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Expansionary zoning and the strategic behaviour of local governments

Miriam Hortas-Rico () and Miguel Gómez ()

Regional Studies, 2020, vol. 54, issue 3, 388-402

Abstract: This paper analyses the extent to which local land supply is the result of strategic interaction among nearby local governments. In a setting of limited tax instruments to raise revenues and interjurisdictional competition for mobile residents, municipal authorities are provided with the economic incentives to convert land from rural to urban uses, hence promoting urban growth. Using data on a large sample of Spanish municipalities for the period 2003–11 and a modified Cournot-style competition model, we report evidence in support of this hypothesis. The results suggest that local incumbents do not make policy decisions in isolation, and reaction functions arise because the mobile tax base reacts to the regulatory measures that modify land uses in each municipality.

Date: 2020
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DOI: 10.1080/00343404.2019.1634801

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Handle: RePEc:taf:regstd:v:54:y:2020:i:3:p:388-402