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FAR regulations and unpriced transport congestion

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  • Pines, David
  • Kono, Tatsuhito

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.

Suggested Citation

  • Pines, David & Kono, Tatsuhito, 2012. "FAR regulations and unpriced transport congestion," Regional Science and Urban Economics, Elsevier, vol. 42(6), pages 931-937.
    • Handle: RePEc:eee:regeco:v:42:y:2012:i:6:p:931-937
    DOI: 10.1016/j.regsciurbeco.2012.01.001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Tikoudis, Ioannis & Verhoef, Erik T. & van Ommeren, Jos N., 2018. "Second-best urban tolls in a monocentric city with housing market regulations," Transportation Research Part B: Methodological, Elsevier, vol. 117(PA), pages 342-359.
    2. Takayama, Yuki & Kuwahara, Masao, 2017. "Bottleneck congestion and residential location of heterogeneous commuters," Journal of Urban Economics, Elsevier, vol. 100(C), pages 65-79.
    3. Domon, Shohei & Hirota, Mayu & Kono, Tatsuhito & Managi, Shunsuke & Matsuki, Yusuke, 2022. "The long-run effects of congestion tolls, carbon tax, and land use regulations on urban CO2 emissions," Regional Science and Urban Economics, Elsevier, vol. 92(C).
    4. Yoshida, Jun & Imoto, Tomoko & Kono, Tatsuhito, 2022. "Agricultural and urban land use policies to manage human–wildlife conflicts," MPRA Paper 115375, University Library of Munich, Germany.
    5. Yoshida, Jun & Kono, Tatsuhito, 2020. "Land use policies considering a natural ecosystem," Regional Science and Urban Economics, Elsevier, vol. 83(C).
    6. Domon, Shohei & Hirota, Mayu & Kono, Tatsuhito & Managi, Shunsuke & Matsuki, Yusuke, 2020. "Congestion Tolls Efficiently Reduce CO2 Emissions from Homes in addition to Urban Transportation in the Long Run," MPRA Paper 102220, University Library of Munich, Germany.
    7. 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.
    8. Zhang, Wenjia & Kockelman, Kara M., 2016. "Congestion pricing effects on firm and household location choices in monocentric and polycentric cities," Regional Science and Urban Economics, Elsevier, vol. 58(C), pages 1-12.
    9. Hirte, Georg & Rhee, Hyok-Joo, 2016. "Regulation versus Taxation," CEPIE Working Papers 05/16, Technische Universität Dresden, Center of Public and International Economics (CEPIE).
    10. Takeda, Yoshihiro & Kono, Tatsuhito & Zhang, Yang, 2019. "Welfare effects of floor area ratio regulation on landowners and residents with different levels of income," Journal of Housing Economics, Elsevier, vol. 46(C).
    11. 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.
    12. Moon, Byunggeor & Ahn, Sungin, 2022. "The effects of a FAR regulation in a model of durable building with redevelopment: The case of New York City," Regional Science and Urban Economics, Elsevier, vol. 95(C).
    13. Takayama, Yuki, 2020. "Who gains and who loses from congestion pricing in a monocentric city with a bottleneck?," Economics of Transportation, Elsevier, vol. 24(C).

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    More about this item

    Keywords

    FAR regulation; Second-best; Transport congestion;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations

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