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FAR regulations and unpriced transport congestion

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  • Pines, David
  • Kono, Tatsuhito
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    Abstract

    Using a fully closed monocentric urban setup with unpriced transport congestion, this paper discusses a second best allocation implemented by spatially-variable excise subsidies, or taxes, on housing and the possibility of replacing it by floor area ratio (FAR) regulations. It turns out that the marginal cost exceeds the demand price (bid rent) of housing close to the city center and is exceeded by it close to the boundary. In both cases, the excess burden of the deviations from marginal cost pricing, either by fiscal or zoning instruments, is the cost of reducing the excess burden of unpriced transport congestion. Efficient deviation from marginal cost pricing requires that any marginal (in terms of the movers' size) residential relocation does not change the aggregate excess burden of both distortions. The present study also shows that FAR optimal regulations render urban growth boundary (UGB) redundant but it cannot always replace the fiscal instruments for achieving the second-best utility.

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    Bibliographic Info

    Article provided by Elsevier in its journal Regional Science and Urban Economics.

    Volume (Year): 42 (2012)
    Issue (Month): 6 ()
    Pages: 931-937

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    Handle: RePEc:eee:regeco:v:42:y:2012:i:6:p:931-937

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    Web page: http://www.elsevier.com/locate/regec

    Related research

    Keywords: FAR regulation; Second-best; Transport congestion;

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    References

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    1. Harberger, Arnold C, 1971. "Three Basic Postulates for Applied Welfare Economics: An Interpretive Essay," Journal of Economic Literature, American Economic Association, vol. 9(3), pages 785-97, September.
    2. Richard Arnott & James G. MacKinnon, 1976. "Market and Shadow Land Rents with Congestion," Working Papers 250, Queen's University, Department of Economics.
    3. Brueckner, Jan K., 1983. "The economics of urban yard space: An "implicit-market" model for housing attributes," Journal of Urban Economics, Elsevier, vol. 13(2), pages 216-234, March.
    4. Fujita,Masahisa, 1989. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521346627, April.
    5. Anas, Alex & Pines, David, 2008. "Anti-sprawl policies in a system of congested cities," Regional Science and Urban Economics, Elsevier, vol. 38(5), pages 408-423, September.
    6. Tatsuhito Kono & Takayuki Kaneko & Hisa Morisugi, 2010. "Necessity of minimum floor area ratio regulation: a second-best policy," The Annals of Regional Science, Springer, vol. 44(3), pages 523-539, June.
    7. Mun, Se-il & Konishi, Ko-ji & Yoshikawa, Kazuhiro, 2003. "Optimal cordon pricing," Journal of Urban Economics, Elsevier, vol. 54(1), pages 21-38, July.
    8. Wheaton, William C., 1998. "Land Use and Density in Cities with Congestion," Journal of Urban Economics, Elsevier, vol. 43(2), pages 258-272, March.
    9. Arnott, Richard J., 1979. "Unpriced transport congestion," Journal of Economic Theory, Elsevier, vol. 21(2), pages 294-316, October.
    10. Kanemoto, Yoshitsugu, 1977. "Cost-benefit analysis and the second best land use for transportation," Journal of Urban Economics, Elsevier, vol. 4(4), pages 483-503, October.
    11. Anas, Alex & Rhee, Hyok-Joo, 2007. "When are urban growth boundaries not second-best policies to congestion tolls?," Journal of Urban Economics, Elsevier, vol. 61(2), pages 263-286, March.
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    Cited by:
    1. Rhee, Hyok-Joo & Yu, Sanggyun & Hirte, Georg, 2014. "Zoning in cities with traffic congestion and agglomeration economies," Regional Science and Urban Economics, Elsevier, vol. 44(C), pages 82-93.

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