3 Brueckner’s Bispanning Bridges Advanced application of the “self-financing theorem”Constant returns in building capacity to alleviate congestionCan apply to an unbounded number of bridges.Monopoly pricing?If midcity owned the suburban bridgeIf central city owned eitherBenefits ruled out by budget balance condition: but could be passed on with lump-sum transfersCould the midcity bridge price discriminate?Different fees to suburban residentsDon’t suburban residents create other externalities going through midcity?Sequential equilibriumWhat if the suburbs developed later?Midcity-central bridge too small: should charge more, until new one built.
4 3 “Jurisdictions”: The Ambassador Bridge U.S., Canada, and PrivateFinished in Cost?$1-2 Billion for new bridge.Capacity of four lanes (initially 5)Annual 5M autos at $5 each; 3M commercial vehicles at ~$20 each = $85M annuallyLong wait times at border crossings25% of U.S. Canada merchandise passes throughPrivately owned by Manuel “Matty” MorounThrough Detroit International Bridge CompanySells duty free gas at only a slight discount.Company held in contempt for failing to make access improvementsGetting competition from the New International Trade CrossingTo be paid for entirely by Canada (with tolls)Held up by Moroun legal and political maneuvering
5 Land use in McMillen’s former suburb Napierville, IL
6 Other kinds of externalities across state borders Primm, NV(formerly “State Line”)Are discontinuous policies efficient?Breakdown of Tiebout: space matters!
7 45 minute drive to Las Vegas; (3 hr 15 min to LA) Las Vegans and others started turning out as early as 6 a.m. Thursday at the Primm Valley Lotto Store to claim their spot in line and get a chance to win the largest Mega Millions jackpot in history.$1 ticket for a shot at the record $540 million jackpotBy 11:30 a.m., the line…stretched to more than 1,000 people.Since lottery tickets are not sold in Nevada, the Primm Valley Lotto Store on the California-Nevada border is one of the closest places Las Vegas residents can get a piece of the Mega Millions action.
8 Jacob-McMillen Borders Is there a more specific way of modeling the behavioral response?Changes in quantity relative to changes in price.Transportation costsMore to look at than densities and prices (although those are key)What are the nature of the externalities?Aesthetic, pollution, moralCould make better sense of the policies and repsonsesWhen are the border effects stronger?Stronger local governmentsIs zoning as efficient as a tax or impact fee system?
9 POLITICAL EXTERNALITIES Rep. Luis Gutierrez4th Congressional District (1993-)Alderman of 26th ward of ( )*Wicker Park/Bucktown developed rapidlyWill soon be running for Chicago mayor…
11 “New Homes for Chicago” program Modular housing very affordableAngers local building unionsSome think its ugly (surprise)
12 Gas cost vs. time cost of commuting Typical commuter drives at 20 miles per hour and gets 20 miles per gallonEach mile costs 0.05 gallons and 0.05 hoursThe price of gas is ~ $4/gallon (after tax) and average wages are ~$24/hour (pre tax)A difference of six times!20 cents a mile in gas2.5 cents/mile in tax (1 cent federal, 1.5 cents state)17.5 cents/mile pre-tax$1.20 in labor (social).Typical federal tax is 30 cents (25%)Typical state 12 cents (10% income tax + consumption)Private cost 78 cents MINUS “leisure value of commuting”Taxes on income do much more to raise commuting distances than gas taxes do to lower them!Should effect patterns of commuting far moreMarginal negative externalities from driving (accidents, pollution, congestion): ~15 to 75 cents/mileAll the more reason to tax gas more to replace income tax
14 Reciprocity Agreements No: Portland,or and Vancouver, waYES: Philadelphia, pa & CAMDEN, NJPennsylvania: 3% income; 8% sales (Philadelphia + 1% payroll)New Jersey: 5% income; 7% salesWashington: no income tax; 9% sales taxOregon: no sales tax; 9% income tax
15 Income TaxTexas: noneArkansas side: received an exemption in 1970Sales TaxTexarkana, TX: 8.25%Texarkana, AR: 12.5%PopulationTexas: 37, Arkansas: 30,000
16 Agrawal Hoyt Bi-taxed Cities Great use of dataAlways wanted to see this testedWhat about benefits of living in each state?Taxes come with benefitsOr do some states have fiscal advantages from other sources.What happens when the crossing cost is zero?The crossing cost is potentially endogenous?Brueckner’s bridges!
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