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Is there a double-dividend from anti-sprawl policies?

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  • Bento, Antonio M.
  • Franco, Sofia F.
  • Kaffine, Daniel

Abstract

This paper examines the welfare effects of anti-sprawl policies, such as development tax, in a simple spatial explicit urban model with two market failures - urban decline at the city core and underprovision of open space amenities at the urban fringe - and pre-existing distortionary property tax, used to fund public services and improvements to mitigate urban decline. Consistent with prior double-dividend literature, there is a tax interaction effect that occurs between the development tax and the pre-existing property tax. However, there are two fundamental differences between the tax interaction effect identified here and that of prior literature. Ours one has two components: First, there is a cost-side tax interaction effect that is 'spatially' concentrated at the urban fringe, as only agents at the urban fringe alter their behavior in response to the development tax. Second, there is also a benefit-side tax interaction effect, as increases in open space at the urban fringe are capitalized into housing prices throughout the city. In contrast to prior literature, we find that the empirical importance of the combined tax interaction effect is of substantially less importance and, as a consequence, the likelihood of a 'double-dividend' is higher than in prior studies. Further, we show that the development tax should be part of the local tax system, even in the absence of open space benefits.

Suggested Citation

  • Bento, Antonio M. & Franco, Sofia F. & Kaffine, Daniel, 2011. "Is there a double-dividend from anti-sprawl policies?," Journal of Environmental Economics and Management, Elsevier, vol. 61(2), pages 135-152, March.
  • Handle: RePEc:eee:jeeman:v:61:y:2011:i:2:p:135-152
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    References listed on IDEAS

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    Cited by:

    1. Kalkuhl, Matthias & Fernandez Milan, Blanca & Schwerhoff, Gregor & Jakob, Michael & Hahnen, Maren & Creutzig, Felix, 2017. "Fiscal Instruments for Sustainable Development: The Case of Land Taxes," MPRA Paper 78652, University Library of Munich, Germany.
    2. Ioannis Tikoudis, 2015. "Congestion Pricing in Urban Polycentric Networks with Distorted Labor Markets: A Spatial General Equilibrium Model for the Area Randstad," Tinbergen Institute Discussion Papers 15-085/VIII, Tinbergen Institute, revised 26 Oct 2017.
    3. Tikoudis, Ioannis & Verhoef, Erik T. & van Ommeren, Jos N., 2015. "On revenue recycling and the welfare effects of second-best congestion pricing in a monocentric city," Journal of Urban Economics, Elsevier, vol. 89(C), pages 32-47.
    4. Extension Faculty & Staff, 2010. "New York Economic Handbook, 2011," EB Series 121656, Cornell University, Department of Applied Economics and Management.
    5. Ioannis Tikoudis & Erik T. Verhoef & Jos N. van Ommeren, 2015. "Second-best Urban Tolls in a Monocentric City with Housing Market Regulations," Tinbergen Institute Discussion Papers 15-006/VIII, Tinbergen Institute.

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