Curbing Excess Sprawl with Congestion Tolls and Urban Boundaries

Using an urban land use model in which jobs and residences are spatially dispersed and mixed, we treat the general equilibrium of land, labor and product markets and the trade-off between labor supply, commuting and discretionary travel. We show that the decentralization of population and of jobs shortens commutes while increasing the number of discretionary trips and the time spent on them. Un-priced traffic congestion causes an excess urban sprawl reflected in an average personal daily travel time 13% or 8 minutes too long. Efficiency gains that curb this excess sprawl come from congestion tolls on traffic. To get the same travel improvement, a Portland-style urban boundary would directly limit urban size by a huge greenbelt. This entails a deadweight loss almost 70 times the efficiency gains from tolls. Urban boundaries can be efficient if urban workers greatly value the greenbelt or the urban compactness it creates as a pure public good. Nevertheless, such efficient boundaries increase congestion and tolls are still needed to reduce travel times.