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General Discussion of “Urban Competition”. David Albouy, university of illinois. Brueckner’s “Bi-spanning” Bridges. Suburbs. Midcity. Central. Brueckner’s Bispanning Bridges. Advanced application of the “self-financing theorem”

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General Discussion of “Urban Competition”

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General Discussion of “Urban Competition”

David Albouy, university of illinois

Brueckner’s “Bi-spanning” Bridges





  • Advanced application of the “self-financing theorem”

    • Constant returns in building capacity to alleviate congestion

    • Can apply to an unbounded number of bridges.

  • Monopoly pricing?

    • If midcity owned the suburban bridge

    • If central city owned either

    • Benefits ruled out by budget balance condition: but could be passed on with lump-sum transfers

  • Could the midcity bridge price discriminate?

    • Different fees to suburban residents

    • Don’t suburban residents create other externalities going through midcity?

  • Sequential equilibrium

    • What if the suburbs developed later?

    • Midcity-central bridge too small: should charge more, until new one built.

3 “Jurisdictions”:The Ambassador Bridge

U.S., Canada, and Private

  • Finished in 1929. 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 annually

    • Long wait times at border crossings

  • 25% of U.S. Canada merchandise passes through

  • Privately owned by Manuel “Matty” Moroun

    • Through Detroit International Bridge Company

    • Sells duty free gas at only a slight discount.

  • Company held in contempt for failing to make access improvements

  • Getting competition from the New International Trade Crossing

    • To be paid for entirely by Canada (with tolls)

    • Held up by Moroun legal and political maneuvering

Land use in McMillen’s former suburb

Napierville, IL

Other kinds of externalities across state borders

Primm, NV

(formerly “State Line”)

Are discontinuous policies efficient?

Breakdown of Tiebout: space matters!

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 jackpot

By 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.

Jacob-McMillen Borders

  • Is there a more specific way of modeling the behavioral response?

    • Changes in quantity relative to changes in price.

    • Transportation costs

    • More to look at than densities and prices (although those are key)

  • What are the nature of the externalities?

    • Aesthetic, pollution, moral

    • Could make better sense of the policies and repsonses

  • When are the border effects stronger?

    • Stronger local governments

  • Is zoning as efficient as a tax or impact fee system?


Rep. Luis Gutierrez

4th Congressional District (1993-)

Alderman of 26thward of (1986-1992)

*Wicker Park/Bucktown developed rapidly

Will soon be running for Chicago mayor…

Urban development and political externalities

“New Homes for Chicago” program

  • Modular housing very affordable

  • Angers local building unions

  • Some think its ugly (surprise)

Gas cost vs. time cost of commuting

  • Typical commuter drives at 20 miles per hour and gets 20 miles per gallon

    • Each mile costs 0.05 gallons and 0.05 hours

  • The 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 gas

      • 2.5 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 more

    • Marginal negative externalities from driving (accidents, pollution, congestion): ~15 to 75 cents/mile

    • All the more reason to tax gas more to replace income tax

Reciprocity Agreements

No: Portland,or and Vancouver, wa

YES: Philadelphia, pa & CAMDEN, NJ

Pennsylvania: 3% income; 8% sales (Philadelphia + 1% payroll)

New Jersey: 5% income; 7% sales

  • Washington: no income tax; 9% sales tax

  • Oregon: no sales tax; 9% income tax

Income Tax

Texas: none

Arkansas side: received an exemption in 1970

Sales Tax

Texarkana, TX: 8.25%

Texarkana, AR: 12.5%


Texas: 37,000Arkansas: 30,000

Agrawal Hoyt Bi-taxed Cities

  • Great use of data

    • Always wanted to see this tested

  • What about benefits of living in each state?

    • Taxes come with benefits

    • Or 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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