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Efficient growth boundaries in the presence of population externalities and stochastic rents

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  • Jou, Jyh-Bang

Abstract

This paper investigates how the uncertain demand for urban land affects the design of efficient growth boundaries. Landowners decide both the timing of conversion and the capital intensity when facing a population externality that decreases urban rents. While growth controls induce landowners to convert their land earlier than planned, these controls do not affect their intensity choices. Growth controls also raise the prices of both urban and undeveloped land. To accommodate the uncertain demand for urban land, the regulator should slacken the growth boundary control once urban rents pass historically high levels. In general, the regulator should also tighten the control when urban rents become volatile.

Suggested Citation

  • Jou, Jyh-Bang, 2012. "Efficient growth boundaries in the presence of population externalities and stochastic rents," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(4), pages 349-357.
  • Handle: RePEc:eee:quaeco:v:52:y:2012:i:4:p:349-357
    DOI: 10.1016/j.qref.2012.10.004
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    Cited by:

    1. Jyh-Bang Jou & Tan (Charlene) Lee, 2015. "How Do Density Ceiling Controls Affect Housing Prices and Urban Boundaries?," The Journal of Real Estate Finance and Economics, Springer, vol. 50(2), pages 219-241, February.

    More about this item

    Keywords

    Growth boundaries; Population externalities; Real options; Stackelberg game; Transportation taxes;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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