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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

General Discussion of “Urban Competition”

David Albouy, university of illinois

Brueckner’s “Bi-spanning” Bridges




Brueckner s bispanning 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
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
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
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…

New homes for chicago program
“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
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
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: 37,000 Arkansas: 30,000

Agrawal hoyt bi taxed cities
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!