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The problem of land value betterment: a simplified agent-based test

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Abstract

In this paper, we employ behaviour-driven cellular automata as a simplified agent-based modelling approach to test the seminal Coase theorem, with a policy focus on the land value betterment effect of urban infrastructure provision. Four prototypical development regimes are identified from international practice: (1) the private developer-oriented Metroland model dating back to the suburbanisation of London in the nineteenth century England; (2) the private household-led special district model, which can be observed in many contemporary US suburbs; (3) the public planning-regulated model, as featured in most post-war European welfare state countries, including the present-day UK; (4) the public state-as-developer model, which characterises what has been taking place in China. A repeated analysis of variance (ANOVA) based on the results of a large number of cellular automata simulations suggests no significant difference between models I and II in terms of their welfare outcomes measured by aggregate utility. However, models III and IV are both found to generate significantly less welfare than models I and II, under strict assumptions of zero transaction costs, perfect information, perfect capital markets and perfect competition.

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Notes

  1. On the other hand, all the land in Chinese countryside is owned by rural collectives as per the same article of the Constitution.

  2. Stigler’s interpretation is not necessarily true to Coase’s original insights—see Coase’s (1992) response to Stigler.

  3. City-states as an urban form have existed since ancient Greek, for example Athens and Sparta (see eg Fine 1983).

  4. In theory, a superpower computer can conduct a sufficiently large number of automations which would exhaust all of the possible combinational outcomes. In practice, we just need to test a sample of the underlying population to infer the general differences.

  5. For example, see Murphy et al. (1993).

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Acknowledgments

We are grateful to the financial support (grant number: CIUC2013002) by the China Intelligent Urbanization Co-Creation Center for High Density Region based at Tongji University in Shanghai, China. We also thank Professor Hui Wang for organising our conference trip to Hangzhou in August 2014 to present an earlier version of this paper at Zhejiang University’s Department of Land Management.

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Correspondence to Yiming Wang.

Appendix: A flowchart illustrating the modelling procedures

Appendix: A flowchart illustrating the modelling procedures

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Wang, Y., Baddeley, M. The problem of land value betterment: a simplified agent-based test. Ann Reg Sci 57, 413–436 (2016). https://doi.org/10.1007/s00168-015-0675-z

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