| Recent research in the Harris-Todaro (HT) tradition has added an important new element to the model by incorporating an urban land market. Brueckner and Zenou (1999) argue that a model where migration equalizes expected wages between city and countryside may overlook another important force that equilibrates the process of rural-urban migration. This force is the migration-induced rise in the urban cost of living, which occurs principally through escalation of urban land rents as the city population expands. Land-rent escalation, which tends to limit rural-urban migration, provides an important additional force that may help determine city sizes in developing countries. This thesis provides a simpler alternative to BZ's analysis by assuming that urban residents smooth their income as they cycle between formal and informal employment.; Second part of thesis explores the connection between the property tax and urban sprawl. While the tax's depressing effect on improvements reduces population density, spurring the spatial expansion of cities, a countervailing effect from lower dwelling sizes may dominate, raising densities and making cities smaller. The analysis shows that this latter outcome is guaranteed under CES preferences when the elasticity of substitution σ, is high. But numerical results for the Leontief case (where σ is zero) suggest that the property tax encourages urban sprawl when substitution between housing and other goods is low. Thus, the distortions generated by the property tax may include inefficient spatial expansion of cities. |
