Expansionary zoning and the strategic behavior of local governments. Evidence from Spain

Miriam Hortas-Rico and Miguel Gómez-Antonio

No eee2017-05, Studies on the Spanish Economy from FEDEA

Abstract: This paper analyzes the extent to which local land supply is the result of strategic interaction among 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 Spanish municipalities from 2003 to 2011, we report evidence in support of this hypothesis. The results suggest that local incumbents do not make policy decisions in isolation: reaction functions arise because the mobile tax base reacts to the regulatory measures that modify land uses in the municipality, leading to an inneficient excess of land devoted to urban development.

Date: 2017-02
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