The Impacts of Fees and Taxes on Choices of Development Timing and Capital Intensity
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This article compares the effects of various fiscal policies on choices of
development timing and capital intensity when rents on housing follow geometric
Brownian motion with those when rents follow arithmetic Brownian motion. These
policy instruments include fees on capital, housing, and land, and taxes on urban
income, and properties both before and after development. Regardless of the motion
of rents, when one choice is fixed, the effects of these policy instruments on the other
choice are qualitatively the same. When the two choices are determined endogenously,
although these policy instruments exhibit the same qualitative effect on the choice of
development timing, they may exhibit different effects on the choice of capital intensity
if rents on housing follow different types of motions.