Agglomeration externalities and urban growth controls

Wouter Vermeulen ()

Journal of Economic Geography, 2017, vol. 17, issue 1, 59-94

Abstract: How can land use policy enhance the exploitation of external urban agglomeration economies? In a system of heterogeneous cities, we show that the second-best land use policy constrains city creation, while subsidizing (taxing) urban development in cities in which the marginal-average productivity gap is above (below) average. This policy cannot be decentralized to competitive urban developers, yet competition among urban developers does result in a lower-best outcome in which development is subsidized everywhere if city creation is unconstrained. A numerical application indicates that a substantial share of the welfare gains from implementing a second-best land use policy may then still be attained, although the aggregate amount of land in urban use is considerably larger.

Keywords: Agglomeration externalities; growth controls; second-best policy; urban sprawl; systems of cities (search for similar items in EconPapers)
JEL-codes: R12 R13 R52 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Working Paper: Agglomeration Externalities and Urban Growth Controls (2011)
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