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Informal housing, spatial structure, and city compactness
Author(s) -
Posada Héctor M.
Publication year - 2018
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/jors.12387
Subject(s) - renting , productivity , unit (ring theory) , informal sector , government (linguistics) , business , land use , local government , central business district , economic interventionism , subdivision , economics , agricultural economics , economic growth , geography , transport engineering , civil engineering , mathematics , political science , linguistics , philosophy , mathematics education , archaeology , politics , law , engineering
This paper develops a monocentric city model with a formal and an informal sector in the housing industry. While formal developers build houses renting land from landowners, informal developers use land for free. However, informal developers must incur defensive expenditures to avoid government intervention. In equilibrium, at any distance of the central business district (CBD), informal developers use land until the value of the marginal productivity of land equals the defensive expenditures per unit of land. The model shows the land allocated to produce short informal (tall formal) buildings increases (decreases) with distance to the CBD. Thus, the model introduces a new source of spatial variation of building height. The model also shows that a higher level of informal housing increases the spatial size of a city and reduces the height of its buildings.