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Discussion Paper Details

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Title: Land use, worker heterogeneity and welfare benefits of public goods

Author(s): Henri L.F. De Groot, Ioulia V. Ossokina and Coen N Teulings

Publication Date: October 2014

Keyword(s): agglomeration, land rates, local public goods, residential sorting and spatial equilibrium

Programme Area(s): Labour Economics

Abstract: We show that investments in public goods change the optimal land use in their vicinity, leading to additional welfare benefits. This occurs through two sorting mechanisms. First, availability of public goods leads to higher population densities. Second, population groups sort according to their preferences for public goods. We develop a structural spatial general equilibrium model that accounts for these effects. The model is estimated using data on transport infrastructure, commuting behavior, land use and land rents for some 3000 ZIP-codes in the Netherlands and for three levels of education. Welfare benefits of investments in public transport infrastructure are shown to differ sharply by workers? educational attainment. Welfare gains from changes in land use account for up to 30% of the total benefits of a transport investment.

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Bibliographic Reference

De Groot, H, Ossokina, I and Teulings, C. 2014. 'Land use, worker heterogeneity and welfare benefits of public goods'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10216