ECONOMICS UNIQUENESS

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42 ■ THE <strong>ECONOMICS</strong> OF <strong>UNIQUENESS</strong> is to the architectural value of its buildings. Th at sense of place can be lost if outside investors move in fi rst and chase local residents away thanks to their better understanding and deeper pockets. Put diff erently, for the same level of private spending I*, keeping local residents in place ensures a higher heritage value ΔH than bringing in outside investors does. Community consultations can be used to provide information to local residents on the windfall they could make by sticking to their property (that is, the option value of waiting before selling). However, the livelihood component of standard urban upgrading projects is usually focused on helping local residents secure better earnings, rather than on helping them maximize the value of their property. Similarly, social safeguards aim at ensuring that local residents whose property is reclaimed for the project get compensated at “fair” market prices. But those are the prices prevailing before the project is implemented and windfall gains materialize. “Fairness” does not typically involve compensating for those windfall gains. Th e numerous demonstrations and protests by local owners of expropriated properties, as the implications of urban upgrading projects become apparent, suggest that this is not merely a hypothetical concern. Conclusion Unfortunately, there are no obvious alternatives to the standard practice. In a world of perfect information, local residents could be off ered access to fi nance for an amount equivalent to I i *, or they could be compensated for their properties at the going market price plus P i *. But there is usually too much uncertainty on the outcome of the project for this to be a workable alternative. Even very competent project teams would have a hard time deciding what the “right” levels of I i * and P i * are in a specifi c context. In light of such uncertainty, any property transaction at an early stage of the project is bound to result in serious regret by one of the two parties involved. Th is likelihood suggests that, in spite of the emphasis put by urban upgrading projects on individual property rights, facilitating property transactions at an early stage may not be socially desirable. An alternative to address this fundamental uncertainty is to shift the risk from local residents to urban authorities. Th is is the equivalent of transforming those residents into shareholders of the urban upgrading project, with the value of their property V i as their equity in it. Like shareholders, local residents participating in the project would have a say on the broader strategy for the area of intervention. Once the strategy is approved, however, decisions would be in the hands of the project managers. Th is arrangement has similarities with the consultations typically preceding the implementation of urban upgrading projects, but it also puts more constraints on the project.
INVESTING IN THE SENSE OF PLACE ■ 43 A local resident endorsing the project would accept the implications for his or her own property. Investments in renovation and new construction could still be conducted in a decentralized way, but the work done would need to follow the architectural standards set by the project. If the resident were to sell his or her property, the new buyers would be bound by the same standards, as in the case of preservation easements, but the resident would be able to choose if and when to sell the property, which means that he or she would be able to fully appropriate the capital gain ΔV i . Th is amounts to keeping an option to claim deferred compensation on the property, but only at a time when the uncertainty about the consequences of the project has been removed. Note 1. Th e notion of culture as an asset can be traced to Th rosby 2001, but the idea that cultural amenities have an economic impact has been part of urban analyses for much longer. References Brueckner, J. K., J. F. Th isse, and Y. Zenou. 1999. “Why Is Central Paris Rich and Downtown Detroit Poor?” European Economic Review 43: 91–107. Mason, R. 2005. Economics and Historic Preservation: A Guide and Review of the Literature. Washington, DC: Th e Brookings Institution. Navrud, S., and R. C. Ready, eds. 2002. Valuing Cultural Heritage: Applying Environmental Valuation Techniques to Historic Buildings, Monuments and Artifacts. Cheltenham: Edward Elgar. Pagiola, S. 1996. Economic Analysis of Investments in Cultural Heritage: Insights from Environmental Economics. Washington, DC: World Bank. Riganti, P., and P. Nijkamp. 2007. “Benefi t Transfer of Cultural Values: Lessons from Environmental Economics.” Journal of Environmental Policy and Law 2: 135–148. Rizzo, I., and D. Th rosby. 2006. “Cultural Heritage: Economic Analysis and Public Policy.” In Handbook of the Economics of Art and Culture Vol. 1, ed. V. Ginsburgh and D. Th rosby, 984–1016. Amsterdam: Elsevier/North Holland. Snowball, J. D. 2008. Measuring the Value of Culture: Methods and Examples in Cultural Economics. Berlin: Springer Verlag. Th rosby, D. 2001. Economics and Culture. Cambridge: Cambridge University Press.
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Public Disclosure Authorized Public
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Th e Urban Development Series discu
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© 2012 International Bank for Reco
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vi ■ CONTENTS Project Appraisal i
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viii ■ CONTENTS Appendix II: Addi
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x ■ CONTENTS 7.4 Tourism Is Coupl
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xii ■ CONTENTS 9.1 How to Organiz
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Exegi monumentum aere perennius reg
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ACKNOWLEDGMENTS ■ xvii Cultural O
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xx ■ OVERVIEW What Are the Object
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92 ■ THE ECONOMICS OF UNIQUENESS
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TABLE 4.1 Overview of Hedonic Price
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FIGURE 6.5 Quito and Oaxaca: Timeli
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TABLE 6.5 Quito Investments in the
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7 UNESCO World Heritage List, Touri
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UNESCO WORLD HERITAGE LIST, TOURISM
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TABLE 7.1 Regional and Historical D
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TABLE 7.3 Benchmark Regressions Fir
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TABLE 7.10 Robustness to Using Diff
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8 Financial Mechanisms for Historic
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FINANCIAL MECHANISMS FOR HISTORIC C
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BOX 8.2 FINANCIAL MECHANISMS FOR HI
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BOX 8.3 FINANCIAL MECHANISMS FOR HI
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TABLE 8.1 Local Financial Tools Use
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FIGURE 8.4 Brownfi eld Concession T
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Boxes, fi gures, maps, notes, and t
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China. See also specifi c cities ac
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public sector role, 222-26, 223b, 2
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Kraay, A., 198 Kratz, C. G., 96 L l
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Pine Ridge Reservation (U.S.), 238
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Shaoxing, China, local residents re
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urban economics appraisal approach,
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ECO-AUDIT Environmental Benefits St
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ECONOMICS UNIQUENESS

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