Jun-Hyung Kim and Myoungsub Choi (2017-12), "Economic benefit of renovating deteriorated industrial districts: production function approach," Journal of the Korea Real Estate Analysts Association, 23(4): 53-63.
Abstract
Recently, the Government has funded large-scale renovation projects of deteriorated industrial districts. These projects should follow the Preliminary Feasibility Study (PFS) including the measurement of project’s economic benefit. However, there are not enough studies to identify and analyze the economic benefit of industrial district’s renovation project. Recent PFSs tried to measure the benefit by analyzing the relationship between road and rent, which may cause a controversy since they treat the rent increase as a benefit factor, although it could be a cost factor as for consumers of the industrial district.
This study develops a model based on the production function to estimate the economic benefit of the renovation projects. In particular, it uses micro-level data including the width of the adjacent road for each user to measure the benefit of projects which are mainly focusing on the road expansion. It calculates the project’s benefit of increasing value added by applying the estimated coefficient of the road width to the planned ratio of road expansion. The simulation results for one old industrial areas in Busan show that the benefit reaches 11.7 billion won per year.
Keywords
Renovation of Industrial District, Production Function, Social Infrastructure, Social Overhead Capital (SOC), Economic Benefit, Preliminary Feasibility Study