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The Effect of Tax Laws and the
Cost of Capital on the Size of Newly Constructed Strip Shopping Centers
Authors: Terrence
M. Clauretie and Melvin
H. Jameson
Start Page: 79
End Page: 96
Volume: 24
Issue Number: 01
Year: 2002
Publication: Journal of Real Estate Research
Abstract: While the impact of tax policy and other economic variables on the
total amount of construction has been widely studied, this paper proposes
that these variables also affect the size distribution of the properties
constructed. The basic intuition is that there is a lower bound to the
economically feasible size of a project due to economies of scale in
construction. Events favorable to construction, such as lower interest
rates and more favorable tax treatment, relax this lower bound permitting
the construction of smaller properties. We test this proposition using
data on newly constructed neighborhood shopping centers in Clark County,
Nevada during the period from 1971 to 1999.
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