ECONOMICS UNIQUENESS

INVESTING IN THE SENSE OF PLACE ■ 19
Urban upgrading projects typically include several self-standing components,
most of which require considerable investments for their implementation. Th e
most common of those components is related to infrastructure development, for
instance, in the form of improved access to water and sanitation or paved streets.
Spending on this component is identifi ed as U. While in some cases the individual
benefi ciaries of this component can be identifi ed (such as households gaining
improved sanitation or owning property on a newly paved street), for simplicity
spending in urban infrastructure is treated here as a local public good, benefi tting
the area of intervention as a whole. It would be straightforward to distinguish
between private and public gains, but that would not add much to the analysis
and would make notation heavier.
A second component involves transferring resources to the local community,
in the form of grants or loans to improve their dwellings or support their livelihoods.
Th e net aggregate transfer to the community is identifi ed as T. Th e allocation
and use of resources under this component is at times managed by grassroots
organizations involving the local population, in the form of community-driven
development. Community participation of this sort may enhance the social capital
of the intervention area, so that there is potentially a public good dimension
to this second component. But again, for simplicity it is preferable to treat these
grants and loans as transfers as if they accrued entirely to their ultimate benefi -
ciaries, which are individual households.
Less conventional urban upgrading projects would include a third component;
namely, the renovation of buildings or dwellings with cultural value. In the
case of narrowly defi ned heritage projects, the renovation eff ort would focus on
landmarks exclusively. But in the general case, renovation spending could also
target dwellings and buildings with character, even if their intrinsic architectural
or cultural value is not extraordinary. Aggregate spending on renovation is
labeled R. Much the same as urban infrastructure, this component can be seen as
a local public good, benefi tting to various degrees all the inhabitants of the intervention
area. An urban upgrading project will be said to have a cultural component
if R > 0.
Finally, urban upgrading projects paying attention to the cultural aspects of
the intervention may also include urban and architectural regulations, covering
aspects such as construction heights, appearance of buildings, lighting and
outdoor advertising standards, mobility, and the like. Th ese regulations are
more stringent than those applying to the intervention area before the implementation
of the project and to surrounding areas aft erward. For simplicity, it is
assumed that there are no project costs associated with the setting of the standards.
But those standards do aff ect the costs and benefi ts of the various investment
choices faced by the local population and outside developers. For instance,
lower authorized construction heights may make the option of demolishing a