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Spatial Policies and Land Use Patterns: Optimal and market allocations

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  • Kyriakopoulou, Efthymia

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Xepapadeas, Anastasios

    ()
    (Dept of International and European Economic Studies, Athens University of Economics and Business)

Abstract

Environmental conditions and pollution levels have been proven to affect firms' and households’location decisions in various ways. In this paper, we study the optimal and equilibrium distribution of industrial and residential land in a given region. Industries produce a single good using land and labor and generate emissions of a pollutant, and households consume goods and residential land and dislike pollution. The trade-off between the agglomeration and dispersion forces, in the form of industrial pollution, environmental policy, production externalities, and commuting costs, determines the emergence of industrial and residential clusters across space. We also show that the joint implementation of a site-specific environmental tax and a site-specific labor subsidy can reproduce the optimum as an equilibrium outcome.

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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 566.

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Length: 41 pages
Date of creation: 22 May 2013
Date of revision:
Handle: RePEc:hhs:gunwpe:0566

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Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Keywords: Agglomeration; land use; spatial policies; pollution; environmental tax; labor subsidy;

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  1. Robert E. Lucas & Esteban Rossi-Hansberg, 2002. "On the Internal Structure of Cities," Econometrica, Econometric Society, vol. 70(4), pages 1445-1476, July.
  2. Bruvoll, Annegrete & Glomsrod, Solveig & Vennemo, Haakon, 1999. "Environmental drag: evidence from Norway," Ecological Economics, Elsevier, vol. 30(2), pages 235-249, August.
  3. Oded Hochman & Gordon Rausser & Richard Arnott, 2008. "Pollution and Land Use: Optimum and Decentralization," Working Papers 200805, University of California at Riverside, Department of Economics, revised Mar 2008.
  4. Henderson, J. V., 1977. "Externalities in a spatial context : The case of air pollution," Journal of Public Economics, Elsevier, vol. 7(1), pages 89-110, February.
  5. Roberton C. Williams, 2000. "Environmental Tax Interactions When Pollution Affects Health or Productivity," NBER Working Papers 8049, National Bureau of Economic Research, Inc.
  6. Carlino, Gerald A. & Chatterjee, Satyajit & Hunt, Robert M., 2007. "Urban density and the rate of invention," Journal of Urban Economics, Elsevier, vol. 61(3), pages 389-419, May.
  7. Esteban Rossi-Hansberg, 2004. "Optimal Urban Land Use and Zoning," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 69-106, January.
  8. 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.
  9. Robert E. Lucas, Jr., 2001. "Externalities and Cities," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(2), pages 245-274, April.
  10. Tietenberg, T. H., 1974. "Derived decision rules for pollution control in a general equilibrium space economy," Journal of Environmental Economics and Management, Elsevier, vol. 1(1), pages 3-16, May.
  11. Bottazzi, Laura & Peri, Giovanni, 2003. "Innovation and spillovers in regions: Evidence from European patent data," European Economic Review, Elsevier, vol. 47(4), pages 687-710, August.
  12. Charles D. Kolstad, 1986. "Empirical Properties of Economic Incentives and Command-and-Control Regulations for Air Pollution Control," Land Economics, University of Wisconsin Press, vol. 62(3), pages 250-268.
  13. Papageorgiou, Yorgo Y & Smith, Terrence R, 1983. "Agglomeration as Local Instability of Spatially Uniform Steady-States," Econometrica, Econometric Society, vol. 51(4), pages 1109-19, July.
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