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Second-best urban tolls in a monocentric city with housing market regulations

Ioannis Tikoudis, Erik Verhoef () and Jos van Ommeren ()

Transportation Research Part B: Methodological, 2018, vol. 117, issue PA, 342-359

Abstract: This paper investigates second-best congestion pricing in a monocentric city characterized by distortionary regulations in the housing market (building height restrictions, no-development areas and property taxation). We demonstrate that the welfare gain of a Pigouvian tax may first fall and then increase as building height restrictions become more stringent. For example, a Pigouvian toll imposed in a city without restrictions may produce up to 40% larger welfare gains than Pigouvian tolling in a city with a mild, uniform in space, floor-to-area ratio restriction. In the presence of a tax-induced distortion, deviations of the Pigouvian toll can lead to non-negligible welfare gains. We discuss the important policy implications of the above findings.

Keywords: Road pricing; Building height restrictions; Floor-to-area ratio regulations; No-development areas; Property tax; Monocentric city; Cost-benefit analysis (search for similar items in EconPapers)
JEL-codes: R48 R52 R13 H21 H23 D61 (search for similar items in EconPapers)
Date: 2018
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Working Paper: Second-best Urban Tolls in a Monocentric City with Housing Market Regulations (2015) Downloads
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