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Pollution and land use: Optimum and decentralization

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  • Arnott, Richard
  • Hochman, Oded
  • Rausser, Gordon C.

Abstract

Space matters not only by inducing transport costs but also by mitigating pollution damages. Previous models of pollution either disregard space altogether or presume a predetermined separation between polluters and pollutees. In our model, workers commute to factories and all possible location combinations of housing and industry around a circle are considered. We investigate optimal allocations and their decentralization. The tradeoff between pollution costs and transport costs, along with the non-convexity inherent in spatial models, results in multiple local optima. With negligible commuting costs, the optimal allocation has one industrial and one residential zone. As commuting costs increase, the number of zones of each type increases until an allocation is reached in which housing and industry are completely intermixed. The global optimal allocation is decentralized by imposing a tax per unit area of industrial land at a particular location equal to the total damage caused by the pollution from that unit area, evaluated at the global optimum. Location-specific Pigouvian taxes by themselves are inefficient.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 64 (2008)
Issue (Month): 2 (September)
Pages: 390-407

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Handle: RePEc:eee:juecon:v:64:y:2008:i:2:p:390-407

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Web page: http://www.elsevier.com/locate/inca/622905

Related research

Keywords: Pollution Space Zoning Pigouvian taxes Land use Non-convexities Regulation Agglomeration;

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References

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  1. Henderson, J Vernon, 1996. "Effects of Air Quality Regulation," American Economic Review, American Economic Association, vol. 86(4), pages 789-813, September.
  2. McCluskey, Jill Jennifer & Rausser, Gordon C, 2000. "Hazardous waste sites and housing appreciation rates," CUDARE Working Paper Series 906, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
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  11. Arnott, Richard, 1979. "Optimal city size in a spatial economy," Journal of Urban Economics, Elsevier, vol. 6(1), pages 65-89, January.
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  13. Hochman, Oded, 1981. "Land rents, optimal taxation and local fiscal independence in an economy with local public goods," Journal of Public Economics, Elsevier, vol. 15(1), pages 59-85, February.
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Citations

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Cited by:
  1. Kyriakopoulou, Efthymia & Xepapadeas, Anastasios, 2013. "Spatial Policies and Land Use Patterns: Optimal and market allocations," Working Papers in Economics 566, University of Gothenburg, Department of Economics.
  2. Anastasios Xepapadeas & Efthymia Kyriakopoulou, . "Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations," DEOS Working Papers 1016, Athens University of Economics and Business.
  3. Hochman, Oded, 2011. "Efficient agglomeration of spatial clubs," Journal of Urban Economics, Elsevier, vol. 69(1), pages 118-135, January.
  4. Efthymia Kyriakopoulou & Anastasios Xepapadeas, 2011. "Spatial location decisions under environmental policy and housing externalities," Environmental Economics and Policy Studies, Society for Environmental Economics and Policy Studies - SEEPS, vol. 13(3), pages 195-217, September.
  5. Kyriakopoulou, Efthymia & Xepapadeas, Anastasios, 2013. "Environmental policy, first nature advantage and the emergence of economic clusters," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 101-116.
  6. Regnier Camille & Sophie Legras, 2014. "Urban Structure and Environmental Externalities," INRA UMR CESAER Working Papers 2014/2, INRA UMR CESAER, Centre d'’Economie et Sociologie appliquées à l'’Agriculture et aux Espaces Ruraux.

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