Question

What are territorial collective goods, and what is their effect?

Answer 1

Territorial collective goods are those goods which can be used or the benefits from which can be utilized within in a particular geographic area or territory. These goods have a significant impact in a particular geographic territory only in which they are present. Also, this geographic territory is much smaller in comparison to the entire earth and even if the territory is large, entry into and out of territory can be controlled. The benefits of such goods can be utilized by people located in that particular territory. These goods have positive value for the people living in that particular geographic territory.

These goods have a positive effect on the demand to be located within the geographic territory in which they are present. Due to the presence of such goods, the demand to be located in that particular territory increases which ultimately results in an increase in the amount of ground rent that the persons would like to pay for this particular territory. It is not the presence of a single good that is present within the geographic territory that leads to increase in ground rent but it is due to presence of wide range of goods that are available within the geographic territory that convinces people to pay a higher ground rent. For example, people are willing to locate themselves in cities because of the various facilities that they can avail by living in cities & therefore, the availability of these facilities convinces them to pay a higher ground rent.