This paper analyzes the effect of speculation in land at the urban periphery on resource allocation. A simple dynamic model of residential location is developed and its properties are analyzed both qualitatively and numerically. One finding is that social costs in a typical city are increased by about three to seven per cent as a result of speculative increases in the value of idle land. Appropriate tax policies are studied.
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Dennis R. Capozza (1976) studied this question.
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