"Vacant Land and the Role of Government Intervention"

Hans-Werner Sinn

Regional Science and Urban Economics 16, 1986, S. 353-385.


The paper presents a perfect foresight intertemporal equilibrium model of the land, rental and housing markets in order to explore and evaluate the causes of vacant land. lt studies a number of taxes including a capital gains tax, a capital income tax, a tax on the value of vacant land and a tax on land transactions. The basic result is that vacant land is not in itself a sign of market inefficiency. On the one hand, it may be an efficiency requirement if housing investment is irreversible and rental demand is growing sufficiently fast. On the other hand, at least a part of it is likely to be a distortion resulting from the asymmetries of capital income taxation.