WELFARE GAINS FROM REMOVING LAND-USE DISTORTIONS - AN ANALYSIS OF URBAN CHANGE IN POSTAPARTHEID SOUTH-AFRICA

This paper analyzes the effect of eliminating apartheid land-use restr ictions in South Africa using a simplified version of the standard urb an model. When freedom of residential location is granted, black towns hip residents compete for land near the center of the core cities, pus hing white residents to less accessible locations. Black consumption r ises and white consumption falls in response, but the increase in tota l land rent is sufficient to compensate for white losses. The resultin g aggregate welfare gain is a natural consequence of eliminating the d istortion imposed by the apartheid system. These conclusions are robus t to a number of modifications of the basic model.