that finances the Pigouvian subsidies for agglomeration externalities and the costs of local public goods by a 100% tax on land is zero at optimal city sizes. ), The Economics of Henry George (2005). Public finance raises revenue from residents, while public expenditures provide the public goods and services these residents enjoy. What does "Henry George Theorem" mean in finance? the Henry George Theorem (henceforth, HGT; Flatters et al., 1974; Stiglitz, 1977; Arnott, 1979; Arnott and Stiglitz, 1979) holds even at the second best where the planner takes the equilibrium prices as given. Henry George theorem. The Henry George theorem, named for 19th century U.S. political economist and activist Henry George, states that under certain conditions, aggregate spending by government on public goods will increase aggregate rent based on land value (land rent) more than that amount, with the benefit of the last marginal investment equaling its cost. And once the government has this whole field of taxation open to it, will it not stealthily nationalize all land by charging land taxes higher than the rent and high enough to make the private possession of land uneconomical? The Henry George Theorem (HGT) states that, in first-best economies, the fiscal surplus of a city government that finances the Pigouvian subsidies for agglomeration externalities and the costs of local public goods by a 100% tax on land is zero at optimal city sizes. Henry George theorem Last updated November 19, 2019. Abstract. Compare the Henry George theorem. Textbooks in public finance and urban economics sometimes contain a topic known as the “Henry George Theorem.” It states that the public revenue that provides for the collective goods of an optimally‑sized community equals the land rent of that community. Financing public capital through land rent taxation: A macroeconomic Henry George Theorem Linus Mattauch 1 , @ , Jan Siegmeier 1 , @ , Ottmar Edenhofer 2 , @ , Felix Creutzig 1 , @ The purpose of this paper is to develop the broad outlines of the general theory of local public goods. The Henry George Theorem. Knut Wicksell had observed a peculiar aspect of public economics. 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