Regulation versus Taxation

Georg Hirte () and Hyok-Joo Rhee

No 05/16, CEPIE Working Papers from Technische Universität Dresden, Center of Public and International Economics (CEPIE)

Abstract: We examine the working mechanisms and efficiencies of zoning (regulation of floor area ratios and land-use types) and fiscal instruments (tolls, property taxes, and income transfer), and extend the instrument choice theory to include the congestion of road and nonroad infrastructure. We show that in the spatial model with heterogeneous households the standard first-best instruments do not work because they trigger distortion of spatial allocations. In addition, because of the household heterogeneity and real estate market distortions, zoning could be less efficient than, as efficient as, or more efficient than pricing instruments. However, when the zoning enacted deviates from the optimum, zoning not only becomes inferior to congestion charges but is also likely to reduce welfare. In addition, we provide a global platform that extends the instrument choice theory of pollution control to include various types of externalities and a wide range of discrete policy deviations for any reasons beyond cost–benefit uncertainties.

Keywords: infrastructure congestion; zoning; road tolls; property tax; instrument choice; heterogeneity; Infrastruktur; Verkehrsstau; Zoning; Maut; Grundsteuer; Heterogenität (search for similar items in EconPapers)
JEL-codes: H21 R52 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-pbe, nep-pub, nep-reg, nep-tre and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tudcep:0516

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